Bailouts didn't halt big paydays
- Article by: ANNIE LOWREY
- New York Times
- January 28, 2013 - 11:52 PM
WASHINGTON - Top executives at firms that received taxpayer bailouts during the financial crisis continue to receive generous government-approved compensation packages, a Treasury watchdog said in a report released Monday.
The report comes from the special inspector general for the Troubled Asset Relief Program, the bank bailout law passed at the end of the George W. Bush administration. The watchdog, a special inspector general for the program, commonly called Sigtarp, found that 68 out of 69 executives at Ally Financial, AIG and General Motors received annual compensation of $1 million or more, with the Treasury's signoff.
All but one of the top executives at the failed insurer AIG -- which required more than $180 billion in emergency taxpayer financing -- received pay packages worth more than $2 million. And 16 top executives at the three firms earned combined pay of more than $100 million.
"In 2012, these three TARP companies convinced Treasury to roll back its guidelines by approving multimillion-dollar pay packages, high cash salaries, huge pay raises and removing compensation tied to meeting performance metrics," Christy Romero, the special inspector general, said in a statement. "Treasury cannot look out for taxpayers' interests if it continues to rely to a great extent on the pay proposed by companies that have historically pushed back on pay limits."
The report charges that Treasury has failed to rein in excessive pay at the three firms. It found that Treasury approved all pay raises requested for AIG, Ally and General Motors executives last year, with individual compensation increases ranging from $30,000 to $1 million. It also faults the Treasury overseer for allowing pay packages above what comparable executives at other firms receive.
The report also accuses Treasury of failing to follow up earlier recommendations made by the special inspector general. A report issued a year ago made many similar criticisms, arguing that the Treasury officials "could not effectively rein in excessive compensation" because the most "important goal was to get the companies to repay" the government.
"Treasury made no meaningful reform to its processes," it said in this year's report. "Lacking criteria and an effective decision-making process, Treasury risks continuing to award executives of bailed-out companies excessive cash compensation without good cause."
In a response letter included in the report, Patricia Geoghegan, acting special master for Tarp executive compensation, disputed several of its assertions. For one, the compensation packages for AIG and General Motors executives were comparable to those received by executives at other firms, Treasury said. Pay packages at Ally were higher than the median because of "unique circumstances," it said.
Treasury also noted that the Obama administration had cut pay for executives at bailed-out firms and required that the companies pay top employees with more stock and less cash. Treasury "continues to fulfill its regulatory requirements," the letter said. It has "limited executive compensation while at the same time keeping compensation at levels that enable the 'exceptional assistance' recipients to remain competitive and repay Tarp assistance."
The Treasury Department is in the process of selling off its remaining shares of General Motors. In December, Treasury sold its final shares in AIG, bringing its and the Federal Reserve's total profit on its investment in the company to nearly $23 billion.
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