A Big, Bad Bailout Loophole: BushCo's Last-Minute Change Allows Golden Parachutes

When lawmakers considered the $700 billion bailout package a few months ago, they argued with the Bush White House over restrictions on executive compensation. Democrats insisted that firms accepting bailout funds could not, in turn, lavish their top executives with multi-million dollar salaries and/or "golden parachute" severance pay. The president wanted no such restrictions.

At first glance, it was a fight Democrats appeared to win, and strict limits were included in the final legislation. Indeed, there was even an IRS mechanism that mandated a close review of executive compensation, and tax penalties for companies that failed to comply.

Apparently, lawmakers neglected to read Bush's fine-print.

[A]t the last minute, the Bush administration insisted on a one-sentence change to the provision, congressional aides said. The change stipulated that the penalty would apply only to firms that received bailout funds by selling troubled assets to the government in an auction, which was the way the Treasury Department had said it planned to use the money.