On Tuesday 16 June 2009 the Australian parliamentary upper house voted down the government’s plans to set up a “last resort” lending facility to maintain the pace of property development during the global financial crisis.  And the absence of a salary cap was the reason.

RuddBank was to provide $4 billion to plug the hole left by the exit of foreign banks as $30 billion in funding is due to rollover in the next 3 years (see the Bill HERE).

The final reason for the defeat was the government’s refusal to accept a Greens’ demand to impose a $1 million cap on the remuneration of the banking and property executives whose companies accepted financial assistance from the Australian Business Investment Partnership (known as ‘Rudd Bank’).

It is reassuring that the government recognised the problems associated with seeking to impose the $1 million salary cap.  In the US, a number of the financial institutions that sought government aid under the TARP legislation have sought to repay the government aid to escape the restrictions the TARP legislation imposes on executive remuneration.  Aid recipients have been concerned these restrictions limit their ability to source and retain the executives they need to manage their way out of the global financial crisis.  There have been concerns that US banks have focussed on re-paying the TARP funding rather than expanding loan books for development opportunities, thereby slowing the prospects of US economic recovery.

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