Did Anyone Get the Number of that Special Purpose Vehicle?

An article in this weekend's Washington Post set off an ado by reporting that the Federal Reserve is circumventing the executive compensation restrictions in the American Recovery and Reinvestment Act (HR 1). The Fed is distributing money through special purpose entities so that TARP money isn't, technically, coming from the government. Whether you're fer or agin you have to wonder why its being done this way.

Section 111(a)(3) of HR 1 applies executive compensation limits to any entity receiving "financial assistance" under TARP. The New York Fed has decided that financial assistance depends on intent. The TALF program, for instance, is intended to stimulate consumer auto lending. Therefore, ABS sponsors participating in the program aren't being bailed out - people who buy cars are.

The New York Fed explains that "Executive compensation restrictions are targeted towards ensuring that executives of institutions that receive government support are not unjustly enriched at the taxpayers’ expense. Given the goals of the TALF and the desire to encourage market participants to stimulate credit formation and utilize the facility, the restrictions will not be applied to TALF sponsors."

This appears to be a straightforward question of Congressional intent. So, why not just ask Congress? Why all the sneaking around? My guess is that the Fed is afraid to raise the issue at all. Even if Congress did draft too broadly, chances are no one is going to have the nerve to face the public wrath that would flow from loosening executive compensation restrictions in the bailout law.