What’s a Bailed-Out Banker Really Worth?
By STEVEN BRILL
NYT
Last August, as midnight approached on a Friday, two Treasury Department staff members sat in a cramped basement office in the Treasury Building next to the White House and watched as their e-mail in-boxes filled up. The aides worked for Kenneth Feinberg, the government’s special master for executive compensation, and they were awaiting submissions from companies that had received (and not yet paid back) billions in what federal regulations call “exceptional assistance” from the government’s Troubled Asset Relief Program, or TARP. The government had the authority to set compensation levels at those seven TARP recipients, and this was the companies’ opportunity to plead for salaries and bonuses for each of its top 25 executives. Chrysler Financial and General Motors submitted their proposals — about 2,000-plus pages each — a few days before. Now, like college kids crashing a term paper, the other five — A.I.G., Bank of America, Chrysler, Citigroup and General Motors Acceptance Corporation — were frantically trying to get their pitches into Treasury’s digital in-box by the Aug. 14 deadline.
Feinberg, a 64-year-old lawyer with an often-booming voice and pronounced Boston accent, has said jokingly that he loves “jobs that seem so hard that they have a low bar for success.” This one, for which he is not accepting a salary, fits the bill. In proposals from the TARP Seven and in confrontations that followed the August deadline, Feinberg would hear arguments that Main Street America would find incredible. Citigroup and Bank of America, for example, concluded that everyone in their executive suites was above average when compared with peers at other giant banks that didn’t need a bailout. Or there was A.I.G.’s behind-closed-doors argument against Feinberg’s directive to pay its top people in large part with A.I.G. stock. The company’s reasoning? That the stock — trading briskly at the time at around $40 on the New York Stock Exchange — was actually worthless. Yet Feinberg would be pushed by staff at Treasury and officials of the Federal Reserve Bank to accept that argument and others in order to keep the captains of these broken companies from quitting.
Feinberg’s other constituency — the rest of America, as represented by members of Congress — wasn’t so eager to placate the executives. Barney Frank, the Massachusetts Democrat who is the chairman of the House Financial Services Committee and whose views on this flash-point issue reflected a broad sentiment, told me recently that his attitude was, and is: “Let ’em quit. Who needs them? How can we reward the same people who screwed up in the first place?” Indeed, if to many on Wall Street the spectacle of their best and brightest reduced to submitting payroll permission slips to government bureaucrats was a dangerous exercise in populist pandering, to almost everyone else it was an overdue reckoning.
(Continued here.)
NYT
Last August, as midnight approached on a Friday, two Treasury Department staff members sat in a cramped basement office in the Treasury Building next to the White House and watched as their e-mail in-boxes filled up. The aides worked for Kenneth Feinberg, the government’s special master for executive compensation, and they were awaiting submissions from companies that had received (and not yet paid back) billions in what federal regulations call “exceptional assistance” from the government’s Troubled Asset Relief Program, or TARP. The government had the authority to set compensation levels at those seven TARP recipients, and this was the companies’ opportunity to plead for salaries and bonuses for each of its top 25 executives. Chrysler Financial and General Motors submitted their proposals — about 2,000-plus pages each — a few days before. Now, like college kids crashing a term paper, the other five — A.I.G., Bank of America, Chrysler, Citigroup and General Motors Acceptance Corporation — were frantically trying to get their pitches into Treasury’s digital in-box by the Aug. 14 deadline.
Feinberg, a 64-year-old lawyer with an often-booming voice and pronounced Boston accent, has said jokingly that he loves “jobs that seem so hard that they have a low bar for success.” This one, for which he is not accepting a salary, fits the bill. In proposals from the TARP Seven and in confrontations that followed the August deadline, Feinberg would hear arguments that Main Street America would find incredible. Citigroup and Bank of America, for example, concluded that everyone in their executive suites was above average when compared with peers at other giant banks that didn’t need a bailout. Or there was A.I.G.’s behind-closed-doors argument against Feinberg’s directive to pay its top people in large part with A.I.G. stock. The company’s reasoning? That the stock — trading briskly at the time at around $40 on the New York Stock Exchange — was actually worthless. Yet Feinberg would be pushed by staff at Treasury and officials of the Federal Reserve Bank to accept that argument and others in order to keep the captains of these broken companies from quitting.
Feinberg’s other constituency — the rest of America, as represented by members of Congress — wasn’t so eager to placate the executives. Barney Frank, the Massachusetts Democrat who is the chairman of the House Financial Services Committee and whose views on this flash-point issue reflected a broad sentiment, told me recently that his attitude was, and is: “Let ’em quit. Who needs them? How can we reward the same people who screwed up in the first place?” Indeed, if to many on Wall Street the spectacle of their best and brightest reduced to submitting payroll permission slips to government bureaucrats was a dangerous exercise in populist pandering, to almost everyone else it was an overdue reckoning.
(Continued here.)
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