Remember those huge bonuses in the wake of the bailouts?

[Direckshun]

Treasury-approved.



Revolving door politics at its worst.

http://www.washingtonpost.com/busine...c=al_comboNE_b

Report: Treasury approved excessive pay for executives at bailed-out AIG, GM and Ally
By Associated Press
Jan 29, 2013 12:02 AM EST

WASHINGTON — A government report Monday criticized the U.S. Treasury Department for approving “excessive” salaries and raises at firms that received taxpayer-funded bailouts during the financial crisis.

The Special Inspector General for the Troubled Asset Relief Program said Treasury approved all 18 requests it received last year to raise pay for executives at American International Group Inc., General Motors Corp. and Ally Financial Inc. Of those requests, 14 were for $100,000 or more; the largest raise was $1 million.

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.

[blaise]

So what?

[mnchiefsguy]

And who was running the Treasury Department at that time?

[FishingRod]

I understand the sentiment but would it also not be fair to ascertain if the pay of the employees “excessive” for a company that was going bankrupt? And who is the “The Special Inspector General” and how much are we paying him or her to tell us we are wasting money?

[petegz28]

Gee, welcome to 2008

[Direckshun]

Wall Street Journal:

The Treasury in 2009 gained power to approve executive pay at firms that received major federal assistance during the financial crisis… Ms. Romero also said the Treasury hasn’t put in place policies that would ensure salaries are within guidelines designed to discourage excessive risk taking by companies receiving bailout aid.

[HonestChieffan]

Its all good

[petegz28]

Originally Posted by Direckshun

Wall Street Journal:

And?

[Amnorix]

When a company is in significant financial distress and its options have been rendered worthless, there is a high incentive for very senior management to leave the company. That is basically the WORST thing that can happen to a company that is already in trouble.

Structuring packages for senior executives to stay through troubled times is very, very standard. I won't comment on how rich those packages were. Maybe there were too much, I dunno. I'm not going to analyze each one and compare to industry averages. The point remains, however, that companies in trouble need to incentivize management to stay.

[Direckshun]

Originally Posted by Amnorix

When a company is in significant financial distress and its options have been rendered worthless, there is a high incentive for very senior management to leave the company. That is basically the WORST thing that can happen to a company that is already in trouble.

Structuring packages for senior executives to stay through troubled times is very, very standard. I won't comment on how rich those packages were. Maybe there were too much, I dunno. I'm not going to analyze each one and compare to industry averages. The point remains, however, that companies in trouble need to incentivize management to stay.

Interesting. Hmm...

[petegz28]

Originally Posted by Amnorix

When a company is in significant financial distress and its options have been rendered worthless, there is a high incentive for very senior management to leave the company. That is basically the WORST thing that can happen to a company that is already in trouble.

Structuring packages for senior executives to stay through troubled times is very, very standard. I won't comment on how rich those packages were. Maybe there were too much, I dunno. I'm not going to analyze each one and compare to industry averages. The point remains, however, that companies in trouble need to incentivize management to stay.

Yes but common sense says that if the senior managment was so important and worth keeping then how did they let the company get in a bad way in the first place?

[Taco John]

Originally Posted by petegz28

Yes but common sense says that if the senior managment was so important and worth keeping then how did they let the company get in a bad way in the first place?

No. That's not common sense. That's yokel sense.

In most cases, the management being incentivized to stick around have been brought in to clean up the mess of previous management. This was the case in the Hostess fracas.

[petegz28]

Originally Posted by Taco John

No. That's not common sense. That's yokel sense.

In most cases, the management being incentivized to stick around have been brought in to clean up the mess of previous management. This was the case in the Hostess fracas.

Having gone through such a scenario the managment that ran shit into the ground was kept around to magically fix things.

[blaise]

Originally Posted by petegz28

Having gone through such a scenario the managment that ran shit into the ground was kept around to magically fix things.

Ok, so you still don't know that to be true of the people that received bonuses in the OP. And you don't know what the financial state of the companies were before the people took over, I bet. And I doubt you know if they received bonuses for mitigating some of the disastrous results.
Neither do I.

[petegz28]

Originally Posted by blaise

Ok, so you still don't know that to be true of the people that received bonuses in the OP. And you don't know what the financial state of the companies were before the people took over, I bet. And I doubt you know if they received bonuses for mitigating some of the disastrous results.
Neither do I.

Generally speaking if you are paying to keep someone then they weren't brought in to fix things. Though I cede that you make a fair argument.