President Barack Obama has imposed pay limits on executives of banks and other companies that receive government bailout money to avoid collapse.
It is a topic that has sparked fury across the nation: financial executives receiving multi-million dollar salaries and lavish bonuses while taxpayers keep their ailing companies afloat.
President Obama says the practice is shameful and irresponsible.
"For top executives to award themselves these kinds of compensation packages in the midst of this economic crisis is not only in bad taste, it is a bad strategy, and I will not tolerate it as President," he said.
The president announced a $500,000 yearly limit on compensation for executives of companies receiving emergency federal assistance. Additionally, he said companies will be required to disclose all benefits provided to their top managers, and that severance packages will be limited.
Not an assault on wealthy Americans
Mr. Obama said the measures should not be viewed as an assault on the wealthy or those who have achieved success. Rather, he said, he wants to ensure that executives are not rewarded for failure while being subsidized by U.S. taxpayers. Last year, Congress approved a $700 billion rescue package for financial firms, the biggest bailout fund in U.S. history.
The president was preceded by Treasury Secretary Timothy Geithner, who suggested that public outrage over executive compensation contributed to the financial meltdown.
"This economic crisis was caused, in part, by a loss of confidence in our financial institutions. And it was made worse by a loss of faith in the quality of judgments made by some executives and some boards of directors. Those failures have caused great damage."
During the past year, dozens of business executives have been called to testify at congressional hearings, and been questioned intensely on pay issues. Many top managers have expressed a willingness to trim their salaries and forgo bonuses. Some, however, have defended the compensation they receive, noting that the terms were stipulated in contracts that were signed before the financial crisis struck.
Should bonuses be eliminated?
No one is suggesting that limiting executive pay will, by itself, return struggling firms to profitability. But for many Americans, the issue appears to be one of basic fairness: how can business executives justify multi-million dollar salaries at a time when millions of workers have lost their jobs and many firms are surviving thanks to a taxpayer-funded bailout?
"I think it is a time for sacrifice for everyone," one man said.
"I really do not think that that's a very wise use of money at this point," a woman said.
"People are losing their houses left and right, people are losing their jobs left and right. I do not think it is right," said another woman.
Last week, President Obama expressed dismay and outrage over a report that bonuses for U.S. financial executives topped $18 billion last year. The report noted that the total was down more than 40 percent from the previous year.