USA Today had an article telling readers that even small banks will be affected by the provision limiting executive salaries to $500k for banks that get federal bailout money. The gist of the article is that this is a bad thing. It gives the example of Old National Bancorp CEO Robert Jones, who was paid $1.5 million in 2007 and will get up to $6 million if his job is terminated. The article goes on to describe Old National Bancorp as a "tiny bank," with assets of just $8 billion. Old National Bancorp is indeed a small bank compared with giants like Citigroup or J.P. Morgan. If the pay and golden parachutes of the top executives at these institutions were the same proportion of their assets, their top executives would be earning more than $300 million a year and could expect a golden parachute of more than $1 billion if they were terminated. If the pay caps discourage Old National Bancorp and other small banks with overpaid executives from seeking capital from the federal government, then it will impede their growth. This will allow banks with more market oriented compensation packages for top executives to grow at the expense of the banks with highly paid executives. This would be an unexpected dividend from Senator Dodd's pay provision.
--Dean Baker
