The U.S. Treasury Department “failed to rein in excessive pay” at bailed-out American International Group Inc. (AIG:US), General Motors Co. (GM:US) and Ally Financial Inc. (ALLY:US), the rescue program’s inspector general said.
Sixteen of the 69 top employees at the three companies (AIG:US) had 2012 pay packages worth at least $5 million and all but one had total compensation of $1 million or more, the Special Inspector General for the Troubled Asset Relief Program said in a report today. Since much of the pay is in stock, only three of the executives had cash salaries of more than $1 million.
Despite previous warnings by the special inspector general that the Treasury “lacked robust criteria, policies and procedures” to curb excessive pay, the department “made no meaningful reform to its processes,” according to the watchdog known by the acronym SIGTARP. “SIGTARP found that once again, in 2012, Treasury failed to rein in excessive pay.”
Christy Romero, the special inspector general, said AIG, GM and Ally “convinced Treasury to roll back its guidelines by approving multimillion-dollar pay packages, high cash salaries, huge pay raises, and removing compensation tied to meeting performance metrics.”
“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,” she said in an e-mailed statement.
Patricia Geoghegan, the Treasury’s acting special master for TARP executive compensation, said she disagreed with the special inspector general’s findings.
The Treasury “has limited excessive compensation while at the same time keeping compensation at levels that enable” the three companies to remain competitive and repay their bailout money, Geoghegan said in a Jan. 25 letter to Romero.
She said a draft of the SIGTARP report was “inaccurate in numerous ways” and Treasury’s comments and objections were largely ignored.
Pay for top executives at seven bailed-out companies was scrutinized and restricted by the Treasury special master’s office starting in 2009. AIG, Bank of America Corp., Citigroup Inc., Chrysler Group LLC and Chrysler Financial Corp. have left TARP and are no longer subject to the special master’s rulings.
“AIG worked closely with the Special Master to make sure we paid our employees market-based compensation, including appropriate amounts of incentive pay,” Jon Diat, an AIG spokesman, said in an e-mailed statement.
AIG, the insurer that left TARP in December, has said pay limits imposed as part of a rescue package that swelled to $182.3 billion harmed the New York-based company’s ability to attract, retain and motivate employees. Proceeds from the Treasury’s sale of its remaining AIG shares boosted U.S. profit on that bailout to $22.7 billion.
AIG’s managers may now get more incentive pay, Chairman Steve Miller said in a Bloomberg Television interview last week. He said the compensation committee met to design the bonus program, and targets may be set within two months.
“AIG is evaluating certain pay structures to ensure the appropriate allocation of incentive compensation as a portion of total pay to employees that reflects our absolute commitment to pay for performance in a post-TARP environment,” Diat said.
AIG Chief Executive Officer Robert Benmosche, 68, received less than some peers in 2011. He got about $14 million in total compensation, including a $3 million salary and $10.9 million in stock awards, according to a regulatory filing. Jay Fishman, the CEO of Travelers Cos., the only insurer in the Dow Jones Industrial Average, received $16.5 million. John Strangfeld, CEO of Prudential Financial Inc. (PRU:US), the No. 2 U.S. life insurer, got $23.7 million.
The Treasury is seeking to sell its remaining shares in GM in the next 12 to 15 months to end its ownership in the automaker, which received $50 billion in taxpayer money in a bailout that began in 2009.
“General Motors is performing at its highest levels in years with a string of 11 profitable quarters (GM:US) and soon will have one of the industry’s newest product lineups, while complying with all TARP restrictions and Special Master’s decisions,” Dave Roman, a GM spokesman, said today in an e-mail.
Ally, the auto lender that received a $17.2 billion rescue, is the non-bankrupt parent of bankrupt Residential Capital LLC. ResCap filed for reorganization in May. An examiner is due to issue a report in April concerning a proposed settlement between Ally and ResCap.
“Ally is focused on strengthening its leading auto services and direct banking franchises, while also executing on a number of transformative strategic actions that will best position the company to repay the remaining Treasury investment,” Ally spokeswoman Gina Proia said in an e-mail. “Ally’s executive compensation is in line with all TARP restrictions and Special Master determinations.”
The Congressional Budget Office estimated in October that TARP would ultimately cost taxpayers $24 billion, less than the $109 billion projected in March 2010.
Congress authorized $700 billion for the financial rescue in October 2008, and the bill was signed into law by President George W. Bush. About $418 billion of the $700 billion has been used, and the Treasury has recovered $389 billion.
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