The Special Inspector General for the Troubled Asset Relief Program is furious at the Treasury. And the extent of that fury came into sharp focus when SIGTARP emailed not only today's testimony of top TARP cop Christy Romero before the house oversight committee, but a reminder copy of a report from last month.
This reminder report, the first time not given enough attention by journalists, is titled 'Treasury Continues Approving Excessive Pay for Top Executives at Bailed-Out Companies'.
In short, SIGTARP is fed up with inflated executive pay going to financial firms that benefitted from the bailout. But it is more irked by the inability of the Treasury to follow its recommendations to put a stop to that excessive pay.
In June 2009, Treasury issued a rule to implement the standards required by the TARP law, as well as the subsequent Recovery Act legislation that gave Treasury discretion to adopt additional standards on executive compensation. In the rule, Treasury created the Office of Special Master for TARP Executive Compensation.
OSM has jurisdiction over compensation at companies that stood out from the more than 700 TARP recipients because of the amount and nature of their exceptional bailout. OSM sets pay for Top 25 employees at these TARP exceptional assistance recipients.
The OSM should limit that pay, but it's not very good at doing it's job, unlike SIGTARP it seems.
"In our oversight role, SIGTARP has made 114 recommendations to Treasury to prevent fraud, waste and abuse related to TARP," Romero said today. "Treasury has not implemented 50 of our recommendations to date."
The report from January highlights the frustration.
"SIGTARP found that once again, in 2012, Treasury failed to rein in excessive pay. In 2012, OSM approved pay packages of $3 million or more for 54% of the 69 Top 25 employees at American International Group [stock AIG] [/stock], General Motors [stock GM] [/stock] and Ally Financial — 23% of these top executives (16 of 69) received Treasury-approved pay packages of $5 million or more, and 30% (21 of 69) received pay ranging from $3 million to $4.9 million."
So why are the firms getting away with this? Well the answer to that lies in the core complaint SIGTARP holds against the OSM and Treasury.
In cases where a company claims an employee should be paid cash salary of more than $500,000 "because of added duties," OSM does not look to see what those duties are, much less compare them to previous duties.
In testimony today, Acting Special Master for TARP Executive Compensation Patricia Geoghegan offered the Treasury viewpoint: "the Special Master's office has worked to achieve a balance between limiting compensation, while at the same time keeping compensation at levels that enable the exceptional assistance companies to remain competitive and repay taxpayers."
But it's a matter of perspective. What SIGTARP considers excessive pay is clearly not what the OSM and by default Treasury, consider excessive pay.
"Acting Special Master Geoghegan said OSM does not spend that much time on a “small decision” like whether to continue to give an individual $600,000," SIGTARP reports, barely concealing the fury.