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SEPTEMBER 19, 2008 1:14PM

Some Suggestions for the Bailout

Rate: 3 Flag

I have some suggestions for the companies about to be bailed out. I believe that the bailout should be contingent on a few small requirements.

1. The CEO and top executive pay packages should be funneled into an account which will serve to paydown the debt assumed by the government. Now I am not heartless, the CEO should keep a
salary equal to the lowest middle manager currently employed.

2. All bonues for CEO and top executives will go into this account.

3. All "extra" perks, such as stock options, jet, homes, etc, will be liquidated at put into the account.

4. If the CEO, or top executive leaves the company, he or she will NOT receive a golden parachute. Rather, the parachute will be funneled into the account as well. The CEO or top executive will receive 2 weeks severance.

5. Due to the extraordinary measures of the bailout, the contract for CEO & top executive compensation will be considered null and void.

6. Any company who does not accept these terms will not be part of the bailout.

I think this is a viable solution to partially pay for the bailout. And, if this becomes the law of the land, forfeiture of pay and bonuses for a bailout, I predict that the companies will be run a bit better from now on.

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I agree with all of the above, especially the golden handcuffs -severance package forfeitures. In addition, allow some "responsible mortgagees" to buy down their mortgages at 80 cents on the dollar if they are qualified, willing, and able. I'll bet there are quite a few of us willing to do so to put money back into the system. It is a win-win situation.
You might also see my What Concessions to Demand for the Bailout? and
Dave Cullen's No blank check without concessions. I think there have been others. But it doesn't hurt for everyone to add their own. I'm just adding cross-references here so it's easier for someone to find them all.

I like your point #6 is theoretically a good way of getting around the "ex post facto" restrictions of the Constitution, although the problem is that the US Government would not be negotiating on this if they didn't think this company was too big to fail. So I don't know if it will work in the early bargaining, but it might save later legal challenges under Constitutional protections against ex post facto laws. The sweet irony of it is that credit card companies use this kind of dodge all the time in order to change interest rates on people, telling them that if they don't want the new higher rate they can cancel their card instead.