Obama Pay Cuts: White House Forcing Bailed-Out Companies To Slash Compensation

WASHINGTON - (Associated Press) The Obama administration plans to order companies that received huge government bailouts last year to sharply cut the compensation of their highest paid executives, according to a person familiar with the decision.

The seven companies that received the most assistance will have to cut the annual salaries of their 25 highest-paid executive by an average of about 90 percent from last year, said the person, who spoke on condition of anonymity because it has not been announced.

This person said Wednesday that the Treasury Department will announce the deep pay cuts within the next few days.

Kenneth Feinberg, the special master at Treasury appointed by Obama to handle compensation issues at the seven firms getting exceptional assistance from the government's $700 billion financial bailout package, is making the pay decisions.

The seven companies are: Bank of America Corp., American International Group Inc., Citigroup Inc., General Motors, GMAC, Chrysler and Chrysler Financial.

Total compensation for the top executives at the seven firms will decline, on average, by about 50 percent, according to the person familiar with the administration's decision.

At the financial products division of AIG, the giant insurance company which has received taxpayer assistance valued at more than $180 billion, no top executive will receive more than $200,000 in total compensation, the person familiar with Feinberg's plan said. The administration also will warn AIG that it must fulfill a commitment to significantly reduce the $198 million in bonuses promised to employees in its financial services division, the arm of the company whose risky trades caused its downfall.

The pay restrictions for all seven companies will require any executive seeking more than $25,000 in special benefits -- things such as country club memberships, private planes and company cars -- to get permission for those perks from the government.

Feinberg's decisions on pay come after administration officials voiced sharp criticism in recent days of the plans of Wall Street firms to pay huge bonuses at a time when the country is still coping with rising unemployment and the effects of the recession.

Obama senior adviser David Axelrod called the bonuses "offensive" on Sunday.

"They ought to think through what they are doing and they ought to understand that a year ago a lot of these institutions were teetering on the brink and the United States government and taxpayers came to their defense," Axelrod said in an appearance on ABC's "This Week."

Comments

[stevendedalus3]

01:42 PM on 10/25/2009

This whole issue is caused by perennial misplaced values on monumental egos.

[GoldsteinD]

02:42 PM on 10/23/2009

political grandstanding that affects none of us

[delta7777]

02:02 PM on 10/23/2009

How convenient that Goldman and JPM are among the fortunate few who are not required to make pay cuts ! !.
How convenient it is that forced pay cuts at their competitors makes it easy for GS and JPM to cherry pick the best and the brightest that their competitors have to offer ! !

[TheyAllSuck]

04:04 AM on 10/23/2009

Its wrong that these top execs make their ridiculous amounts of money for failure, and have taxpayers pay for those bonuses. But even if the people are successful in reducing such salaries and bonuses, it won't fix our economic situation.

We are in an economic morass because the leaders of Wall Street are THIEVES. They pay legislators to pass loopholes to allow them to STEAL from the honest investor. Those loopholes are too technically arcane for the average voter to grasp.

Our economy collapsed NOT because the Fed was too generous with interest rates, or that the subprime market bankrupted the banking system. Its because banks are allowed to gamble WAY beyond its assets, with UNREGULATED derivatives, and any minor collapse threatens to collapse all the banks like dominoes. Also, Goldman Sachs & Co. conspired to institutionalize NAKED SHORT SELLING, which is an economic death ray against any legitimate company. Finally, what really triggered our recession was a credit freeze caused by the disappearance of Lehman Bros, which eliminated close to 50% of all the short term credit trading in the world.

Focusing on executive pay will make us feel good, but its like convicting Bernie Madoff to FIX the economy. Its a SIDE SHOW, a distraction. Regulate derivatives trading, break up the megabanks, make fraudulent short selling a felony, put in a REAL program to help small businesses with credit, and ride years of economic recession. Or find a way to take these Wall Street executives out of the

[cavegal]

12:05 PM on 10/23/2009

Very well said.

[Prakosh]

01:08 AM on 10/23/2009

Does any Republican here know how many banks Reagan nationalized or what he did with the managers of the bank or banks that he nationalized???

Any Republican here know anything that happened before Obama became president???

[kcmookie]

09:58 AM on 10/23/2009

Reagan was a SOCIALIST!!!
Reagan was a SOCIALIST!!!

[4inline]

11:18 PM on 10/22/2009

Oooh, the envy on here. There's not many people here that wouldn't jump at the change to live a wealthy life. Even lottery winners get their money at the expense of the losers.

[cavegal]

12:06 PM on 10/23/2009

Yeah but everybody knows they are losing that buck for a shot at all the bucks. You don't get a seat at a poker table without buying chips.

[RalphOWalker]

04:24 PM on 10/22/2009

This is a good idea, most CEO are getting paid way to much money. Time to get their pay back in line. How can you pay someone a bonus when you just laid off hundreds of people only making enough to get by. Stay on them President Oboma.
http://www.makemoneyfromtexting.info

[katieandtom]

09:34 PM on 10/22/2009

i agree, but how do you pay a ceo what you pay mid level execs? wouldnt they quit? then where are we? maybe obama will replace them with government employees.

[whodoyouvoodoo]

03:54 PM on 10/22/2009

If anyone should be giving up their pay, it should be ALL of congress, the white house, and ALL czars and staffers.

[BlueRoseofTexas]

10:15 AM on 10/23/2009

How silly. If you believe that the captains of industry who supposedly are at the helm of the economy should receive unfettered compensation regardless of their success rate then how do you then turn around and say that the people who are elected/appointed to run government should make nothing. Illogical and not at all constructive.

[GoldsteinD]

03:44 PM on 10/22/2009

and will they do the same to Fannie and Freddie Mac? Maybe we should take back all of Franklin Raine's pay not to mention we should throw him in jail.

yeah. like that's going to happen

[tiredofthesameoldstuff]

08:22 PM on 10/22/2009

Fannie and Freddie Mac got out of the subprime market years before it went south. As the mortage insurer they had no choice but to take the bad mortages. The gov't already owned both companies.

[seroquel]

01:49 PM on 10/22/2009

I too am tired of the smoke and mirrors. I agree with ezeflyer, nationalize the Fed, and put the private bankers out of business.

This is no longer capitalism.

[kassandrasduplex]

01:39 PM on 10/22/2009

FORMER GOLDMAN SACHS PARTNER Gary "Obama-Commodities Futures Trading Commission-Appointee" Gensler was the single most important figure in creating the ECONOMIC COLLAPSE. (He co-wrote the de-regulation that led to the collapse of AIG which resulted in national economic collapse which took out General Motors among others...contrary to popular myth GM did not go bankrupt because they "built cra.ppy cars" , the 2006 Buick was ranked best car in the world by J.D. Powers and Assocs. and GM's Chinese low wage and benefits operations are wildly prosperous accounting for 25% of the company's total profits.The people paying for Goldman Sachs de-regulation are old American GM retirees who are at this moment seeing their pension benefits SLASHED. Toyota with less benefits and NO UNION also saw their sales drop by 37% at the worst, but no one accused Toyota of building bad cars! Toyota has no legacy costs as GM does.) See here where Rep. Bernie Sanders tried to BLOCK Obama from appointing Gary Gensler to head the CFTC.
http://www.democracynow.org/2009/3/25/sen_sanders_blocking_vote_to_confirm
No, the boys from GOLDMAN SACHS have been rigging the economy for years (Paulson, Geithner et al) and even took your TAX DOLLARS and GAVE THEM AS BONUSES before paying anything back to the government. Remarkably, missing from the list of executive pay cut is ANY Goldman Sachs figure. There is an ethnic and political spin to this.

[kassandrasduplex]

01:45 PM on 10/22/2009

...and don't forget who they just put in charge of the Securities and Exchange Commission, former Goldman junior executive Adam Storch. He's all of 29 years old.

[rinpochet]

01:23 PM on 10/22/2009

It is ONLY FOR A YEAR!! This is all smoke and mirrors. These companies continue to rake in the money with their shady derivatives with no oversight on the horizon.

[rinpochet]

01:21 PM on 10/22/2009

Notice how Goldman Sachs, the one company that benefited the most from our taxpayer money is not on that list. Still protected by Geithner and company.

How do we get rid of Geithner and all those other Goldman Sachs enablers in this administration?

[kassandrasduplex]

01:42 PM on 10/22/2009

It was former Goldman partner Gary Gensler who caused this collapse by writing the de-regulation that led to the collapse of AIG. These guys at Goldman have rigged all this to their benefit and are likely our new Ruling Overlords.
Obama appointed Gensler recently to head the Commodities Futures trading Commission, the wolf watching the henhouse.

[GoldsteinD]

03:48 PM on 10/22/2009

Obama...change we can believe in. more like propoganda we can believe in

[Jmz4gtu]

04:17 PM on 10/22/2009

http://www.bloomberg.com/apps/news?pid=20601087&sid=aIezubwp9xFE&refer=home

Goldman is apparently negotiating paying back the 10 billion they got from TARP so they can have their bonuses.

[vm12608]

01:17 PM on 10/22/2009

It is not solely a case of slashing annual salaries. These corporate socialists must restructure their bonus compensation schedules.

Bonuses are great motivators and used throughout the business world. However, when did bonuses begin to be paid for failed productivity? This is what perplexes me. Why did ( and do) these Wall Street geniuses get bonused on financial instruments that do not work? How bizarre is it that AIG etc people get to argue they deserve their bonuses because their contract says so? I understand the sanctity of a contract, but I also know contracts are broken all the time...usually by management when they decide the people aren't worth what they are being paid.

One thing is certain: the more convoluted a pay schedule, bonus or financial instrument is, the more leeway it gives the perpetrator to hoodwink the recipient.

Also: why are people who played such prominent roles in the virtual destruction of the world's economy still in such powerful positions in government, in the the Fed, on Wall Street etc. While I understand the theory of hiring the hacker who penetrated your supposedly safe computer system, I don't understand the theory of giving them a completely free pass. Do we really believe they will suddenly curb their greed and eliminate the policies and loopholes which permitted them to gain their inordinate wealth? Do we really believe they will grow consciences and seek to protect the people they robbed at the expense of themselves, their families and friends?

[TruelyFedUp]

01:15 PM on 10/22/2009

This story would not exist in a resource based economy - all basics of life including our homes, education, food, medical would be a natural right of every citizen. Technology would be used to handle most of the work. City centers would be universities. People might work one day a week to help handle work not done by machinery. Government would be of the people via their input into a central database where their idea would be analyzed and added to the solutions that benefit society. See www.thevenusproject.com for details.

Truly