'Pay Czar' Denies Report That He Raised Base Salaries at Bailed-Out Banks

Oct. 28, 2009 — -- The Obama administration's so-called pay czar, Ken Feinberg, today denied a report that found he had increased base salaries at the seven bailed-out companies under his supervision.

Feinberg said last that he had slashed overall pay by 50 percent and cash pay by 90 percent for the top 25 executives at AIG, Citigroup, Bank of America, GM, Chrysler and the two automakers' financing arms.

But the Wall Street Journal released today a new study of Feinberg's pay cuts that determined he had increased base salaries by an average of 14 percent to $437,896 a year and boosted base pay for 89 of the 136 employees under his purview.

In testimony today before the House Oversight & Government Reform committee, Feinberg defended his work.

"We greatly reduced the amount of cash that would be made available to these senior officials," he said. "We reduced that cash by approximately 90 percent."

Feinberg, the special master for Troubled Asset Relief Program executive compensation, said the Wall Street Journal analysis had used a different definition for base salaries than the one he had used.

"If somebody is getting cash salary, guaranteed, last year, of $3 million, and now they're getting, under my program, $300,000 in cash, that sounds to me like a 90 percent reduction," he told lawmakers.

The newspaper also reported that Feinberg raised the base salary of a Citigroup official to $475,000, an increase of 111 percent.

"What the article does not point out is last year that same official received from Citi $13 million in cash and under my report, that cash was reduced by 98 percent," Feinberg said.

"So I am very comfortable in defending my report and saying that overall, one of our primary objectives succeeded in this report for these seven companies -- to reduce absolute guaranteed cash by 90 percent."

Feinberg also warned today that his job should not be expanded to include more than the seven companies under his jurisdiction.

"I am troubled at the notion that it could be expanded," he said. "That would be a mistake."

Washington Keeps Bailing Out Wall Street

But asked if Wall Street understood the public outrage about big pay at bailout recipients, Feinberg said, "I found that the submissions did not adequately address the major concerns expressed by the American people."

After Feinberg's testimony, a second panel of academics testified before the committee.

Denouncing Feinberg's work as "too little, too late," Russell Roberts, an economics professor at George Mason University in Virginia, argued that a more serious problem than Wall Street was Washington's willingness to bail it out.

"Washington keeps giving bad banks and Wall Street firms a do-over," he said, comparing Wall Street to a drunk driver. "Here are the keys. Keep driving. It always ends with a crash."