Closing bell, time to vote

Treasury Secretary Timothy Geithner should have learned from Congress.

Geithner’s speech announcing the administration’s plans for the remaining financial rescue funds was greeted with a giant raspberry from Wall Street, where the market closed at 7,888, down nearly 380 points.

{mosads}Geithner should have delayed his speech until after the markets had closed, something House and Senate leaders increasingly appear to be doing on big economic votes.

The most recent example was Monday’s procedural vote in the Senate on the stimulus package, which occurred in the early evening after the 4:30 p.m. closing bell.Winning the 60 votes necessary to end debate was the true test for the bill, since the stimulus easily won the 50 votes necessary for passage.

The timing of the vote had nothing to do with the markets, according to Jim Manley, a spokesman for Majority Leader Harry Reid (D-Nev.). In an e-mail, he noted the Senate rarely votes on Mondays before 5 p.m.

Still, since the Dow Jones Industrial Average dropped 777 points on Sept. 29, the day the House rejected a bailout for the financial sector, the House and Senate generally have avoided big votes on economic bills during market hours.

Last week, the House vote on the stimulus package took place after 6 p.m. Similarly, the House approved legislation to extend the bailout to carmakers in a vote held after 8 p.m. The Senate rejected the measure at 10:42 p.m. on Dec. 11, but then-President Bush announced a day later he’d use funds from the $700 billion bailout, which might have prevented a bigger run on the markets.

Doug Roberts, the founder and chief investment strategist for ChannelCapitalResearch.com of New Jersey, sees the after-closing votes as part of a strategy similar to the one employed by companies that release their earnings after the close. He said it provides more time for “damage control” if Wall Street traders are surprised by Washington’s actions.

Of course, the markets also move up and down regardless of what Congress does on any given day.

The 777-point drop on Sept. 29 left the Dow Jones at 10,365. On Tuesday, it closed more than 2,500 points lower.

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Stimulus could limit executive pay

Eight of the most highly paid executives on Wall Street will be grilled on Wednesday by a House panel, even as lobbyists for the financial industry work to remove language in the stimulus bill that could tighten executive pay.

Language in the stimulus added by Sens. Chris Dodd (D-Conn.) and Claire McCaskill (D-Mo.) could impose retroactive limitations on senior executives who have taken money under the Troubled Asset Relief Program (TARP). The limits would be much more potent than the rules announced by the Obama administration.

{mosads}That would be bad news for Citigroup CEO Vikram Pandit, who reportedly made $3.1 million last year, and Bank of America CEO Kenneth Lewis, who received $5.75 million in bonuses and salary in 2007. Both will testify Wednesday at the House Financial Services Committee, which is sure to pound witnesses on excessive pay.

McCaskill’s office insisted it does not believe the language would be retroactive, but lobbyists for a range of financial groups think it would be. They note that McCaskill’s amendment, which limits pay to $400,000, applies to executives with firms that receive or have received TARP funds.

Others note that Dodd’s language states that the government “shall seek to negotiate” in clawing back compensation.

The financial industry understands there’s a need for companies to look at the way they handle compensation, but argue retroactive penalties would go too far. Scott Talbott, a vice president with the Financial Services Roundtable, said there’s a need to find a balance between safeguarding taxpayer money and having a chilling effect on participation in the TARP.

Regardless of what happens with the language, those testifying on Wednesday are in for a rough day. Referring to the likely grilling, one observer quipped, “Bring your barbecue sauce.”

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$15K tax credit is not a down payment

Prospective homebuyers won’t be able to use the $15,000 tax credit in the Senate’s stimulus bill as a down payment, according to the way the legislation is written.

The Senate provision, intended to address the housing crisis and stimulate the economy, was added to the stimulus bill in a mostly fruitless effort to gain GOP votes last week. Because it isn’t monetized, however, it won’t make loan applications more attractive. That’s something that could significantly lower the provision’s impact.

{mosads}“Obviously, we would prefer it to be monetized,” said Jerry Howard, president and chief executive officer of the National Association of Home Builders, which is lobbying to keep the provision in a conference agreement. “One of the major impediments to homebuyers is having enough money for down payments.”

Howard, who is pressing lawmakers to improve the tax credit before passing a final stimulus bill, said it could also be a problem for homeowners who want to use the tax credit to buy a new home in the “trade-up” market. Because housing values have dropped, existing homeowners might not have enough equity in their homes to make a down payment, something the tax credit could alleviate if monetized.

Sen. Johnny Isakson (R-Ga.), the sponsor of the tax credit amendment, introduced legislation earlier this year that did monetize the credit. His office wasn’t sure why it wasn’t monetized in the stimulus bill. Isakson voted against a procedural vote to move the stimulus bill forward, despite the tax credit’s inclusion.