Obama to cap US executive pay

Al Jazeera’s John Terrett reporting from New York said the Bush administration had imposed some rules on how firms spent bailout payments but that they had been considered to be quite lax.

Terrett said Obama’s move was about honesty and openness and telling the American people that company executives would no longer be rewarded using taxpayers money.

The move comes on the same day that the US’s main oversight committee, the Federal Securities and Exchange Commission, was accused of ignoring a $50bn fraud scheme allegedly committed by finacnier Bernard Madoff.

Harry Markopolos, a former investment manager turned “whistleblower”, told politicians on the House Financial Services Subcommittee that he had tried to warn US regulators about Madoff as far back as 2000 but that he had been ignored.

Five senior members of the SEC appeared in front of the committee but angered those on the panel by refusing to answer specific questions on the Madoff scandal, citing the ongoing investigation.

‘Taking responsibility’

Obama has repeatedly criticised Wall Street executives over reports that they accepted billions of dollars in bonuses last year as they received government aid during the global financial crisis.

In depth

“We all need to take responsibility. And this includes executives at major financial firms who turned to the American people, hat in hand, when they were in trouble, even as they paid themselves their customary lavish bonuses,” Obama said.

Obama also said that any payments beyond $500,000 to executives would have to be in stock options and could only be made after government aid had been repaid.

The US president also announced that limits would be set on severance packages.

“We’re putting a stop to these kinds of massive severance packages we’ve all read about with disgust – we’re taking the air out of golden parachutes,” Obama said with Timothy Geithner, the US treasury secretary, at his side.

However, some Wall Street analysts criticised the move, saying it could lead to talented executives leaving to seek better pay elsewhere.

David Kotok, the chief investment officer at the Cumberland financial advice firm, said: “This is pure political grandstanding. If the limit has bite, it will be counterproductive and the unintended consequences will hurt the US as skilled and bright senior managers make choices.”

Job loss

The US president also promised a new series of measures to spark economic activity amid what many say is the nation’s worst economic crisis since the Great Depression of the 1930s.

Millions have lost jobs as the US suffers a major economic slowdown [GALLO/GETTY]

Two reports by private analysts released on Wednesday said thousands of jobs had been lost in the the US in the first month of the year alone.

Non-agricultural private jobs fell by 522,000 in January, according to a report by Automatic Data Processing, a payroll firm.

A separate report by Challenger, Gray & Christmas, a consultancy firm, said 241,749 planned job cuts were announced in January, the largest monthly total since January 2002, when 248,475 jobs were cut.

The US senate is currently debating a massive economic stimulus plan that could be worth up to $900bn.

The plan is the first major attempt by Obama’s administration to tackle the ailing US economy.