In my opinion the legislation was all for show and had no real provisions to limit executive pay for bailed out financial institutions but now we have an even worse situation.
Some of the corporate governance and executive compensation rules in the original bailout legislation have since been softened by interim final rules drawn up by the Treasury as part of its plan to inject capital into banks.
The same guys who got into the mess will be oversee the taxpayer money. The Treasury added interim rules which then made any previous promises to limit executive compensation, avoid further risks like the ones which got the banks in trouble in the first place.
Under the rules, banks can't deduct executive compensation above $500,000 against taxes.
That's tougher than the current standards, but it probably won't stop companies paying executives handsomely, McCormick said.
"Executives at these firms are accustomed to making a lot of money and the companies will want to retain talent and prevent them leaving for hedge funds," he explained.
The banks will probably give up the tax deduction, rather than pay executives less, he added.
The original bailout legislation also banned golden parachutes, which are big severance payments made to executives after mergers or acquisitions.
The Treasury's interim final rules defined golden parachutes as payments equal to or exceeding three times an executive's annual salary and bonus. That's in line with the current tax code and common practice already among companies.
"Under the rules, you can still pay out up to three times annual salary and bonus," McGurn said. "The legislation looked like it had real teeth, but the interim final rule is just a gap-toothed smile.
Then, the Treasury changed the tax code:
The latest such move was unveiled on Tuesday, when the Treasury Department declared that the cash infusions for banks won't be considered "federal financial assistance." Normally, that type of funding would count as taxable income for the recipients, and could trigger other unfavorable tax consequences for banks receiving assistance that take part in mergers.
A Treasury Department spokesman said the agency is seeking to "provide clarity and certainty regarding tax issues that have come up during market turmoil."
Tax experts say some of the changes are justified, including a number of technical fixes to protect taxpayers from unintended consequences related to government actions, such as the takeovers of Fannie Mae and Freddie Mac, or the substantial investments in banks. Plus, the broader bailout legislation passed by Congress earlier this month shut some other tax loopholes, including one that permitted offshore hedge-fund managers to get favorable treatment for deferred compensation.
The most controversial move so far is an obscure IRS ruling that gives banks the unfettered ability to use the "tax losses" of banks they acquired
What is the last thing all corrupt governments do before leaving power....they rob the treasury.
Read Supporting the Aristocracy for more on how the super rich are robbing the people blind.