The Treasury Department ignored its own guidelines on executive pay at firms that received taxpayer bailouts and last year approved compensation packages of more than $3 million for the senior ranks at General Motors, Ally Financial and American International Group (AIG), according to a watchdog report released Monday.
The report from the special inspector general for the $700 billion Troubled Asset Relief Program (TARP) said the government’s pay czar signed off on $6.2 million in raises for 18 employees at the three companies.
The chief executive of a division of AIG received a $1 million raise, while an executive at GM’s troubled European unit got a 100,000 raise.
In one instance, an employee of AIG’s Residential Capital was awarded a $200,000 pay increase weeks before the subsidiary filed for bankruptcy.
“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, special inspector general for TARP.
The report accuses Patricia Geoghegan, Treasury’s acting special master for compensation, of sidestepping protocol that allowed for pay packages at the midpoint of comparable firms.
Geoghegan said the audit is riddled with inaccuracies and mischaracterizes the data provided to the inspector general.
Compensation at bailed-out firms became a lightning rod during the financial crisis. A public outcry erupted in 2009 when AIG paid some $168 million in retention bonuses to employees at Financial Products, the unit whose complex deals had crippled the insurance giant.
The nation’s biggest banks, including Morgan Stanley and JPMorgan Chase, also came under fire for doling out six-figure salaries and bonuses from taxpayer funds.
Treasury’s compensation chief at the time, Kenneth Feinberg, scolded companies for what he called “ill-advised” payouts to executives and vowed to curb lavish pay. Nonetheless, Treasury allowed seven firms to bypass pay restrictions from 2009 to 2011, according to a report issued by the special inspector general in January 2012.
Monday’s report evaluates Treasury’s actions since then, with stinging allegations of lax oversight and supervision.
Romero said Geoghegan deferred to the pay proposals provided by the companies, approving raises above pay limits and failing to link compensation to performance.
According to the report, Treasury approved total pay packages exceeding the 50th percentile by more than $37 million for nearly two-thirds of the top 25 employees of AIG, GM and Ally. The three firms combined received nearly $250 billion in TARP funds. Only AIG has fully repaid its $182 billion bailout.