THE BLOG
07/25/2010 05:22 pm ET Updated May 25, 2011

The Administration's "Pay Czar" Soft Pedaling Bank Bonuses as "Ill Advised." What Is This Man Talking About?"

Kenneth Feinberg, the administration's "pay czar" should be more appropriately termed its "pay orderly". He categorized his powder puff slap on the wrist in his report covering the exogenous executive compensation doled out by some 17 banks at the height of the financial crises as "ill advised". This while positing the rhetorical question, " at what point are you piling on and going beyond what is warranted".

Thereby in one fell swoop, Feinberg is permitting the $1.6 billion he identified as "ill advised" payments to sit cozily in bankers bank accounts, monies that could well be deemed taxpayer gratuities, and with Feinberg counting, one could well imagine the sums are far greater. Not even the words "contrary to the public interest" were included in Feinbergs findings, terminology that would have opened the possibility and indeed would have signaled a fight to get these funds back. As reported in the Chicago Sun Times on July 24, according to Feinberg the use of such stronger language would have exposed banks to lawsuits from shareholders trying to recapture the executive's money. Well, duh! Now that would have been awful.

What has not been fully discussed is that in principle these bonuses are owed to the government and in turn to the taxpayers whose cash infusions made these institutions whole, without which most would have fallen into bankruptcy. Had that been the case these bonus boondoggles, and much much more in the way of bonuses alone, would have almost immediately, first and foremost, been classified as "fraudulent transfers" by the receiver in bankruptcy appointed by the courts.

It is the job of the "receiver" to reinstate to the bank's creditors all monies or transfer of funds from the insolvent estate disbursed over the preceding six years that were unjustified and in essence diminished the estate without business rationale (aka "fraudulent transfers"). It would be up to the receiver in bankruptcy to assure that such funds be returned to the bank's estate and in turn to its creditors, now in large measure the taxpayers.

By having kept these myriad institutions out of bankruptcy the federal agencies are shielding these monster pay packages from the legal demands of a receiver. For a so-called "pay-czar" to put these alleged "fraudulent transfers" further out of reach from those whose pockets were picked to fund these multi-billion dollar payouts benefiting those whose greed very nearly brought down the nation's financial system, ruining or vastly diminishing the wealth of millions of Americans, is a sham beyond comprehension.