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Bailout officials might need bonuses themselves

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DANIEL WAGNER | March 17, 2011 07:10 PM EST | AP

WASHINGTON — In an ironic twist, government auditors say the Treasury Department might need to award bonuses to its staff to finish efforts to recoup billions of bailout dollars.

Bonuses became a flashpoint for public outrage during the financial crisis. Companies such as American International Group Inc. paid out millions just after they accepted billion-dollar rescue packages.

That outrage extended to Capitol Hill, where lawmakers created tough new rules banning cash bonuses, retention payments and other pay practices by any company holding bailout money.

Now, the officials who monitor those hundreds of companies might need some bonuses themselves, said Thomas McCool, director of applied research and methods with the Government Accountability Office, on Thursday.

McCool monitors the bailout program for the GAO, one of three oversight bodies to do so. He said Treasury's Office of Financial Stability might learn what private companies have been arguing for years: In a competitive job market, your best people might leave – and that can make it difficult to get the job done.

The office also faces a wave of departures in the next two years, he said. Half of its employees were appointed to four-year terms. The terms are about to start running out.

The amount of money at stake for government workers is far less – five figures, compared with six or seven in the financial industry. But the principle is the same: Employers believe a little extra pay can be a big help in holding the team together.

Treasury spokesman Mark Paustenbach said the concern is overplayed.

"Treasury has very strict criteria around bonuses and we have had no trouble finding excellent people who want to serve their country and help wind down" the bailouts, he said in a statement.

Financial executives have railed against the pay limits imposed after many of them already had taken bailout money. Robert Benmosche, CEO of American International Group Inc., threatened to quit when negotiations with then-pay czar Kenneth Feinberg reached an impasse, The Wall Street Journal reported in June.

In a memo to employees, Benmosche said he was struggling to "overcome this compensation barrier that stands in the way of restoring AIG's value."

Under government rules, only officials with competing job offers can be paid bonuses. The amounts are capped at 25 percent of a person's salary. Such amounts might not sway OFS leaders, many of whom took massive pay cuts to leave Wall Street for Washington.

In addition, Treasury officials said, the office has a new staffing plan in final draft form, and it's close to being adopted.

McCool pointed out that the plan hasn't been refreshed since March 2009. "We just want them to keep looking forward," he said.

Testifying before a House panel Wednesday, Treasury Secretary Timothy Geithner appeared ready to heed that advice.

"We want to make sure that we're . . . keeping talented people there as long as we need them for that period of time, so you have to manage these things carefully," Geithner said. "We want to be very, very careful to make sure that we're doing as good a job as we can for the taxpayer."