The Workhouse Test

The new Bailout plan has some interesting restrictions on CEO compensation and golden parachutes.  For example:

…a prohibition on the financial institution making any golden parachute payment to its senior executive officer during the period that the Secretary holds an equity or debt position in the financial institution.

This could either be a disaster or a saving grace.  If you think the situation is very dire and also that Wall Street is ruled by greed then it’s a disaster as the captain may prefer to go down with his ship, rather than give up the golden parachute (life-jacket?).  Thus, those who think the situation is very dire must be gambling on CEO altruism!

On the other hand, if you think that there is still private capital out there ready to buy at the right price then this clause may mean a smaller public bailout than many are predicting.

It all reminds me of the workhouse test.   

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