SIGTARP: ResCap executives highly paid right before bankruptcy
Ally Financial, a bailed out financial firm that put its ResCap Mortgage subsidiary into bankruptcy, is among three major firms that compensated multiple executives by paying them well above the recommended executive pay limits outlined by TARP pay czar Kenneth Feinberg, an oversight committee for TARP funds alleged Monday.
The Special Inspector General for TARP Christy Romero highlighted Ally Financial, General Motors and AIG in a special report Monday, saying the three firms – with the approval of the Treasury department – returned to paying some of their executives millions of dollars in excessive compensation.
Ally Financial alone is cited by SIGTARP as having three executives at mortgage subsidiary ResCap pulling in compensation that exceeded the 50th percentile in terms of executive pay by approximately $1.7 million, $1.2 million and $850,000. SigTarp says that list includes the pay for ResCap's CEO, which was approved by the Treasury at a time when ResCap was about to file for bankruptcy.
Romero says Feinberg had initially wanted compensation for bailed out firms to be limited to the 50th percentile for executives in similar positions, with cash salaries limited at $500,000 in most cases and the inclusion of long-term stock incentives that strike a balance between incentivizing solid leadership while curbing excessive risk-taking.
SigTarp's review of what the Treasury approved at the bailed out firms in 2012 prompted SIGTARP to concluded, "the Treasury failed to rein in excessive pay for executives."
SIGTAP says 16 of 69 executives tied to bailed out firms received Treasury-approved pay packages of $5 million or greater for 2012. These 16 employees pulled in a combined $107 million in compensation.
37 of 69 executives received $3 million or more in pay and 68 of the 69 impacted by the study made at least $1 million or more. All but one AIG executive was approved for 2012 pay packages worth at least $2 million, SIGTARP said.
"Despite SIGTARP’s previous warning and recommendations in its report last year that Treasury lacked robust criteria, policies, and procedures to ensure Treasury’s guidelines to curb excessive pay are met, Treasury made no meaningful reform to its processes," said SIGTARP.
"Americans have grown to expect TARP companies AIG, GM, and GMAC (Ally) to push against Treasury guidelines designed to curb excessive pay for top executives,” said Christy Romero, Special Inspector General for TARP (SIGTARP).
“However, we also expect Treasury to look out for taxpayers who funded the bailout of these companies by holding the line on excessive pay. In 2012, these three TARP companies 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."
The Treasury responded to the allegations saying: "The draft criticizes OSM for approving 'excessive' pay packages. The IFR requires that OSM strike a balance between limiting compensation and approving pay packages consistent with comparable positions at comparable companies. Therefore, in evaluating the companies’ pay package proposals, OSM reviews market data surveying compensation for comparable positions in comparable entities."
The Treasury added, "AIG’s average total compensation for the Top 25 was at the 48th percentile of similar positions at similar companies and GM’s was at the 50th. Ally, which has historically been higher due to its unique circumstances, was nevertheless mid-way between the 50th and the 75th percentiles."