The Obama administration's watchdog for executive pay at U.S. financial institutions has found 17 companies paid out $1.6 billion in bonuses shortly after receiving taxpayer-funded bailouts last year.
But Kenneth Feinberg, the Treasury Department's pay czar appointed in the wake of the financial crisis, says the payments were not technically "illegal" leaving the government little authority to do anything about it.
"At the time these payments were made, they were ill advised, bad judgment on the part of these companies, but they didn't violate any statute, they didn't violate any regulation at the time," Feinberg told ABC News.
They were "in the face of the public interest, perhaps. But 'contrary to the public interest' -- a statutory standard -- no," he said. "The taxpayer has a right to be outraged. Who wouldn't be?"
Feinberg named the banks in a review of pay among the top 25 executives at 419 firms that received government assistance before February 17, 2009. Some of the payments exceeded $10 million, as in the case of one individual
The 17 firms identified in the report include American Express, AIG, Bank of America, Boston Private Financial Holdings, Capital One, CIT, Citigroup, JP Morgan Chase, M&T Bank, Morgan Stanley, Regions, Suntrust, Bank of NY Mellon, Goldman Sachs, PNC Financial Services Group, US Bancorp, and Wells Fargo.
President Obama today said the findings underscored the importance of financial reform legislation signed into law on Wednesday. "We made enormous progress this week on Wall Street reform, on making sure that we're eliminating waste and abuse in government, and in providing immediate assistance to people who are out there looking for work," he said.
By law, the pay czar cannot sue for repayment or issue subpoenas. He can only ask for reimbursement. The recently-enacted Wall Street reform law also has no binding rules for executive compensation.
Eleven of the 17 companies have already paid back government bailout funds and have no other outstanding financial obligations to taxpayers.
The six companies that have not fully reimbursed the Treasury Department are CIT Group, SunTrust Banks, Regions Financial, M&T Bank, Citigroup, and AIG. The most egregious "offender" of all - Citigroup - has already agreed to restructure its compensation practices.
"I think Citigroup has complied. I thought it appropriate that these other five companies repay," Feinberg said.
Feinberg is pressing the 17 firms to voluntarily adopt a so-called "break provision" which would give the boards of directors and compensation committees the right to terminate any binding or expected payments to employees in the event of another financial crisis.
The companies have told Feinberg they are taking the request "under advisement."
"They've been through a real crisis. I'd like to think they've learned something from this," Feinberg said, hopeful that Wall Street firms will self-regulate in a way they haven't done in the past. "All these [Obama administration] initiatives will help guide this type of internal decision."
Feinberg assumed his watchdog role shortly after the huge federal bailouts at the height of the financial crisis.