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Fed Eliminates Compensation Limits for TALF SponsorsBloomberg.com: Worldwide
From: David Farber <dave () farber net>
Date: Tue, 3 Mar 2009 13:00:26 -0500

Fed Eliminates Compensation Limits for TALF Sponsors (Update1)
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By Scott Lanman

March 3 (Bloomberg) -- The Federal Reserve eliminated executive- compensation limits for sponsors of asset-backed securities accepted under a new $1 trillion program, indicating the rules may have hampered efforts to get the plan underway.

The Fed isn’t applying the requirements to the Term Asset- Backed Securities Loan Facility because of the government’s “desire to encourage market participants to stimulate credit formation and utilize the facility,” the New York Fed said in a question-and-answer document on its Web site today.

The change suggests the government doesn’t intend to apply compensation limits beyond firms that receive direct investments from the Treasury’s $700 billion bailout fund. Officials have yet to announce whether such requirements will be imposed on firms participating in a separate effort to remove as much as $1 trillion of distressed assets from banks’ balance sheets.

“Executive compensation restrictions are targeted towards ensuring that executives of institutions that receive government support are not unjustly enriched,” the New York Fed said in a separate question- and-answer document on its Web site.

The revised terms and conditions of the TALF, posted on the New York Fed’s Web site, also omitted a previous section on compensation requirements. The limits were previously instituted because the program is being seeded with capital from the $700 billion financial- stability plan, which has provided capital injections to banks with compensation rules attached.

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