Paulson agrees to address financial execs’ pay in bailout bill

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The White House is relenting on Congress’ demands that financial company executives face restrictions on compensation -- particularly golden-parachute severance packages -- if their firms decide to sell bad mortgage loans to the government.

Treasury Secretary Henry M. Paulson, who on Tuesday balked at including pay limits in the proposed $700-billion financial-system bailout plan, changed his tune in testimony before the House Financial Services committee this afternoon.

‘The American people are angry about executive compensation and rightfully so,’ Paulson said, according to Bloomberg News. ‘We must find a way to address this in the legislation, but without undermining the effectiveness of this program.’

Before the Senate on Tuesday, Paulson had said: ‘In terms of the compensation issue, there’s a lot of things that need to be done there, but I would respectfully submit that we can’t do those as quickly as it takes to get this system up and running, because that’s what you care about.’

Rep. Barney Frank (D-Mass.), chairman of the House Financial Services panel, has been pushing to make sure bank and brokerage execs can’t leave their firms with big payouts after putting toxic loans to the government.

‘I don’t want the federal taxpayer to be at risk for their bad debt and then the guy who incurred the debt gets tens of millions of dollars on the way out the door,’ Frank said on CBS’ ‘Face the Nation’ last weekend.

The Christian Science Monitor reported today that a draft of proposals by Frank’s committee calls for ‘appropriate standards for executive compensation’ at financial firms, as part of the bailout terms.

From the Monitor: ‘These include: a ‘clawback’ provision for bonuses based on earnings, gains, or other criteria that are later proved to be inaccurate; limits on incentives based on risks deemed ‘inappropriate or excessive;’ and limits on severance compensation to senior executives ‘in the public interest.’ ‘