I have been covering Washington D.C. for 21 years, so it takes quite a bit to shock me.
This week, I moved into the “I am shocked” category. I was shocked by a government report and dismayed that the press corps did not do more when the report was published. I can even be a lazy press commentator and not have to do much writing about this report because quoting it is unsettling enough.
The report written by Christy Romero, the special inspector general of the Troubled Asset Relief Program, has a title that at first blush looks like it came from one of the slanted Washington, D.C., think-tanks: “Treasury Continues Approving Excessive Pay for Top Executives at Bailed-Out Companies.” I missed it the first go-around in January of 2012, and this is the second time a similar report has been issued, hence the words in the title “continues approving.” The report was sent as memorandum for Secretary of the Treasury Tim Geithner.
When companies were bailed out by you and me – the taxpayers – a special master for TARP executive compensation was created. Kenneth Feinberg, well known for overseeing government payouts from Katrina and other national problems, was the first paymaster, also known as the “pay czar.” He has been succeeded by Patricia Geoghegan, and the report takes aim right at her. According to the summary, the first report said Feinberg “could not rein in excessive compensation at the seven companies that received exceptional TARP assistance” because the most important goal “was to get companies to repay TARP.”
Feinberg had attempted to establish criteria for granting exceptions to an edict that cash salaries should not exceed $500,000 and that total compensation should target the 50th percentile. The data released by this report details how this benchmark has been ignored.
The special inspector general found that Geoghegan’s office had “approved pay packages of $3 million or more for the 54 percent of the top 25 employees of American International Group (AIG), General Motors Group (GM) and Ally Financial Inc. (Ally, formerly General Motors Acceptance Corporation, Inc.).” Of these, says the report, 16 of 69 top executives “received Treasury-approved pay packages of $5 million or more.
Companies had initially complained that by not paying large salaries and high compensation packages, good talent would go elsewhere. So, early on at TARP a deal was made to have long-term incentive-based stock. This clearly went out the window, and the report says Geoghegan’s office relinquished its authority to the companies that “have their own best interests in mind.”
Inspector General Romero’s report puts the blame right where it needs to go, saying, “By proposing and negotiating for excessive 2012 pay, these executives continue to lack an appreciation for their extraordinary situations and fail to view themselves through the lenses of companies substantially owed by the U.S. government.”
As I stated above, a cash limit of $500,000 was imposed. Geoghehan’s office allowed 70 percent of the top 25 employees at those three companies to get the full to the limit of $500,000! Romero’s report asks, “If the pay czar is not even willing to independently analyze the high cash salaries for 23 employees, who else will protect taxpayers?”
So, what is to be done? Two recommendations of the report should be taken up by the executive branch and also Congress. The first is that there should be guidelines, policies and procedures to ensure guidelines are met. The second recommendation is that the government should take an “active role in monitoring and regulating factors that could contribute to another financial crisis, including executive compensation that includes risk taking.” Yes, especially since the very same taxpayers that lent these companies money have a median household income of about $50,000.
If this were Africa, we would be reviewing this report and screaming, “Corruption!” But, sadly, this is America, where we were occupied this week by a sexy story, the gun hearings and partisan wrangling of the debt ceiling. The press took little notice. Although we have a free press, we have a pack-mentality press that should have had this report in the headlines.