Infidels Paradise

CNBC/NYT:

U.S. Said to Order Deep Pay Cuts at Bailed-Out Companies

By: Stephen Labaton

Responding to the growing furor over the paychecks of executives at companies that received billions of dollars in the government’s financial rescue, the Obama administration will order the companies that received the most aid to deeply slash the compensation to their highest paid executives, an official involved in the decision said on Wednesday.

Under the plan, which will be announced in the next few days by the Treasury Department, the seven companies that received the most assistance will have to cut the annual salaries of their 25 best-paid executives by an average of about 90 percent from last year. Their total compensation — including bonuses and retirement contributions — will drop, on average, by about 50 percent. The companies are Citigroup [C 4.42 -0.01 (-0.23%) ], Bank of America [BAC 16.51 -0.50 (-2.94%) ], American International Group [AIG 38.96 -1.47 (-3.64%) ], General Motors, Chrysler and the financing arms of the two automakers.

At the financial products division of the insurance giant, 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, such as stocks or stock options.

And at all of the companies, any executive seeking more than $25,000 in special perks — such as country club memberships, private planes, limousines or company issued cars — will have to apply to the government for permission. The administration will also warn A.I.G. that it must fulfill a commitment it made to significantly reduce the $198 million in bonuses promised to employees in the financial products division.

The pay restrictions illustrate the humbling downfall of the once proud giants, now wards of the state whose leaders’ compensation is being set by a Washington paymaster.

They also show how Washington in the last year has become increasingly powerful in setting corporate policies as more companies turned to the government for money to survive.

The compensation schedules set by Kenneth R. Feinberg, the special master at Treasury handling compensation issues, comes as many other banks that received smaller but significant taxpayer assistance in the last year have been reporting huge year-end bonuses, setting off a new round of recrimination in Washington about bailout of Wall Street.

Since his appointment last June by Treasury Secretary Timothy F. Geithner, Mr. Feinberg has spent months in negotiations with the companies as he seeks to balance compensation concerns against fears at the companies that any huge restrictions in pay could prompt an exodus of executives. Under a law adopted earlier this year, the Treasury Department was instructed to examine the salaries and bonuses for the five most senior executives and their 20 most highly paid employees at companies that have received extraordinary assistance.

Mr. Feinberg has already achieved significant results at several companies. As a result of his discussions, Kenneth D. Lewis, the head of Bank of America who recently was ousted, agreed to forego his salary and bonus for 2009. (He will still receive a pension of $53.2 million, although Mr. Feinberg can issue an advisory opinion challenging it that would carry political weight.) And fearful of a political backlash over the pay of Andrew J. Hall, a successful energy trader who received nearly $100 million last year, Citigroup agreed two weeks ago to sell its Phibro unit that Mr. Hall heads to Occidental Petroleum.

AP:

US plans big pay cuts at bailout firms

AP source: Administration to order pay cuts for top US executives at big bailout companies

By Martin Crutsinger

WASHINGTON — The Obama administration plans to order companies that received huge U.S. government bailouts last year to sharply cut the compensation of their highest paid executives, according to a person familiar with the decision.

The seven companies that received the most assistance will have to cut the annual salaries of their 25 highest-paid executive by an average of about 90 percent from last year, said the person, who spoke on condition of anonymity because it has not been announced.

This person said Wednesday that the Treasury Department will announce the deep pay cuts within the next few days.

Kenneth Feinberg, the special master at Treasury appointed by Obama to handle compensation issues at the seven firms getting exceptional assistance from the government’s $700 billion financial bailout package, is making the pay decisions.

The seven companies are: Bank of America Corp., American International Group Inc., Citigroup Inc., General Motors, GMAC, Chrysler and Chrysler Financial.

Total compensation for the top executives at the seven firms will decline, on average, by about 50 percent, according to the person familiar with the administration’s decision.

At the financial products division of AIG, the giant insurance company which has received taxpayer assistance valued at more than $180 billion, no top executive will receive more than $200,000 in total compensation, the person familiar with Feinberg’s plan said. The administration also will warn AIG that it must fulfill a commitment to significantly reduce the $198 million in bonuses promised to employees in its financial services division, the arm of the company whose risky trades caused its downfall.

The pay restrictions for all seven companies will require any executive seeking more than $25,000 in special benefits — things such as country club memberships, private planes and company cars — to get permission for those perks from the government.

Feinberg’s decisions on pay come after administration officials voiced sharp criticism in recent days of the plans of Wall Street firms to pay huge bonuses at a time when the country is still coping with rising unemployment and the effects of the recession.

Obama senior adviser David Axelrod called the bonuses “offensive” on Sunday.

“They ought to think through what they are doing and they ought to understand that a year ago a lot of these institutions were teetering on the brink and the United States government and taxpayers came to their defense,” Axelrod said in an appearance on ABC television’s “This Week.”