PREVIEW-UPDATE 1-U.S. pay czar poised for next wave of rulings

* Next rulings will impact pay for 26-100 highest paid

* BofA is out pay czar's authority, while Citi seeks exit

* AIG has bristled at pay rulings citing talent loss
(Changes timing of planned announcement in first sentence)

By Steve Eder and Karey Wutkowski

NEW YORK/WASHINGTON, Dec 10 (Reuters) - The Obama
administration's pay czar plans to announce on Friday his next
wave of rulings as bailout recipients struggle to get out from
under his thumb.

Kenneth Feinberg has said these rulings will likely reduce
pay for the 26th to 100th highest-paid employees at the six
firms still under his authority.

Those firms, all of which received "exceptional assistance"
from the taxpayers, are: Citigroup Inc (C.N), American
International Group (AIG.N), General Motors Co [GM.UL],
Chrysler, Chrysler Financial and GMAC.

Feinberg, a Washington lawyer appointed by Obama, slashed
the pay of the top 25 employees at the companies under his
jurisdiction in October, feeding concern that it would be
difficult for the companies to retain or recruit talent.

The debate over what constitutes appropriate pay at
financial firms was renewed this week as the United Kingdom
slapped a 50 percent tax on bank bonuses and Goldman Sachs said
its top executives will not receive cash bonuses for 2009.
[ID:nN1076736]

Feinberg's next rulings will involve setting the
"compensation structure" for the 26 through 100 highest-paid
employees, but Feinberg told the Reuters Global Finance Summit
last month the cutoff line is frequently blurred and that his
rulings could affect many additional employees.

Douglas Elliott, a former JPMorgan investment banker now
with the Brookings Institution, said the stakes are not as high
for this next wave of rulings, compared with the top 25
earners.

But he said there is still potential for the six firms to
lose a lot of key employees if Feinberg's latest rulings are
perceived as too harsh.

"Any time there's a pay freeze or something makes it less
attractive to work there, it is usually the best people that
leave because they are the most mobile," Elliott said.

Feinberg's control has caused significant friction with
insurer AIG, where top executives, including CEO Robert
Benmosche, have reportedly considered quitting because of the
pay constraints.

The chief executive of Korn/Ferry International (KFY.N),
the world's largest executive search firm, said this week that
Wall Street may see an exodus to overseas rivals that have no
limits on pay.

Gary Burnison said being a TARP firm involves uncertainty
about government restrictions and could scare away potential
employees. [ID:nN08203480]

For its part, Bank of America Corp (BAC.N) will not have to
worry about Feinberg's rulings.

The bank, which openly griped about Feinberg's first wave
of rulings, on Wednesday finished its repayment of $45 billion
it received from the U.S. Treasury's Troubled Asset Relief
Program (TARP), making it the first company to come out from
under Feinberg's authority.

Feinberg told Reuters it was "very satisfying" to see Bank
of America, the largest U.S. bank by assets, come out of TARP.

Citigroup, the last remaining bank under Feinberg's
immediate purview, is racing to exit the program and is in
active negotiations with the government to repay billions in
taxpayer bailouts.

However, it is not likely that Citigroup, the No. 3 U.S.
bank, will be free of Feinberg's scrutiny anytime soon, as
regulators believe the company must first pay back all of its
bailout.

The bank has received $45 billion in TARP funds as well as
insurance from the FDIC on $300 billion of assets. The multiple
rescues have left the United States with a stake of roughly 34
percent in the bank.

Feinberg's forthcoming rulings will apply only to the final
month of 2009, but will set the stage as the baseline for 2010,
he has said. The rulings could also sharply scale back 2009
bonuses, which will likely be determined in January after the
banks and other TARP recipients report fourth-quarter
earnings.

In his first wave, Feinberg cut overall compensation by 50
percent and cash pay by 90 percent at those firms. Feinberg
said the rulings are designed to reward long-term performance
and clamp down on guaranteed cash, while still being
sufficiently attractive to keep talent as the companies seek to
repay the government.
(Reporting by Steve Eder and Karey Wutkowski; additional
reporting by Nick Zieminski, editing by Matthew Lewis)