Barney Frank: Retention bonuses are 'extortion' and 'bribes' David Edwards and Rachel Oswald

Published: Monday March 23, 2009





Print This Email This Though retention bonuses are a long-standing business practice on Wall Street, the AIG scandal has turned new attention to them, with some, including Rep. Barney Frank, going so far as to call them a form of extortion.



Speaking on CBSs Face the Nation on Sunday, Frank (D-MA), chairman of the House Financial Services Committee, said of the executives receiving bonuses, If you look at their actual performance, I think there was an element frankly with some of almost extortion, where they said we know what all you need to know and well quit if you dont bribe us.



He added later, It is people saying Ive got the combination to the safe and if you dont bribe me, Im going to leave and youll never be able to open the safe, Frank said.



Frank told CBS Harry Smith that he was urging the executive branch to assert the rights of the federal government as the primary shareholder of the company to sue AIG.



I think one of the things we should be doing is suing as a shareholder, saying look these are people who were paid bonuses that they werent entitled to, Frank said.



Kenneth Lewis, CEO of Bank America, has been quoted objecting to the clampdown on executive bonuses as having the potential to damage the ability of the government to engineer a financial recovery.



Said Smith of the outlook by Lewis and others, Folks in this world say the people inside that are getting these bonuses are the only people who can entangle this mess.



But Frank objected to this claim, saying, I think it is wrong and lets point out what a lot of talented people have lost their jobs in this financial crisis. Its not that they wouldnt be able to hire good people to do this, so I really resent the extortion element of this. Thats one of the things we have to deal with, not only with AIG, but going forward to restrict that.



Anger over the retention bonus is spreading throughout the country in the wake of the AIG bonus scandal.



It's basically a bribe, so your employees don't bolt and take their clients with them," said Chuck Collins, a senior scholar at the Institute for Policy Studies and an executive compensation expert, in an interview with The Salt Lake Tribune."It's part of this Marie Antoinette syndrome of Wall Street. They're completely in a bubble, and they don't understand how these payments are perceived."



Reported The Tribune, In a December survey of 264 companies across a variety of industries, business consultant Watson Wyatt Worldwide found that 9 percent of companies had added, or expected to add, a special retention bonus. An additional 21 percent were considering doing so.



Morgan Stanley, which has received $10 billion in bailout funds, has plans to pay up to $3 billion in retention bonuses to 6,500 brokers, according to The Tribune.



Frank said that while he voted for the bill that overwhelmingly passed the House on Thursday and would tax by 90 percent some of the executive bonuses, he was not a major advocate of it.



Also speaking on Face the Nation, Sen. Chuck Grassley (R-IO) said he believed Congress best leverage to deal with the bonuses was through new taxes. He said he hoped that Senate Majority Leader Harry Reid would be putting the Houses bill on the docket for Senate consideration on Monday.



We ought to hear some apology [from the AIG executives], Grassley said. We ought to hear remorse. We ought to hear contrition. I havent heard any of that, not only with AIG, but any corporation thats got bailed out.



This video is from CBS' Face the Nation, broadcast Mar. 22, 2009.









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