WASHINGTON – The Treasury Department has told four bailed-out companies that they can't pay some top earners more than $500,000 cash per year. But the official who made that decision has said that the rule shouldn't always apply, according to reports by The Associated Press.
Kenneth Feinberg, the Obama administration's pay czar, said Friday that lobbying by Treasury and Federal Reserve officials helped persuade him to exempt about 12 executives from the salary cap. The pay cap will affect about 300 employees at Citigroup Inc., GMAC, American International Group Inc. and General Motors.
The move highlights tension between the government's competing priorities: Appeasing public fury over outsized pay, while making sure the firms retain the talent they need to stay competitive and repay their taxpayer billions.
"It's a little like you have the left half of your brain and the right half of your brain arguing," said Douglas Elliott, a fellow at the Brookings Institution and former investment banker.
"As an owner, you can see why the government wouldn't want to make these rules too onerous. But as a regulator, following the will of Congress, there's an intention to hold these firms accountable and to hold down what they pay their top executives," Elliott told the AP.
Outrage over banker salaries exploded this year after it was revealed that AIG would pay millions in bonuses to employees of the division that had toppled the company. The government provided up to $182 billion to stabilize AIG. Congress held hearings and grilled Treasury Secretary Timothy Geithner about the bonuses.
The Obama administration responded by appointing Feinberg. He oversees pay packages for the top 100 earners at the companies that received the largest bailouts.
As they negotiated their pay packages, the companies warned that pay restrictions could keep them from attracting and retaining top talent. Without competitive pay, they said, it would be hard to regain their footing and repay their bailout money.
