Fed Eliminates Compensation Limits for TALF SponsorsBloomberg.com: Worldwide

[David Farber <dave () farber net>]

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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