Kenneth Feinberg, pay warrior

By Felix Salmon
October 21, 2009
This is much more aggressive than anybody had dared hope it would be:

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Oh wow. This is much more aggressive than anybody had dared hope it would be:

The seven companies that received the most assistance will have to cut the cash payouts to their 25 best-paid executives by an average of about 90 percent from last year…

And for all executives the total compensation, which includes bonuses, will drop, on average, by about 50 percent…

At the financial products division of A.I.G., the locus of problems that plagued the large insurer and forced its rescue with more than $180 billion in taxpayer assistance, no top executive will receive more than $200,000 in total compensation, a stunning decline from previous years in which the unit produced many wealthy executives and traders.

In contrast to previous years, an official said, executives in the financial products division will receive no other compensation, like stocks or stock options.

Are you feeling outraged? Well, remember that $200,000 a year makes you rich. (Yes, really.) But these guys are effectively civil servants now, and they deserve to be paid as such. And if they have any fiscal responsibility at all, they will have saved up a huge amount of their past compensation to tide them through this fallow period.

What this means is that the people who used to be the 25 best-paid employees are now going to be far down the list, with underlings making much more than they do. That’s OK too. There’s no particular reason why senior executives should always be the best-paid employees in any organization. Quite the opposite, in fact.


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I must be lacking an allele for the populism gene, because how much executives get really doesn’t concern me all that much. The structure of compensation packages and incentives is a concern, but the magnitudes themselves don’t put me in a wall-punching mood. Sure, if you effectively work for the PTB, you should expect to sing their tune, but high-rollers’ pay is pretty much noise compared to wealth theft through government redistribution (largely downward), profligacy and outright waste.

Posted by Mike | Report as abusive

How about citing and linking to your source for that big, news-packed block quotation: A scoop by Steven Labaton in The New York Times.

Posted by Pat Lyons | Report as abusive

This is NOT more aggressive than anyone hoped it would be.

JPM, Goldman, and ALL banks receiving AIG/TARP money need to be included.

This is farce masquerading as force.

Posted by Unsympathetic | Report as abusive

Well this certainly works out wonderfully for Goldman Sachs, not doesn’t it? They continue to make money hand over fist in a consolidated industry, meanwhile their competition is castrated. The competition has severe pay limits, while Goldman can hire whoever they want with lavish pay packages.

The Goldman takeover is nearing completion.

Posted by Phil | Report as abusive

Pat Lyons, see the word “This” in the second sentence of the original post? Put your mouse over it.

Posted by peatey | Report as abusive

* A Nation of No Losers *

We do not let you be a loser!
Your mistakes will be rewarded handsomely.

When you bought a clunker that you should not have, we give you $4,500.
When you bought a mansion that you cannot afford, we’re going to bail you out.
When you bought any inefficient appliance or anything, we’ll pay you no matter how old they are.

When you lost your job, we extend your benefit.

When you do not have saving, we give you free health care.
When you have saving or a job, we take away your health care.

Teenagers, the more babies you have, the more benefits you have.
Drunk drivers, no one will prosecute you as the entire jury and even the judge are drunk.
Old ladies, your driver’s license is also a license to kill.
Black kids, special pass to go to college and jobs.
Prisoners, you will get the flu shots first and free dental care.
Fatsos, do not worry as our up-coming drugs will melt all your fat while you sleep.

All athletes are rewarded with millions for taking drugs.
We voice loudly and disapprovingly on foreign athletes doing same.
It is an America invention!

When you cheated billions, you can retire in a resort-like ‘prison’.
Also, the billions your wife hid is hers – no questions asked.

No other developed country lets their citizens own guns.
NRA and his puppet politicians will give you millions of funny ‘reasons’.

When your company fails, we bail it out.
The executives are rewarded with bailout money for bringing down a company.

You die penniless, we give you $500.
You die with millions, we share your wealth.

The small catch.
We need you to re-elect us in 4 years.

The children cannot vote today, so let’s pass our debts to them.
China does not have a voice here, so let’s pass all the blames to them.

Even the entire world agree with us.
Our president is awarded the Nobel prize for doing nothing for peace, so why you need to work hard?

Posted by TonyP4 | Report as abusive

Won’t the executives quit in droves after this? Why are they going to hang in “through this fallow period”?

Posted by Bob Montgomery | Report as abusive

“At the financial products division of A.I.G., the locus of problems that plagued the large insurer and forced its rescue with more than $180 billion in taxpayer assistance”

AIG didn’t get $180B in taxpayer assistance, their counterparties (like Goldman) did. The shareholders of AIG were forced to accept this deal, with the government paying off their creditors in exchange for 80% ownership. If the government didn’t pay off those claims, the counterparties would have had to negotiate with AIG, and would most likely have ended up with less than they recevied from the government, and AIG shareholders would have retained more equity in their company.

Now the people working at the divisions that remain with AIG are effectively government employees, and probably shouldn’t get any bonuses, because the government only gives out medals to employees who screw up, not bonuses.

Posted by KenG | Report as abusive

Seriously, this is theater. The execs will still find a way to be overpaid, something like….I don’t know….Dividends on special preferred the stock that they cannot sell yet?

You still don’t understand that “rich” is a measure of wealth, not income. Someone who starts with little and earns $200K a year, every year of his or her life, is simply not rich.

Posted by right | Report as abusive

“What this means is that the people who used to be the 25 best-paid employees are now going to be far down the list, with underlings making much more than they do. ”

I am betting that suddenly execs won’t want to pay their underlings so much anymore, bringing about big wage deflation to the entire organization.

They will want very badly to repay TARP. If under this burden, a bank still does not repay TARP it must be in horrible shape.

So many banks have avoided realizing their losses by just refusing to deal with borrowers who have defaulted on their mortgages a long time ago. They are gradually becoming insolvent as more borrowers go delinquent, but they are not realizing these losses. They are doing nothing, because any action on the loan will force a write-down. That makes the profit of the present entirely fictitious, exceeded by unrealized losses which are mounting.

It is appropriate that they are earning much less. Every penny they earn falls in the category of what Galbraith called the ‘bezzle’ since the insolvency of these banks is not appreciated yet.

Posted by Dan | Report as abusive

so, if they quit, do the people that take their place also get the same pay?

Is it possible for nobody to take that job and for some subordinate position to start taking on that responsibility?

Posted by DW | Report as abusive

It bears to keep this in mind:

Without gov’t money, these companies would have gone belly up. Had that happened, the compensation would have received would have been $0.

Posted by John Huss | Report as abusive