What is pay czar Kenneth Feinberg up to these days? He’s claiming broad, unlimited power to retroactively “claw back” executive compensation paid to employees of TARP recipients. Open sky. L’czar c’est moi.
Via Reuters, here are the details of the confiscatory special master’s new designs:
Kenneth Feinberg, the Obama administration’s pay czar, said on Sunday he has broad and “binding” authority over executive compensation, including the ability to “claw back” money already paid, and he is weighing how and whether to use that power.
Feinberg told Reuters that Citigroup Inc included the contract of energy trader Andrew Hall in submissions due Friday by seven major companies still locked in the federal government’s TARP Program.
Feinberg said he hasn’t looked at Hall’s contract, which reports have said could pay him as much as $100 million this year.
“Whether I have jurisdiction to decide his compensation or not, we will take a look and decide over the next few weeks,” Feinberg said after speaking at a public forum in Martha’s Vineyard, Massachusetts, part of a newsmaker series hosted by the Martha’s Vineyard Times newspaper.
Feinberg has been consulting with seven companies that have yet to pay back money they borrowed from the government, including Citi, American International Group Inc, Bank of America Corp, Chrysler Financial, Chrysler Group LLC, General Motors Co and GMAC Inc.
Those companies faced a deadline of Friday of submitted proposals to Feinberg for their top 25 employees.
Feinberg said on Sunday that decisions he makes will be “binding,” but the law limits his power over contracts signed before February 11, 2009.
He also said he has the authority to use a “clawback” provision to go after compensation for executives from any company that received money from the U.S. Treasury’s Troubled Asset Relief Progr.am (TARP).
It appears that the regs he is talking about are here.
And it appears that no one can stop him from interpreting those regs any way he pleases:
“I have the discretion, conferred upon by Congress, to attempt to recover compensation that has already been paid to executives not only in these companies, but in any company that received federal assistance,” Feinberg said during his remarks.
Asked by Reuters if he could use that ability to target a firm like Goldman Sachs Group Inc, which paid back $10 billion in bailout money, Feinberg said: “Anything is possible under the law.”
Citigroup is claiming exemptions for two executives, and the White House is in a pickle:
On Friday, Citigroup, which is facing a government deadline, submitted the pay packages for its 25 senior executives and highest-paid employees. People involved in that process said Citi advised the Treasury that an energy trader named Andrew J. Hall, due $98 million, was exempt from federal review, and so was a second unidentified trader who received more than $30 million.
Mr. Hall, 58, and the other trader were paid under an employment contract signed last October, said a person briefed on the contract who was granted anonymity because of not being authorized to disclose the information. That was before a law went into effect instructing the Treasury secretary, Timothy F. Geithner, to examine the pay packages of top executives at companies that received exceptional bailout assistance from the government.
In recent weeks, Treasury officials had warned top Citigroup executives that the administration would reject the contract, hoping to persuade the bank to rewrite it. Now the bank’s decision presents the administration with an awkward political choice between doing little or doing nothing about the contract.
Treasury officials could issue a nonbinding advisory opinion critical of the pay package that that would carry no legal weight but could ameliorate some of the expected political fallout. Or it could do nothing and face the wrath of the public and Congress, which will consider legislation to limit executive pay after its August recess.
Chapter 6 of Culture of Corruption details the myriad ties between Citi, the Obama White House, and the Obama Treasury Department.
Stay tuned. And let this be a continuing lesson to corporations considering federal bailout money in the future:
Government strings are like STDs. They last forever.