Financial Regulatory Forum

U.S. pay czar may issue rulings before Oct. 30 deadline

By Reuters Staff
October 21, 2009

By Karey Wutkowski
WASHINGTON, Oct 20 (Reuters) – The Obama administration’s pay czar said on Tuesday he may publicly release his rulings on the compensation packages for top earners at bailed-out firms before his Oct. 30 deadline.

Kenneth Feinberg also said Citigroup’s decision to sell its Phibro unit — and therefore the trader slated to get up to a $100 million paycheck this year — “speaks for itself.”

“Citigroup made a determination in its wisdom,” Feinberg said during a panel discussion at a National Association of Corporate Directors event.

Citigroup’s move to shed its profitable commodities trading business allowed it to duck a ruling from Feinberg on the pay of Andrew Hall, who had become a poster child for large Wall Street paychecks.

Feinberg is charged with approving or renegotiating the pay contracts for the top 25 earners at seven firms that have received “exceptional” taxpayer assistance under the Troubled Asset Relief Program (TARP).

Those companies are Citigroup Inc, American International Group Inc, Bank of America Corp, Chrysler Financial, Chrysler Group LLC, General Motors Co and GMAC Inc.

Feinberg said he will publicly release his rulings “on Oct. 30 or before.”

Responding to a question about whether he has made it difficult for General Motors to attract a chief financial officer, as news reports have suggested, Feinberg said GM has been “extremely cooperative” and that he has worked very closely with them.

He also said the case of Bank of America Chief Executive Ken Lewis, who has announced he is retiring, presented “unique facts” because there was not an issue of retention and he has a prior contract that obligates the company to pay out a significant sum upon his retirement, estimated as high as $125 million.

Feinberg said he “would have been surprised” if the result on Lewis’ 2009 pay was anything other than what the company announced. Bank of America said last week that Lewis will receive no salary or other pay for 2009, at Feinberg’s request.

But questions still linger about how much he will receive as part of his retirement payout.

FORMIDABLE CHASM
Feinberg provided some more insight on how he intends to clamp down on Wall Street pay, but said his rulings may still fall short of public expectations.

He said there is a considerable gap between Wall Street perceptions on pay and Main Street perceptions.

“It is a formidable chasm that I’m not sure can be bridged, although the law requires me to attempt to bridge that chasm,” he said.

Feinberg, who was also the special master in charge of doling out hundreds of millions of dollars to victims of the Sept. 11, 2001 attacks, was appointed in June to the position of “pay czar.”

His appointment followed public outrage over huge bonuses awarded to employees of Merrill Lynch and AIG while taxpayers propped up the firms with billions of dollars.

Feinberg is expected in the coming days to reveal how aggressively he has pushed bailed out companies to rein in pay.

He said on Tuesday that he has spent the past four months working closely with the firms “to try to come up with actual dollars that can be endorsed by these seven TARP recipients.”

He said he believes he has “basically succeeded” at renegotiating pay, even for contracts he did not have explicit authority over.

Contracts signed before Feb. 11, 2009, are generally exempt from Feinberg’s review, according to statute, but Feinberg said he still has three options on how to deal with them.

He said one option is to find that the contracts, under law, are invalid. But he said he is “extremely reluctant to do that.”

The second option is to seek to renegotiate the contract. “I have had some real success in doing that,” Feinberg said.

The third option, if the company refuses to renegotiate the contract, is to consider the pay package when advising how the employee’s pay should be structured in future years.

Regarding his future as pay czar, Feinberg said the statute that created his role has no expiration date. He said companies will only get out from under his jurisdiction when they have repaid TARP funds.

“We’ll finish 2009 and we’ll see where we go from
there,” he said. (Reporting by Karey Wutkowski; Editing by Andre Grenon, Gary Hill) ((E-mail:karey.wutkowski@thomsonreuters.com +1 202 898 8374)) Keywords: FINANCIAL/REGULATION PAYCZAR

Tuesday, 20 October 2009 14:47:30RTRS [nN20441761] {C}ENDS

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