* "Pay czar" approved all 18 pay raises sought by companies
* Watchdog: No resistance from pay czar on company requests
* Special Master says pay is down from pre-TARP levels
By Anna Yukhananov
WASHINGTON, Jan 28 The U.S. Treasury Department
in 2012 failed to curb executive pay at companies rescued with
taxpayer funds, the second straight year that it did not live up
to its own rules, an internal watchdog said on Monday.
The inspector general for the government's bailout program
had harsh words for Treasury's Office of the Special Master, the
"pay czar" charged with setting compensation for companies that
received rescue funds during the financial crisis.
"While taxpayers struggle to overcome the recent financial
crisis and look to the U.S. government to put a lid on
compensation for executives of firms whose missteps nearly
crippled the U.S. financial system, the U.S. Department of the
Treasury continues to allow excessive executive pay," the report
In 2012, the pay czar acceded to company requests in
approving multi-million-dollar pay packages and pay hikes for
top executives at General Motors, AIG and Ally
The Special Master approved all 18 pay raises requested by
the companies, for a total of $6.2 million, and approved pay
packages of at least $1 million for 68 of the 69 employees at
the companies it was overseeing, the report found.
The government's Troubled Asset Relief Program, known as
TARP, had pumped $68 billion into AIG, $50 billion in GM and $17
billion in Ally Financial, among others, to save them from
collapse during the 2007-2009 crisis.
The special inspector general, Christy Romero, said it was
not surprising companies asked for large pay packages and higher
"But what we saw in 2012 that is somewhat different than
prior years is that this time the companies pushed back on pay,
but they seemed to have met no resistance," she said in an
Romero is tasked with overseeing TARP.
In December, the Treasury sold the last of its common stock
in insurer AIG and said it plans to sell its remaining shares in
automaker GM in the next year or so, leaving Ally as the last
major company that still owes money to the government under
The acting pay czar, Patricia Geoghegan, said her office
achieved its mission, cutting average cash compensation for the
top 25 executives at bailed-out companies by more than 90
percent from what they were getting prior to the TARP bailout,
and cut average total pay by more than 50 percent.
In 2011 and 2012, the office also froze pay for the chief
executives of General Motors, AIG and Ally Financial.
In a Jan. 25 letter accompanying the report, Geoghegan said
she disagreed with the findings. She said her office "has sought
the appropriate balance" between its competing priorities, which
include curbing compensation that would encourage risk-taking,
but also ensuring that companies remain competitive with their
peers and able to repay TARP funds.
Last year, Romero's office found pressure from financial
institutions undermined efforts to limit executive pay at
bailed-out companies, especially as some Treasury officials were
more concerned with getting TARP funds back than in limiting
Romero said the situation has worsened since then. Contrary
to recommendations the inspector general made last year, the pay
czar's office has not developed procedures for how to decide
compensation or when to determine high salaries are warranted.
"Without developing some criteria ... Treasury put itself in
a position of essentially letting the companies drive what pay
Treasury was approving," she said.
Under the rules governing pay for TARP recipients, cash
salaries are supposed to rarely exceed $500,000. But in 2012, 23
of the 69 top executives at TARP recipients had cash salaries
exceeding that level, a number that has quadrupled since 2009,
the report said. And 94 percent received cash compensation of
$450,000 or more.
'A LITTLE EXTRA'
Romero said in one situation, the Treasury approved a pay
raise of $50,000 for one GM employee because the company wanted
to "do a little extra for him."
"This shows the complete lack of appreciation that GM has
for the fact that they're owned by taxpayers, and that Americans
are in tight budgets and don't have any extra" funds, she said.
In another case, the pay czar approved a $200,000 pay raise
for an employee of Residential Capital LLC, the bankrupt
mortgage lending unit of Ally, despite knowing the unit was
about to go bankrupt.
In response to the report, GM and Ally Financial both said
they have complied with all TARP restrictions. Ally said it was
focused on repaying all remaining Treasury funds.
Romero said the government's pay curbs were unlikely to have
a lasting impact.
The report found it likely AIG will return to its "past
practices" in setting high executive compensation now that it
has repaid the government's TARP funds.
"The responsibility shifts to the Federal Reserve Board to
ensure that AIG does not encourage excessive risk-taking through
compensation," the report said.
AIG spokesman Jon Diat said the company is currently
examining what portion of total employee pay should be tied to
incentives, reflecting "our absolute commitment to pay for
performance in a post-TARP environment."