La. bankers may give back bailout money

Louisiana banks that took loans tied to the federal financial bailout are considering giving back the money in light of new rules that could drastically shrink the paychecks of their top officers.

Executives of banks that took bailout money are now barred from receiving cash bonuses or incentives until the loans are repaid to the Treasury Department, according to an amendment in the $787 billion economic stimulus bill signed into law Tuesday by President Barack Obama.

The new rule does not sit well with many bankers, including those in Louisiana, who rely on incentives for a significant portion of their take-home pay. They also fear that the provision created a slippery slope that will heap further restrictions on companies that took bailout money.

"The rules have changed so much that they're now interfering with our business," said John C. Hope III, president and chief executive of Whitney Holding Corp., the publicly traded parent of New Orleans' Whitney National Bank. "It is now at the point where the cost now far exceeds the benefits."

The amendment by Sen. Christopher Dodd, D-Conn., permits banks to opt out of a Treasury-run program that allowed banks to borrow bailout money. The program initially had more rigorous requirements for releasing participants, requiring them to hold on to cash for at least three years and to raise additional private equity. But the new rule allows banks to simply pay back the money, according to an analysis by the American Bankers Association.

Whitney, which took $300 million from the Treasury last year, will consider returning the cash at once if directors think such a move would be in the best interest of the bank, Hope said.

--- A big part of income ---

The personal income of Whitney's top executives depends heavily on incentives tied to the company's performance. Although the model is common in the financial industry, Dodd was concerned that permitting bonuses at banks that took the bailout would be akin to allowing executives to "enrich themselves at the expense of the taxpayers," according to a statement from his office....