CEO compensation draws ire in $700B rescue plan
U.S. Rep. Gabrielle Giffords
U.S. Rep. Gabrielle Giffords said calls to her office are “running 100 to zero” against a possible $700 billion injection of tax dollars into the banking system.
Giffords, a freshman Democrat, hosted a conference call with local financial experts hoping to learn how to explain to the public why the move is necessary.
She said something should be done to protect the economy but she has problems with what might happen if the bailout goes through.
“I don’t think hardworking taxpayers should be bailing out greedy CEOs,” she said. “I don’t think the president should get a blank check.”
Chief executive compensation and the Bush administration’s initial proposal that the Treasury secretary should have a free hand in spending the money are two of the bigger targets of the proposed rescue plan.
Count state Senate President Tim Bee, Giffords’ Republican opponent in District 8, as one of those angry constituents.
“Clearly, this is an example of Washington, D.C., failing to address an issue until it becomes a crisis,” Bee said.
Bee blames Giffords, in part, for being a part of the Washington that let the current credit problems happen.
Just don’t call what’s happening a “bailout,” said Randall Yenerich, president and CEO of Commerce Bank of Arizona.
“This is liquidity legislation, not bailout legislation,” Yenerich said. “The banks don’t need money to stay solvent.”
The money instead will put cash flow back into the credit system so investment and credit don’t seize up and take down the economy, he said.
But the government would be buying large bundles of bad mortgages and debt so the lenders can get them off their books, said former UA securities law Professor Elliott Weiss.
“This can be described as a bailout,” he said.
Weiss also said if sophisticated bankers managed to flub investments as badly as they have, the individuals having problems with their mortgages deserve help, too.
“These financial institutions bought all these securities and they didn’t know what they were doing,” Weiss said. “How can you expect the average person to cut through the sales talk and appreciate what they were being sold?”
Joe Minarik, senior vice president at a Washington think tank, The Committee on Economic Development, was with Giffords in Washington and warned that real economic damage could ensue if Congress does not act.
“This is not much ado about nothing,” Minarik said. “If we can spend $1 to keep from losing $3 from the gross domestic product, that may be worthwhile.”