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Obama To Cut Bank CEOs Pay Up To 90%

From a wildly cheering Associated Press:

In this Aug. 15, 2007 file photo, Kenneth R. Feinberg, now the special master at the Treasury Department appointed by President Obama to handle compensation issues, speaks at his office in Washington.

TARP figure confirms substantial pay cuts looming

By Martin Crutsinger, AP Economics Writer

WASHINGTON – The Treasury Department on Thursday is expected to order seven companies that have not paid back last year’s government bailouts to halve their top executives’ average compensation.

The cuts apply to the 25 highest-paid executives at banks and other companies that received the most assistance, with salaries being slashed by as much as 90 percent, according to a person familiar with the matter.

Kenneth Feinberg, the special master at Treasury appointed to handle compensation issues as part of the government’s $700 billion financial bailout package, is making the pay decisions. He is scheduled to release the details Thursday afternoon.

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

Elizabeth Warren, who heads the Targeted Asset Relief Program’s oversight committee, said Thursday on CBS’s "The Early Show" that reports of pending slashes in executive salaries are "real."

Smaller companies and those that have repaid the bailout money, including Goldman Sachs Group Inc. and JPMorgan Chase & Co., are not affected…

In the AIG trading division, the arm of the company whose risky trades caused its downfall, no top executive will receive more than $200,000 in total compensation, the person familiar with Feinberg’s plan said. The giant insurance company has received taxpayer assistance valued at more than $180 billion.

In an August filing with the Securities and Exchange Commission, AIG disclosed that new CEO Robert Benmosche would be paid $7 million a year, with the potential to make millions more in performance-based incentives. According to reports from the time, the package included $3 million initially with $4 million in stock to be held for five years as well as performance bonuses.

As CEO, Benmosche’s pay would be considered outside of the $200,000 average compensation for AIG’s trading unit. But, according to reports at the time, Feinberg saw splitting the salary and future stock bonuses as a model because it tied compensation to the company’s long-range performance.

The administration will warn AIG that it must significantly reduce the $198 million in bonuses promised to employees in its financial services division, the person familiar with Feinberg’s decisions said.

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.

Until now, these companies were only required to provide guidelines for the use of such luxuries. The inspector general at Treasury who oversees the bailout program found a range of standards. GM, for instance, generally prohibits employees from flying in private jets for business travel. Bank of America, on the other hand, encourages senior management to use corporate aircraft "for safety and efficiency purposes."

Feinberg’s decisions come days after administration officials voiced sharp criticism of plans by some firms, particularly those on Wall Street, to pay huge bonuses even as the country continues to struggle with rising unemployment and the effects of the recession.

Goldman Sachs, which has paid back its bailout money, has said it earmarked $16.7 billion for compensation so far this year, more than $500,000 per employee. Citigroup is paying $5.3 billion in bonuses to its employees and Bank of America $3.3 billion.

Elsewhere, Freddie Mac is giving its chief financial officer compensation worth as much as $5.5 million, including a $2 million signing bonus. The government-controlled mortgage finance company doesn’t have to follow the executive compensation rules because it is being paid outside the TARP.

Congress passed legislation in February requiring Treasury to oversee pay at companies that took bailout money. Treasury created the pay czar’s office in June as one means of implementing that law.

Treasury’s rules require the special master to review pay for the 25 top earners at companies that received "exceptional assistance," examining overall pay structures and recapturing payouts that go against taxpayers’ interests

So it’s clear that Obama feels that he now ‘owns’ the Bank of America, AIG and Citigroup just as much as he ‘owns’ General Motors and Chrysler.

Of course the lesson here is that you cannot let the government even get its nose under the tent, or it will claim to own the whole tent — and the caravan and every oasis.

Still, let’s hope these pay cuts aren’t in retaliation for the reported “reluctance” of many of these selfsame financial firms to donate to the Democrats’ war chest that the New York Times reported on just a couple of days ago.

But of course that can’t be. Mr. Obama is above such pettiness.

Do note, however, that fully owned and operated government institutions are exempt from any such controls on their pay and bonuses:

Elsewhere, Freddie Mac is giving its chief financial officer compensation worth as much as $5.5 million, including a $2 million signing bonus. The government-controlled mortgage finance company doesn’t have to follow the executive compensation rules because it is being paid outside the TARP.

Why is that?

All of which somehow reminds us that Mr. Obama’s chief of staff, Rahm Emanuel, got $250,000 from a very limited stint at Freddie Mac at the very time they were cooking their books so badly.

Will he give any of that money back?

Still, we would say that it serves these bank CEOs right for taking the money in the first place. Except that many of them were forced into doing so by the government.

Nevertheless, just imagine how well the war against the terrorists would go if Mr. Obama would be as tough on the Taliban and Al Qaeda as he is on law abiding American executives.

This article was posted by Steve on Thursday, October 22nd, 2009. Comments are currently closed.

12 Responses to “Obama To Cut Bank CEOs Pay Up To 90%”

  1. BannedbytheTaliban says:

    the Obama plan to “fix” the economy:

    1. Cut executive pay to levels so low everybody quits.
    2. Maintain low pay so nobody wants to take the job.
    3. Install government cornies to run said companies because of crisis.
    4. Complete nationalization of another company.

  2. Rusty Shackleford says:

    And the Point/Counterpoint point:

    From Bloomberg:

    Wall Street Pay Cuts Stoke Debate About Washington’s Reach


    Julianna Goldman, Ian Katz and Robert Schmidt Julianna Goldman, Ian Katz And Robert Schmidt – Thu Oct 22, 12:01 am ET

    Oct. 22 (Bloomberg) — The Obama administration slammed Wall Street by ordering pay cuts of an average of 50 percent and caps on benefits for top executives at companies owing the government billions of dollars from taxpayer-funded bailouts.

    The news triggered debate about the government’s reach into private industry, whether pay reductions would spread to other companies and if a talent drain from U.S. firms would ensue. Others cheered the move.

    “I don’t think there will be any charity cases on Wall Street,” said Representative Barney Frank, 69, a Democrat from Massachusetts and chairman of the House Financial Services Committee in a telephone interview. “This is a very good thing.”

    Executives at seven companies including New York-based Citigroup Inc. and Charlotte, North Carolina-based Bank of America Corp. will have their pay cut by an average of 50 percent after months of negotiations with Kenneth R. Feinberg, 63, the U.S. special master on compensation, according to people familiar with the matter.

    The cash portion of salaries for the 25 highest-paid employees will be slashed 90 percent under Feinberg’s review, which will be released as early as today, according to one person familiar with the talks. Some cash will be replaced by shares that employees will be restricted from selling immediately, another person said.

    ‘Slam Dunk’

    The administration, mindful of popular anger over Wall Street bonuses and risk taking that sparked the worst financial crisis in seven decades, responded favorably to Feinberg’s work. “The president put Ken Feinberg in place in order to be an advocate for taxpayers and it appears that Feinberg is doing what the president put him in place to do,” said Bill Burton, a White House spokesman.

    Some compensation experts said that the moves would drive talent out of U.S. financial institutions when their expertise was most needed.

    “The government is acting like the owner they are, and they’re a pretty ticked-off owner,” said Steven Hall, managing director of New York-based compensation consultant Steven Hall & Partners LLC. “The fear is, will this make people throw up their hands and say, ‘I have to leave’?”

    Indeed, they are. Hello darkness, my old friend.

    Remember, also, that Herr Feinberg, the “pay czar” has never been vetted and has no specific authority to do this, other than Obama told him to.

    The Constitution has been ignored and thus, Obama is categorically a criminal. Yet not one single republican will lift a finger to cry foul. I guess the neutering of our government representation is complete. Perhaps they fear skeletons in their own closets…or have no stomach for a fight or both.

    I don’t care. Our government is terribly and horribly broken. The only rule is that there are no rules anymore. Unless you ARE a republican and then the whiners and race-baiters will cry if you tell them they lie.

  3. Rusty Shackleford says:

    A thought piece on “czars” in Common Conservative: http://www.commonconservative.com/clark-packard/clark-packard090109.shtml

  4. proreason says:

    It’s hard to be sympathetic to Wall Street Executive, but let’s remember 2 things:

    1. The economic crisis is 100% the fault of the US government, and is highly likely to have been triggered by Wealthy uber-liberals like Soros and Goldman-Sachs executives to get a communist elected to the POTUS.
    2. The government has no right to meddle in private business. Period. That is the biggest step toward fascism and loss of freedom for every citizen. And the Moron has crossed that line in spades. He is the most dangerous person this country has ever produced.

    Cutting the pay of Wall Street execs is that same thing as cutting the pay of engineers 1 year after a bridge collapsed because the government dictated the use of inferior materials so that a minority business could get rich.

  5. haljett says:

    And thus the continued failure of the US economy and government continues. It amazing to watch. Scratch that. It’s scary.

    It’s hard not to look at any of this anymore and not think of Fascism.

  6. Reality Bytes says:

    “Hey! I’m the only one standing between you & the pitch forks!”

    – Barack Hussein Obama Hmmm, Hmmm, Hmmm

    Why don’t they just drag them out of their houses too, maybe take some of their stuff they bought with that money, huh? Yeah!

    Can Kristallnacht be far behind?

    And to think, these are the same people that supported this guy!

  7. Right of the People says:

    “Nevertheless, just imagine how well the war against the terrorists would go if Mr. Obama would be as tough on the Taliban and Al Qaeda as he is on law abiding American executives.”

    Steve, The Taliban and Al Qaeda have never been the enemy in The Won’s™ mind whereas money-grubbing capitalists always have been.

  8. U NO HOO says:

    What do those Wall Street guys actually do to earn those bonuses?

    Do they have to give the company money if the company loses money?

    Or what?

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