One day after slashing cash payments to the top 25 executives at seven bailed-out companies by an average of 90 percent, the Obama administration's pay czar, Kenneth Feinberg, today defended the government's involvement in the compensation structures of these private businesses.
"These seven companies, the taxpayer owns them, so it's not simply the government interfering -- it's the government representing the taxpayers as a creditor seeking to maximize the likelihood that the money will be returned to the taxpayer," Feinberg said in remarks at George Washington University.
"So, let's not get too carried away with a philosophic argument about the government intervening in the private sector, when the government intervened in the private sector to save the private sector."
On Thursday, Feinberg decreased cash payments for the remaining two months of this year to the top 25 executives at the seven bailout recipients by a total of $337 million. The pay czar cut total direct compensation by $873 million.
The seven companies under Feinberg's jurisdiction -- AIG, Bank of America, Citigroup, GM, GMAC, Chrysler, and Chrysler Financial -- have received a total of around $250 billion in taxpayer aid. Total direct compensation at GMAC declined by $413 million. Citigroup saw their total direct compensation fall $272 million and their cash compensation drop $244 million, a decrease of 96 percent.
More to Come
But Feinberg's work is far from over. In the next 60 days he will design compensation structures for the next 75 highest-paid officials at these companies.
He will also assess whether to claw back money at all companies that received money under the $700 billion Troubled Asset Relief Program, but that, he said, is a move he is hesitant to make.
"I'm reluctant to become a bill collector or a Treasury official reaching out and trying to get back compensation long since distributed, long since cashed, long since spent," he said. "There may be situations where I'll do it, but they will be rare and far between."
Obama's Pay Czar Says Government Had to Protect Taxpayers
As he has said in the past, Feinberg today reiterated that the divide between Wall Street and Main Street on executive pay is too big to overcome.
"The gap between Wall Street expectations and Main Street expectations is unbridgeable -- it is absolutely unbridgeable," he said.
But he added, "I believe we struck the proper balance between public dissatisfaction with principled decisions on compensation that will likely keep people at their chairs, attract talent, and let the company prosper in order to pay the taxpayer. That's the real goal."