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December 2012
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CEO pay restrictions focused TARP’s aid

Executive pay limits that were imposed as part of the bank bailouts in the 2009 Troubled Asset Relief Program (TARP) seemed to discourage some banks from participating in the federal program, according to a Journal of Business Finance & Accounting report coauthored by Mary Ellen Carter. Of the 263 banks eligible for TARP assistance, 35 did not seek funds, and statistical analysis suggests that the decision was related to those banks’ higher levels of CEO pay. TARP’s restrictions “gave financial incentives for bank executives to think carefully about participating and, if they did participate, to get out from underneath the program as quickly as possible,” Carter told an interviewer. The study concludes that the compensation restrictions “may have separated out the firms that would be just as viable without the funds, allowing the government to allocate the funds more effectively.”

“Pay limits tore at TARP bailout,” Boston Herald, November 24, 2012

“Executive Compensation Restrictions: Do They Restrict Firms’ Willingness to Participate in TARP?” by Brian Cadman, Mary Ellen Carter, and Luann J. Lynch, Journal of Business Finance & Accounting, September 2012