Bailed-Out Companies Pressured TARP Pay Czar To Keep Executive Pay High: Report

WASHINGTON, Jan 24 (Reuters) - Pressure from financial institutions and Treasury officials undermined an effort to limit executive pay at seven companies rescued with taxpayer money, a new government audit showed on Tuesday.

The official overseeing executive pay for bailout firms limited cash compensation and made some reductions in pay, but still approved compensation packages in the millions, the TARP (Troubled Asset Relief Program) inspector general said in the report.

Former U.S. pay czar Kenneth Feinberg approved pay packages worth $5 million or more from 2009 to 2011 for 49 top earners, the report said.

"Special Master Feinberg said the companies pressured him to let the companies pay executives enough to keep them from quitting, and that Treasury officials pressured him to let the companies pay executives enough to keep the companies competitive and on track to repay TARP funds," the report said.

Public anger over high pay and billion-dollar bonuses at bailed-out firms in 2008 prompted the Obama administration to limit cash salaries at $500,000 and approve compensation packages for the companies' top earners.

The report said the companies had "significant leverage" over Feinberg in negotiating for excessive pay packages based on historical pay, warning that if he did not provide competitive pay packages, top officials would leave and go elsewhere.

"Rather than view their compensation through the lens of partial government ownership, the companies argued that their proposed pay packages were necessary to retain or attract employees who were crucial to the company," the report said.

The companies affected were: AIG, Bank of America, Citigroup, Chrysler Financial Services, Chrysler Holding, General Motors, and Ally (formerly GMAC).

The report evaluating how the pay packages were set suggested a need for a more uniform standard for compensation decisions.

It recommended that each request to exceed the $500,000 pay limit be justified and that new guidelines be put in place to ensure the decision process is evenhanded.

In Treasury's response, Acting Special Master, Patricia Geoghegan, said her office had cut average cash compensation for the top 25 executives at the seven companies that received "exceptional" TARP assistance by more than 90 percent.

"Our office was effective at limiting compensation at the seven companies over which it had authority, while ensuring the companies were well-positioned to pay back the taxpayers' investments," Geoghegan wrote.

She noted that Bank of America, Citigroup, Chrysler Financial and Chrysler had exited TARP and that Ally, AIG and GM were in the process of exiting the program.

The TARP audit was conducted between November 2009 and December 2011.

Comments

[Donald J Sullivan]

06:57 PM on 02/02/2012

I have personally been in a room with most of the corporate 500 CEO's at a fundraiser. They aren't the geniuses you think they are trust me. I found them ignorant, drunkards some just regular guys but most I wouldn't say geniuses! Picture a football wedding ( same thing).

[catbite]

02:42 PM on 01/25/2012

Special Master, Acting Special Master, TARP Czar? Are you kidding me?

[Dosadi]

08:43 PM on 01/24/2012

 "warning that if he did not provide competitive pay packages, top officials would leave and go elsewhere."

This is just stupid. Even a third grader would have called their bluff and told them to leave. If the best and the brightest were at the helm when the financial ship ran aground then it is obvious we need to establish better standards. These guys were not the best and the brightest, and if they were it proves we don't need the best and the brightest.  What we probably need is a few honest people.

[bpmfinch]

07:17 PM on 01/24/2012

Corruption has become so systemic in our American political and corporate scheme that even voting for chane seems to bring little or no relief. Corporate and personal greed is the driver of capitalism and like the parasite that it is it will kill the host.

[redscarecrow]

05:40 PM on 01/24/2012

These execs cared more about their personal bottom line than they did their organization or the country. Lucky for them they live so they don't have to look the people they've trashed in the eye.

[Azlegit]

05:12 PM on 01/24/2012

I guess we are now in the "gimme" mode of America where making money legally is a crime?? Sooo, if I make 100K per year and my neighbor down the street makes 50K then under the liberal and Obama mindset I guess I should give him 25K of mine so we are now equal under a wealth redistribution mandate that equals us out at 75K whether he earned it or not??? Gimme mine (yours) economics!

[redscarecrow]

05:29 PM on 01/24/2012

You miss the point.

[Dosadi]

08:45 PM on 01/24/2012

Nope. Just keep thinking that way and in a couple of years the poor will decide how to split up your assets. Just as has happened in the past it will happen again. I'm making friends with the poor so they will bypass my home on the way to ransack yours. Scary huh?

[Jim NLN]

04:29 PM on 01/24/2012

Oh, oh, oh, please. I do not know how I can get by on just $5 million per year. You need to raise my compensation.

[jimme]

02:56 PM on 01/24/2012

Bonuses for what ? They lost billions, if not trillions. Sounds like they're getting paid for being quiet and not saying anything before the melt-down. Good little cons.

[ur2nutty4me]

02:36 PM on 01/24/2012

Just another fraud perpetrated on the American people. The same people and their friends keep swapping position back and forth from company to company and from industry to industry. It's like in this whole world only 50 people are capable of running the worlds corporations and financial institutions which is rediculous. Look what they have managed to do. Let them quit and we probably would be much better off.

[shanesdad]

01:56 PM on 01/24/2012

Feinberg, you caved. Nice going. They pressured you by threatening to leave? Then you should have handed them their walking papers with no severance or benefits and said 'adios mofo'.

[DebtNavigation]

01:52 PM on 01/24/2012

Instead of their being a TARP these businesses should have been allowed to implode like they were supposed to. That is how capitalism works when it has not followed the Iron Law of Oligarchy and turned into crony capitalism. Now the homeowners are the ones who take it in the neck because without the bailouts the defaulted mortgages would have been sold at big discounts to investors who would thus have leeway to make deals that would have kept people in their homes. American can revolt, should revolt and are revolting against this mess.

In Mexico in the mid-'90s Wall Street engineered a currency coup that tripled the debt owed by small businesses and family farms and also allowed for them to be massively ratejacked on top of it. Mexicans consequently formed the "el Barzon" movement and pushed back Wall Street and deposed their ruling party of 60+ years. In this country YouTube phenom Ann Minch has already declared the debtors' revolt and begun going after them.

If you've been pushed under, you can read every other page of my book for free: http://www.scribd.com/doc/25443175/Debt-Hope-Down-and-Dirty-Survival-Strategies-Evaluation-Version-Complete

[notdarkyet]

01:51 PM on 01/24/2012

After watching a show on PBS last night on the 60's, it all came back to me. After Chicago we realized it was all a big lie. That's why the last years of the sixties our mantra was "Turn on, tune in, and drop out." They've been playing the same game since the dawn of civilization. How to steal the labor and get all the rewards from the slaves. Make your own reality.

[Azlegit]

05:06 PM on 01/24/2012

Were you watching the Phil Ochs story?? It was well done and a very bad ending to a creative individual.

[notdarkyet]

11:05 AM on 01/25/2012

Yes. I decided at the end, when his friends kept saying we won when the war ended, he realized it was all a sham. Over ten years of fighting a war that ended when the military wanted it to now because of anything we did. And under a Repub Pres.

[notdarkyet]

11:07 AM on 01/25/2012

Especially after what happened in Chile.

[Gerry Malan]

01:41 PM on 01/24/2012

We heard this same sort of "reason back when it was supposedly necessary to keep Enron "running right".
As an executive recruiter in Houston, we knew then that the big lie was in play. At that point in time there were plenty of capable managers in that industry, and in fact, it was a buyer's market.

Not all hiring decision-makers had the Enron ethos.

We were conducting a search for a new division CEO for a firm owned by Warren Buffet, and had forwarded an ex-Enron candidate. I received my one and only call from Omaha: "Don't send us any more people from Enron. At his level, he was part of the problem."

Special Master Feinberg is part of the problem.

[big tom]

04:32 PM on 01/24/2012

what ever happened to the winner of the ken lay look alike contest ?

[loki]

01:30 PM on 01/24/2012

you all got it wrong. You are just envious of them.

Yeah, thats it.. envy...


for those who dont know, this is called *sarcasm*

[loki]

01:21 PM on 01/24/2012

but of course they would. After all, they sure wouldn't want to work for the money.

Remember, according to them, the Rich create jobs..

But the real world knows that jobs are only created when we the consumers buy, and force the rich to either hire to keep up with demand, raise prices, or close down if someone else takes their place in production of the product or service. So its consumers who hold the golden key to the economy. But, since the Rich think they do, they are actually strangling themselves by moving jobs over sea and killing jobs here. They are destroying their own life lines and they are to stupid to see it.