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January 29, 2013

Shock: Treasury Department Approved "Excessive" Pay Raises, Salaries at Bailed-Out Companies

The executives had run GM and AIG so well that they had to come begging to the government for billions in subsidies and direct gifts.

So of course they should have massive million-dollar raises.

And of course Timothy Geithner's Treasury Department should approve those raises.

Ggovernment report Monday criticized the U.S. Treasury Department for approving “excessive” salaries and raises at firms that received taxpayer-funded bailouts during the financial crisis.

The Special Inspector General for the Troubled Asset Relief Program said Treasury approved all 18 requests it received last year to raise pay for executives at American International Group Inc., General Motors Corp. and Ally Financial Inc. Of those requests, 14 were for $100,000 or more; the largest raise was $1 million.

Treasury also allowed pay packages totaling $5 million or more for nearly a quarter of the executives at those firms, the report says.


The report says Treasury bypassed rules under the 2008 bailout that limited pay. Treasury approved raises that exceeded pay limits and in some cases failed to link compensation to performance, it notes.

The rules stated that executives at bailed-out companies could not receive pay higher than the fiftieth percentile of CEO's in non-bailed out companies (that is, they could not be paid as if they were in the top half of executives).

But most executives in bailed-out companies -- 63% -- received pay at or above that level.

The woman who approved these pay rates called the rule a mere "benchmark."

Consider the fact that incentives and disincentives matter, and control behavior. Consider the fact that Treasury is now approving CEO payments in the top half of all executive compensation for executives at companies the taxpayers bailed out.

So what would be the incentive and disincentive structure here, as regards getting government bail-outs? There is hardly any disincentive for an executive to lobby the government for bail-outs and for a fusion of his company with the government -- he can still get paid what the top half of non-balled-out executives are paid.

It's an advertisement for corporatism, isn't it?

There's a process by which "accident" becomes so close to deliberate intent it's almost not worth arguing about the semantics of it. Plainly, Timothy Geithner thinks that corporate welfare, like the regular sort of individual welfare, is nothing to be ashamed about taking, and not the sort of thing we should penalize people for taking.

As with individual welfare, corporations should be encouraged to apply for government benefits, for those times when, goshdarnit, they just can't quite make ends meet.

Sometimes we just need to give an executive at a bailed-out company an extra million dollars per year just to make sure he has heating and food. And birth control, probably.

Compassion (TM). Try it!

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posted by Ace at 01:04 PM

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