AIG is one of three firms who still had TARP money outstanding in 2012. TARP watchdog rips 'excessive' pay

The Treasury Department approved excessive pay for top executives last year at three companies that had been bailed out, the watchdog office for the Troubled Asset Relief Program said in a report Monday.

The report, similar to one released last year, serves as a flash point in the debate over whether the government is being tough enough with executives at companies that received taxpayer funds following the 2008 financial crisis.


Treasury in 2012 cleared pay packages of at least $3 million for more than half of the top 25 employees at American International Group, General Motors and Ally Financial, according to the Office for the Special Inspector General for TARP.

All three firms had TARP money outstanding in 2012.

The Treasury had also set a maximum of roughly $500,000 in cash compensation, according to SIGTARP, but in 2012, the department allowed 70 percent of the executives to be paid in cash at or above the threshold.

By allowing so many executives to make more than $500,000 in cash, not basing their income on long-term stock and approving all pay raises companies sought from Treasury last year, SIGTARP said Monday, Treasury again “failed to rein in excessive pay.”

“Americans have grown to expect TARP companies … to push against Treasury guidelines designed to curb excessive pay for top executives,” said SIGTARP’s Christy Romero. “However, we also expect Treasury to look out for taxpayers who funded the bailout of these companies by holding the line on excessive pay.”

SIGTARP also said that Treasury approved excessive pay raises for executives at Residential Capital, the former mortgage unit under Ally, as the firm was heading into bankruptcy early last year.

In a letter in response to the report, Treasury’s so-called pay czar, Patricia Geoghegan, who is in charge of managing the amount the executives are paid, said compensation at AIG and GM was in line with industry averages and was necessary for the firms to retain the talent necessary to pay back taxpayers.

Geoghegan argued that federal law requires Treasury to approve pay packages that both curb excessive risk-taking and allow the companies to keep employees who can help the firm return taxpayer funds.

The Treasury “has sought the appropriate balance between these sometimes competing considerations in making all of our determinations,” Geoghegan wrote.

One year ago, SIGTARP found that Treasury was not reining in excessive pay at seven companies that still had TARP funds and had cleared compensation worth more than $5 million for 49 top employees while following no set criteria.

Four of those firms, including Bank of America, have repaid the Treasury since. AIG completed its repayment of TARP and Federal Reserve assistance late last year, and Treasury has put in place a plan to exit its investment in GM over the next 12 to 15 months.

Former pay czar Kenneth Feinberg, who stepped down in 2010, had told SIGTARP that the Treasury would limit cash salaries to $500,000 and that in many cases, pay should be below that level. Feinberg also said he would fix executive compensation to long-term restricted stock tied to the performance of the companies.

Geoghegan removed the requirement last year for senior executives, including the CEOs at AIG, GM and Ally at the companies’ request, according to SIGTARP.

Geoghegan said in her letter this was done when a senior executive was expected to retire “in the next few years” or when the position was set to “disappear in the near future,” which was the case with ResCap’s bankruptcy.

Feinberg in an interview Monday criticized the SIGTARP report.

“This is armchair quarterbacking,” Feinberg told POLITICO.

Feinberg said Geoghegan has the discretion to provide waivers to limit when the companies have presented facts to support the need for higher salaries.

He then downplayed the rule’s importance compared with when he held the job because the companies are closer to or already have paid back the bailouts.

“It was important a few years ago,” he said.