Congress strengthens pay limits for executives of bailed-out banks

CHICAGO (AP) — President Barack Obama’s economic team tried to keep Democratic allies negotiating the stimulus bill from limiting paychecks for executives at banks in need of a bailout. Treasury Secretary Timothy Geithner and economic aide Lawrence Summers failed.

Sen. Christopher Dodd, chairman of the Senate Banking, Housing and Urban Affairs Committee, inserted strict rules into the $787 billion economic stimulus package over the White House’s objections. Dodd’s limits on bankers’ bonuses are significantly more aggressive than those sought by Obama or Geithner in recent days, with much fanfare.

Dodd, D-Conn., said the restrictions — an executive making $1 million a year in salary could receive only $500,000 in bonus money, for example — are necessary if Obama plans to ask Congress for more money to save the financial sector.

“It will never happen as long as the public perceives that there are people getting rich,” Dodd said in an interview. “Save their pay or save capitalism.”

That tone among Democrats flavored much of the discussion about how to write the stimulus bill, which the president planned to sign Tuesday in Denver. Despite direct appeals from Geithner, Summers and White House officials, Democrats didn’t budge, according to administration officials.

The Obama administration’s proposed restrictions applied only to banks that receive “exceptional assistance” from the government.