Treasury also allowed pay packages totaling $5
million or more for nearly a quarter of the executives
at those firms, the report says.
Also noted: A $200,000 raise was approved for an
executive of Ally’s mortgage-lending subsidiary
Residential Capital LLC just weeks before ResCap filed
for bankruptcy protection. Ally was GM’s financial arm
until it was taken over by the government in the
bailout.
“We ... expect Treasury to look out for taxpayers who
funded the bailout of these companies by holding the
line on excessive pay,” said Christy Romero, the special
inspector general for TARP. “Treasury cannot look out
for taxpayers’ interests if it continues to rely to a
great extent on the pay proposed by companies that have
historically pushed back on pay limits.”
The report says Treasury bypassed rules under the
2008 bailout that limited pay. Treasury approved raises
that exceeded pay limits and in some cases failed to
link compensation to performance, it notes.
Romero said the guidelines say compensation should
not exceed the 50th percentile of pay for executives in
similar positions at other financially distressed
companies.
But pay surpassed that level for 63 percent of the
executives whose pay was approved, according to the
report.
The report also said Treasury officials had been
warned a year ago that the department needed to reform
its procedures to ensure that the pay guidelines are
followed.
Patricia Geoghegan, the Treasury official who
approved the raises, disputed the findings of the
report.
In a letter to Romero, Geoghegan said it’s unfair to
call the pay excessive. She said Treasury must strike a
balance between limiting compensation and approving pay
packages that are consistent with executives in similar
jobs.
Geoghegan called the 50th percentile “a benchmark.”
She noted that some pay packages at the three companies
exceeded that level in 2012. But she said more than half
at AIG were at or below that level, while nearly half at
GM and Ally were below it.
A Treasury Department spokesman had no additional
comment Monday and referred to Geoghegan’s letter.
The three companies received a total $248.7 billion
in the financial bailout in 2008. AIG has repaid the
$182 billion it received; GM still owes $21.5 billion on
the $49.5 billion it received and Ally owes $11.4
billion on $17.2 billion in aid.
In a statement, AIG said it has overhauled its
compensation practices to align pay with the company’s
goal of balancing profit and risk. The company also is
reviewing pay policies to ensure that compensation is
tied to performance, AIG said.
GM and Ally said they are complying with all pay
restrictions under the bailout rules.
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