Obama's Team Sticks to Its To-Do List

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Citing unnamed sources, The Wall Street Journal on May 13 said that the Treasury was evaluating how to change executive pay practices broadly for financial firms, including those not receiving federal bailout funds. "This is not going to be about capping compensation or micro-management," the paper quoted an Administration official saying. "It will be about understanding what is the best way to align compensation with sound risk management and long-term value creation."

Sound familiar? It should. On Feb. 4, the same day Obama announced pay caps for top executives at companies getting bailout funds, he warned that more was to come: "We're going to examine the ways in which the means and manner of executive compensation have contributed to a reckless culture and quarter-by-quarter mentality that in turn have wrought havoc in our financial system," he said in prepared remarks."We're going to be taking a look at broader reforms so that executives are compensated for sound risk management and rewarded for growth measured over years, not just days or weeks."

echo from a year ago

In fact, in a widely watched economic speech more than a year ago, during the Presidential primaries, Obama declared it "time to realign incentives and the compensation packages so that both high-level executives and employees better serve the interests of shareholders."

And so it goes. When the Treasury released its Greenbook, detailing its tax proposals, most of what was in there had been sketched out in the Administration's earlier tax announcements. Investors learned this week that some life insurers will get federal bailout funds—something telegraphed weeks ago (and, indeed, even late in the previous Administration).

"These are all ideas they have been putting out," Gardner says. "So far I think it's going according to script."

However disciplined the Administration proves at pursuing the program it has outlined, there's no guarantee it will be successful. It helps, though, that so far officials have shown themselves willing to revisit plans that aren't panning out.

Take the Treasury's press conference the morning of May 14 that unveiled subsidies for lenders willing to take a hit from homeowners selling at a loss and sweetening incentives for lenders that modify mortgages where home prices are falling. It marked at least the third expansion of the Administration's foreclosure-prevention program, which began as a vague promise in Geithner's ill-starred Feb. 10 introduction of the Administration's financial-stability plan. In early March it gained more detail, including a series of financial incentives to encourage lenders, investor, and the firms that service mortgages to modify the loans for homeowners at risk of foreclosure.

On Apr, 28, Treasury unveiled a companion program, previously only hinted at, with incentives for second-mortgage holders to relinquish some or all of their claims, making it easier for many homeowners to benefit from the original program. Now, the Administration is expanding it once more.

mortgage rescue a work in progress

To some degree, the latest set of changes also sweetens the original set of incentives. That's tantamount to an admission that the government didn't hit the mark the first time. Indeed, a new wave of foreclosures is in progress as banks pull back from voluntary foreclosure-suspension programs they put in place as they waited to see what the government would come up with. The good news is that the Administration is willing to revisit programs when they fall short, says John Taylor, chief executive of the National Community Reinvestment Coalition, the low-income consumer advocacy group that hosted the May 14 press conference with Geithner and HUD Secretary Shaun Donovan.

"I think it's recognizing that what they were doing was not working," says Taylor. While he called the latest iteration of the program encouraging, he said he would prefer to see the government buy and modify mortgages wholesale.

Administration officials have acknowledged that, as time goes on, they may have to revisit other aspects of their mortgage-rescue efforts as well. "We're going to be refining this program over the next couple of months," Geithner said at the May 14 press conference.

Francis is a correspondent in BusinessWeek's Washington bureau.