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Pay czar: ‘Ill advised’ bonuses at 17 bailed-out banks

Kenneth Feinberg
Kenneth Feinberg, the administration's pay czar and its administrator of Gulf Coast Claims Facility, is expected to criticize a slew of big banks for paying large bonuses after they received taxpayer-funded bailouts.Alex Brandon / AP
/ Source: news services

The Obama administration's pay czar said Friday that 17 banks receiving taxpayer money from the $700 billion financial bailout made "ill-advised" payments to their executives. But he stopped short of calling them "contrary to the public interest," language that would have signaled a fight to get it back.

Kenneth Feinberg also said he did not try to recoup $1.6 billion in lavish compensation to top executives at the bailed-out banks because he wanted to protect the banks from possible lawsuits from shareholders trying to recapture the executives' money. Feinberg said his public shaming of the 17 banks was punishment enough.

"I'm not suggesting we should blink, or turn the other cheek," Feinberg said in an interview with The Associated Press. "These 17 companies were singled out for obviously bad behavior. The question is, at what point are you piling on and going beyond what is warranted?"

Among the companies he let go are two whose bailouts will cost taxpayers billions: American International Group Inc. and CIT Group Inc.

Rather than demanding they return the money, Feinberg invited the 17 banks to give their boards of directors more power to withhold pay during future crises. The request was voluntary.

Feinberg reviewed 419 companies that received bailout money before pay curbs were enacted by Congress in February 2009.

Readers, has the recession left you feeling overworked and underpaid?

The review covered the period from October 2008 to February 2009. The starting point was when banks began receiving bailout money from the bailout, formally known as the Troubled Asset Relief Program. The ending point was when Congress enacted pay curbs on institutions receiving government support.

He determined that a total of $1.7 billion in payments were made during that period that would have violated the guidelines adopted later. And $1.6 billion of that amount was paid out by 17 of the country's largest financial institutions.

Friday's announcement came as Wall Street's most powerful banks face a raft of new regulations signed into law this week. One provision gives shareholders a chance to vote on proposed pay for executives of public companies. The votes won't be binding.

Separately, the Federal Reserve recently started monitoring pay at banks more closely. The goal is to prevent executives from reaping huge payouts if their decisions cause long-term losses for their companies.

Feinberg's clout in Washington grew this summer after he was appointed to administer the $20 billion fund set up by BP to compensate victims of the oil spill in the Gulf of Mexico.

Friday's review is likely to be Feinberg's final act before he leaves Treasury to focus full-time on the BP fund.