"That makes it sound like I'm going to issue some imperial decree on the subject of compensation. There's nothing further from the truth," Feinberg said Thursday, one day after his appointment. "My goal is to reach out to these seven companies and meet with them and work out an acceptable compensation program -- acceptable to the business community, acceptable to the administration, and hopefully acceptable to Congress and the public. It's a challenge, but I think it's do-able."
Feinberg's sensitivity about his title is understandable – he now finds himself in the delicate position of balancing the populist uproar about excessive pay with growing fears that the government has gotten too involved in the private sector.
"Historically the American people frown on the notion of government insinuating itself into the private marketplace," he said in an interview with ABC News. "My answer to those critics is I understand that concern, I share that concern, and the question is how do you strike a balance between that legitimate concern and the populist outrage at prior industry compensation practices?"
Feinberg's actual title is "special master," charged with supervising pay for the top 100 salaried executives at bailed-out companies receiving "exceptional assistance" from the government – AIG, Citigroup, Bank of America, General Motors, GMAC, Chrysler, and Chrysler Financial.
It was AIG, three months ago, that incited an uproar when the insurance giant, after receiving around $180 billion in taxpayer aid, paid out $165 million in corporate bonuses. Now these seven companies, each receiving tens of billions of dollars from the $700 billion Troubled Asset Relief Program, will have to submit their compensation plans to Feinberg for approval.
"We felt in the case of companies that receive such exceptional tax assistance, we had to have a stronger fiduciary duty," said Gene Sperling, a counselor to Treasury Secretary Tim Geithner, at a House Financial Services committee hearing Thursday. "We felt that if we could find somebody of the judgment and stature of Ken Feinberg who could look across the companies, looking at a set of principles on risk, on performance and also on what is likely to lead taxpayers to get return on their dollar -- that that extra level of protection for the taxpayer was necessary and important."
Critics Argue Administration is Too Involved in Private Companies
However, critics have seized on the new oversight, arguing that it is just the latest step for an administration that has become too involved in private companies.
"We need to get the government out of businesses," urged Rep. Spencer Bachus, the committee's ranking Republican, at Thursday's hearing.
Such vocal opposition is not lost on Feinberg.
"What's jumped out at me is this very real tension between the populist rage at these windfall bonuses versus the historical reluctance of the American people to permit the federal government to insinuate itself and micromanage these companies," said Feinberg. "And that tension is very apparent to me no matter which way I turn – you're facing criticism either from those who are appalled at what these companies did versus those who question the value of the government getting involved."
Feinberg's new challenge started to take shape around six weeks ago when Geithner's deputy approached him about coming on board. Neal Wolin and Feinberg have known each other for three decades. The two men discussed the job, prompting a second meeting, this time with the Treasury chief himself, and then a job offer.
"When the Secretary of the Treasury asks you to do something, you do it," Feinberg said. "I think millions of Americans would have done what I did. It's a patriotic undertaking. And it's an important one."
The Department clearly holds Feinberg in high regard, in part for his role in another patriotic – and also high-profile and contentious - undertaking: he was chair of the compensation fund for the families of victims of the 9/11 attacks. A senior Treasury official noted Wednesday that Feinberg was "highly respected" and "widely praised" for his work with the fund.
"We were involved there with horrible unprecedented tragedy – the deaths of 3,000 people is no comparison," recalled Feinberg. "On the other hand where there is a comparison is the fact…that we did develop a compensation methodology to value claims of over 5,000 people. I think our success in developing that compensation methodology, factors, and variables that we considered in adjusting compensation levels – I think that had a lot to do with the view of the administration that I might be able to bring some substantive skill to this assignment."
Business Groups Oppose Steps to Curb Executive Pay
As part of this assignment, he knows that many business groups oppose the administration's steps to curb executive pay.
"This is a huge watershed step towards government involvement in the private sector," warned Scott Talbott, senior vice president at the Financial Services Roundtable.
"On the surface it's a watershed step," said Feinberg. "But I'm hoping that in practice it turns out to be a very successful government/private partnership -- that's certainly my objective."
The industry also argues that government-imposed compensation limits could impede companies' ability to attract and retain top talent.
"One of the challenges here is to set compensation at levels where you won't drain that talent," acknowledged Feinberg.
The special master plans to reach out to the seven companies in the coming days. In the long term, Feinberg knows that the government needs to exit the private sector.
"We must slowly but surely extricate the government from a role in the private marketplace," he said, noting that the administration shares the same view.
Untangling the government's involvement will not be easy, he admitted, but when it comes to his own "exit strategy," Feinberg has no doubts about what lies ahead.
"My exit strategy is to work out acceptable levels of compensation for those who I'm required to do so and then to leave the field to others. I have no interest in making this a lifetime job."