Earlier this month, we reported on big payouts made to departing executives at banks that received TARP funds. The execs received the sums, ranging from $270,000 to multimillion-dollar payouts, simply for leaving. The story was a partnership with public radio's Marketplace, and you can listen to it here.
Our story came just after the Treasury issued new rules on executive pay for banks that received TARP funds. Those rules prohibit paying an exec just for leaving. At the time, we reported that it was unclear if executive payments made prior to the new guidelines would be affected. Now, after hearing from the Treasury Department, we can report that they will not. The previously promised golden parachutes will be grandfathered in, meaning the banks can pay them out in full.
Those payments fall under the guidelines issued under the Bush administration, which were much more permissive. Those rules prohibited golden parachutes, but defined a golden parachute only as a payment three times the executive's average annual compensation or more. In other words, an exec who averaged $2 million a year in salary and bonuses could receive up to $5.99 million on the way out.
The payouts we identified in our report with Marketplace fit within that lax limit. For instance, the president and CEO of Huntington Bancshares (almost $1.4 billion in bailout funds), received more than $2.5 million in compensation in 2008, so that $2.6 million payment for retiring would be A-OK.
The Treasury detailed the new rules to us, but declined to comment on the record regarding our report.
What remains unclear is whether execs might be able to skirt the golden parachute prohibition by simply calling it something else. We found one exec who was paid $1.65 million for agreeing not to compete with the bank, and another who received a hefty three-year "consulting" gig. We'll be watching to see if that happens more.