Bailed-out firms got big raises
WASHINGTON — The Treasury Department ignored its guidelines on executive pay at firms that received taxpayer bailouts and last year approved compensation packages of more than $3 million for the senior ranks at General Motors, Ally Financial and American International Group, according to a watchdog report released on Monday.
The report from the special inspector general for the Troubled Asset Relief Program said the government's pay czar signed off on $6.2 million in raises for 18 employees at the three companies. The chief executive of a division of AIG received a $1 million raise, while an executive at GM's troubled European unit was give a $100,000 raise. In one instance, an employee of AIG's Residential Capital was awarded a $200,000 pay increase weeks before the subsidiary filed for bankruptcy.
“We expect Treasury to look out for taxpayers who funded the bailout of these companies by holding the line on excessive pay,” said Christy Romero, special inspector general for TARP. “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 inspector general's report accuses Patricia Geoghegan, Treasury's acting special master for compensation, of side-stepping protocol that let pay packages at the midpoint of comparable firms. Geoghegan, however, said the audit is riddled with inaccuracies and mischaracterizes the data provided to the inspector general.
Compensation at bailed-out firms became a lightning rod during the financial crisis. A public outcry erupted in 2009 when AIG paid $168 million in retention bonuses to employees at Financial Products, the unit whose complex deals had crippled the insurance giant. The nation's biggest banks, including Morgan Stanley and JPMorgan Chase, came under fire for doling out six-figure salaries and bonuses from taxpayer funds.