Power of Story Send a Tweet        
- Advertisement -
OpEdNews Op Eds

Pay Czar Put to the Test

By       Message Dustin Ensinger       (Page 1 of 1 pages)     Permalink

Related Topic(s): ; ; ; ; ; ; , Add Tags  Add to My Group(s)

View Ratings | Rate It

opednews.com Headlined to H2 8/15/09

Author 29253
- Advertisement -

Executive pay czar Kenneth Feinberg will face his first true test this week as seven companies that received extraordinary government bailouts are required to present their compensation plans for their top 25 executives.

Officials from American International Group, Chrysler, Citigroup, Chrysler Financial, Bank of America, General Motors and GMAC had to submit their reports Thursday and every indication is that the threat of a financial czar regulating pay did very little to curb the excesses of Wall Street.

One such example is Andrew Hall, Citigroup's energy trader who is set to make a handsome $100 million this year despite the fact that his company has received $45 billion in Troubled Asset Relief Program funds. His compensation package is out of the reach of Feinberg because his contract was signed before the legislation was enacted to provide the pay czar with the authority to regulate pay packages.

Critics claim that Hall should not be rewarded for bad behavior and gambling with taxpayer money. In addition, critics point out that the pay is based partly on profits made speculating in the oil trade. In other words, he made millions profiting off the misfortunes of Americans paying $4 per gallon of gasoline.

- Advertisement -

Some on the right, however, claim that the pay czar is another example of an overly interventionist government. They claim that by curbing executive compensation it will make companies less competitive curtailing their abilities to attract and retain employees.

The fact that he will not be able to please everyone was not lost on Feinberg himself during an interview with ABC News earlier this year.

"Historically, the American people frown on the notion of government insinuating itself into the private marketplace," he told ABC News on June 11, a day after his appointment. "My answer to those critics is I understand that concern, I share that concern, and the question is how do you strike a balance between that legitimate concern and the populist outrage at prior industry compensation practices?"

- Advertisement -

Some have argued that the pay czar should have much more power and leeway after last month, the New York Attorney General's office issued a report demonstrating that excessive pay package were still the norm rather than the exception on Wall Street.

The report also found that nine of the nation's largest banks paid out $1 million or more to roughly 5,000 employees last year. In all, the nation's nine largest banks paid out $32.6 billion in bonuses last year despite recording $81 billion in losses and accepting $175 billion in taxpayer money through the Troubled Assets Relief Program.

Some financial firms even went as far as to pay executives bonuses larger than the entire profit of the company last year.

Goldman Sachs, which received roughly $10 billion in TARP money, made just $2.3 billion last year, but paid $4.8 billion in executive bonuses. Morgan Stanley, which also received roughly $10 billion in TARP money, paid out $4.5 billion in bonuses with a 2008 profit of just $1.7 billion.

JPMorgan Chase, which received $25 billion in TARP money, earned only $5.6 billion last year while paying out $8.6 billion in bonuses.

In response, House Democrats passed a bill designed to ban extravagant pay and bonus packages that encourage excessive risk-taking and pose a systemic risk to the nation's financial system.

- Advertisement -

"Empowering financial regulators to prohibit risky bonus practices by financial firms is not only long overdue, but the responsible thing to do for the taxpayers, who have ended up footing the bill for too many corporate excesses," Speaker Nancy Pelosi, Democrat of California, said in a statement.

Still, huge executive pay packages are likely to continue. In creating the position, the White House handcuffed Feinberg by only allowing him to oversee compensation packages at companies that have received more than one federal bailout. Since then, the White House has been determined not to get specific on what it believes is excessive compensation.

"The president continues to believe, as he has long before he got here, compensation has to be based on -- not on reckless risk-taking, but on value that you're providing and doing so in a way that doesn't jeopardize your firm or taxpayers," White House Press Secretary Robert Gibbs said. "I don't think the American people begrudge that people make big salaries, as long as they're not jeopardizing the goodwill of the public in doing so. And I think that will ultimately be the test of all of this."

 

- Advertisement -

View Ratings | Rate It

opednews.com

Dustin Ensinger graduated from The Ohio State University with a Bachelor of Arts in Journalism and Political Science. He is a contributing journalist for EconomyInCrisis.org.

Share on Google Plus Submit to Twitter Add this Page to Facebook! Share on LinkedIn Pin It! Add this Page to Fark! Submit to Reddit Submit to Stumble Upon Share Author on Social Media   Go To Commenting

The views expressed herein are the sole responsibility of the author and do not necessarily reflect those of this website or its editors.

Writers Guidelines

Contact AuthorContact Author Contact EditorContact Editor Author PageView Authors' Articles
- Advertisement -

Most Popular Articles by this Author:     (View All Most Popular Articles by this Author)

American Government Facilitating in U.S. Titans' Downfall

American Businesses Waging War Against America

China Investing in U.S. Mortgages

New Legislation Aims to Protect Against Toxic Imports

Snatching Up American Assets