A new report came out today from the Special Inspector General charged with auditing the government's TARP program for foundering financial institutions. According to the report, which you can read in full below, the "Special Master" appointed to curb executive pay at companies getting TARP money wasn't all that special after all. Although President Obama and Congress wanted pay caps of $500K for executives at seven companies that got bailed out, 49 fat cats still got paid $5 million or more between 2009 and 2011. Here's why, according to the audit:
Although generally he limited cash compensation and made some reductions in pay, the Special Master still approved total compensation packages in the millions. Special Master [Kenneth] Feinberg said that 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.
Given OSM's overriding goal, the seven companies had significant leverage over OSM by proposing and negotiating for excessive pay packages based on historical pay, warning Special Master Feinberg that if he did not provide competitive pay packages, top officials would leave and go elsewhere.
In proposing high pay packages based on historical pay prior to their bailout, the TARP companies failed to take into account the exceptional situation they had gotten themselves into that necessitated taxpayer bailout. 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.
On page 48 of the audit, the CEO of Ally Financial (formerly the General Motors Acceptance Corporation) explains why his company pressured the Special Master to go above the $500K pay cap. "We had an individual who was making $1.5 million total compensation with $1 million in cash," the executive, Michael Carpenter, said. "Cutting this person’s salary to $500,000 cash resulted in the person being cash poor. This individual is in their early 40s, with two kids in private school, who is now considered cash poor... We were concerned that these people would not meet their monthly expenses due to the reduction in cash."
WON'T SOMEONE THINK OF THE CHILDREN (in private school)?! Ally Financial, for what it's worth, still owes taxpayers billions of dollars. But thank goodness none of their executives were driven to the bread lines because they were forced to live on half a million a year—if you call that living.
