UPDATE 1-U.S. pay czar: Will soon decide how to use clawback
* Pay czar not negotiating clawbacks now, but on radar
* Expects to release pay structures soon for 7 TARP firms
* New compensation structures likely to result in pay cuts (Adds further Feinberg comments, background, details on Fed rules, byline)
WASHINGTON, Nov 2 (Reuters) - The U.S. pay czar said on Monday that he will determine "in the near future" how he will use his power to claw back pay at companies that have taken bailout money but is not currently in negotiations to do so.
Kenneth Feinberg said he is still reluctant to use those powers, which let him recoup salary and bonuses already paid out to employees at companies that currently hold or have paid back funds from the U.S. government's Troubled Asset Relief Program (TARP).
"I think that exercise of discretion should be very, very narrow," Feinberg said during a conference on executive compensation organized by the University of Maryland.
He said he could start negotiating with specific companies about clawbacks after he has finished his next task -- setting compensation structures at seven firms that have received "exceptional" TARP funds.
Feinberg said he will complete that task near the end of this month or in early December. The compensation structures will apply to the 26th to 100th highest-paid workers at the seven firms and those people "will likely receive less compensation" after his rulings, Feinberg said.
Last month, Feinberg slashed compensation for the top 25 earners at the seven companies for the final two months of the year -- when bonuses are typically paid.
The seven companies are American International Group Inc (AIG.N), Bank of America Corp (BAC.N), Citigroup Inc (C.N), General Motors Co [GM.UL], Chrysler, GMAC and Chrysler Financial.
He generally did not claw back pay as part of those rulings, but Feinberg did determine that retiring Bank of America Chief Executive Ken Lewis should receive no more pay for 2009 and will have more than $1 million of his prior pay clawed back.
Feinberg was appointed in June as the pay czar amid public outrage that companies bailed out by the government were still paying huge bonuses.
Recent news that Goldman Sachs Group Inc (GS.N) had set aside $16.8 billion for compensation, so soon after repaying $10 billion in taxpayer money, fueled concerns Wall Street was already returning to the lavish pay practices that were commonplace before the financial crisis struck.
Feinberg said his mandate is limited and should not be expanded. But he said financial firms should be prepared to face tough scrutiny from regulators on pay plans.
"Do not underestimate what the regulators may do here," Feinberg said.
The Federal Reserve last month issued bank pay guidelines aimed at curbing the type of reckless risk-taking officials say contributed to the crisis that nearly brought down the financial system last year.
Top bank executives met with Fed officials on Monday to discuss the process for the incentive compensation arrangement reviews that are part of the new guidelines.
Feinberg said his office has met regularly with Fed officials and has also met with officials from the Securities and Exchange Commission and with Sheila Bair, chairman of the Federal Deposit Insurance Corp. (Reporting by Karey Wutkowski, editing by Tim Dobbyn)
