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Pay czar: Don't give me more power

Kenneth Feinberg, the Obama administration's special master for executive compensation, says his authority should extend only to the seven largest recipients of government bailout funds.

October 29, 2009|Jim Puzzanghera

WASHINGTON — The Obama administration's "pay czar" doesn't want his domain expanded beyond the seven major recipients of government bailout money.

It was easy to see why after he appeared Wednesday before the House Oversight and Government Reform Committee. Kenneth Feinberg, the special master for executive compensation, got heat for being too tough in recently dictating pay for top employees at those companies and for not being tough enough. He also was criticized for wielding too much power over his sliver of the private sector.

"We're the largest economy in the world. And now one person, one single person, is deciding what people make," said Rep. Jim Jordan (R-Ohio). "That's a dangerous, dangerous place we're going."

Feinberg defended himself, saying he only was doing a job created by Congress and the Treasury Department to corral pay at firms that have received "exceptional" government assistance. But Feinberg acknowledged he was concerned by suggestions that his authority should be increased to require corporate governance changes at those companies or to dictate pay policies at all firms that have received bailout money.

"I am troubled at the notion that my role . . . could be expanded," he said. "That's a mistake." Feinberg said the government should not be "micromanaging other companies in the private sector."

Feinberg last week announced he was slashing salary and pay packages for the top five executives and 20 highest-paid employees at the seven companies that have received "exceptional" assistance through the $700-billion Troubled Asset Relief Program, or TARP. Those companies are Bank of America Corp., Citigroup Inc., American International Group Inc., General Motors Co., Chrysler and the two automakers' financing units.

But more than 200 banks and other companies have received bailout money through the program. And there is widespread anger in the public and among members of Congress about the large salaries and bonuses at some of the firms that have received taxpayer money. Rep. Darrell Issa (R-Vista) described the worst Wall Street offenders as "pigs," and House oversight committee Chairman Edolphus Towns (D-N.Y.) said "Wall Street can no longer be trusted to control themselves."

"We need more than just a special master," Towns said as he praised the job Feinberg has done. "We need to give the shareholders a way to get this under control."

Feinberg said he hoped that other companies -- TARP recipients and beyond -- would use his pay determinations as a guide. Feinberg reduced cash compensation an average of 90% and total compensation an average of 50% for top employees at the seven firms. He replaced some of the lost pay with restricted stock, an arrangement designed to reduce incentives for the type of short-term risk-taking that many believe was at the heart of the financial crisis.

Rep. Marcy Kaptur (D-Ohio) criticized Feinberg for allowing six pay packages of more than $9 million and for not placing more restrictions on stock incentives.

Rep. Dan Burton (R-Ind.) hit Feinberg from the other direction, saying the pay cuts would force valuable workers to leave, endangering firms' ability to repay the bailout money.

Feinberg said he tried to balance limits on compensation with the ability of the companies to retain top talent. And he said his best argument to Wall Street for voluntarily restricting compensation was that Congress might mandate it if they didn't.


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