Obama “Pay Czar” Kenneth Feinberg wields a mighty money ax, and that ax is coming down once more on executive salaries at bailed out companies, says Reuters. The five firms under consideration – AIG, General Motors, GMAC, Chrysler and Chrysler Financial – are still depending upon government assistance to remain afloat. Since the Obama administration has found that previous crackdowns haven’t sent talented workers “fleeing for the exits” as the companies feared, the Pay Czar has the power to make another cut. Overall for 2010, the Treasury cut cash pay 33 percent.
Pay Czar’s office says 84 percent still with firms, despite pay cuts
In fact, Feinberg told the media that “There is a striking number of holdovers.” So far, that’s all the evidence the Treasury needs to justify striking this delicate balance and enable more money to come back to American taxpayers. The firms must be able to function, but taxpayers’ overnight loans must also be repaid. If a firm received “exception assistance” from the $700 billion in TARP funds, that firm must make sacrifices to repay America’s taxpayer base.
People don’t like to hear about AIG execs receiving multi-million-dollar bonuses
Yet that’s what happened, even after taxpayers had given up TARP monies to keep them afloat. Now that Pay Czar Feinberg is making wider cuts, the hope is that more Wall Street firms will follow the example. It could be the only way to begin restoring public confidence in a financial sector that openly played unnecessarily risky games with other people’s money. Reuters reports that Bank of America and Citigroup have repaid all or some of the TARP money they took, but too many offenders are still on the hook.
No cash bonuses, no long-term restricted stock, no golden parachutes
Those have all been eliminated in those companies under Pay Czar Feinberg’s watch. That frees up $45 million for AIG to repay their obligation to the American people. Salaries will also remain frozen at AIG with only “one exception” until they meet their obligation, says Feinberg. GMAC’s CEO has no cash salary now, only long-term stock. Chrysler’s CEO has a similar deal. Salaries there and at General Motors have been tightly monitored and kept down.
Let us reflect back on your greed
Companies that repay their TARP obligation would technically slip out of Pay Czar Feinberg’s regulation. Perhaps this is why he is looking to expand his legal authority. Reuters says he has contacted 419 TARP firms – including those who are technically off the hook – and asked them to “look back” at their past salary history. If pay was “excessive” between October 2008 (when TARP funds were first distributed) and February 2009 (when legislation affected pay levels at TARP firms), Pay Czar Feinberg wants there to be renegotiation. Specifically, pay above $500,000 for 2008 that is “not in the public interest” will apparently be routed back to American taxpayers in a yet to be determined percentage. Companies can either cooperate voluntarily or be forced by the Pay Czar to comply and give up news of their transgression to the public.
That’s quite an aggressive retroactive plan, isn’t it?
It will be interesting to see how many TARP companies fall in line. It is difficult to imagine the American public having any sympathy for them at this point. The recession has run too long and struck too deep in the country’s consciousness for more excuses. Taxpayers are not a personal loan company for these wasteful behemoths. Pay Czar Kenneth Feinberg may be the czar America needs; he may be the czar that Glenn Beck will regret weeping over.