How many bailed-out executives does it take to screw the American taxpayer?
Not many, when they have the kind of phony oversight the Treasury Department has been providing for the companies we bailed The latest report by the special inspector general for the Troubled Asset Relief Program (TARP) - known to the rest of us as the Wall Street bailout – portrays the Treasury Department’s bailout overseers as more concerned with coddling corporate titans than they were with protecting taxpayers – even though excessive compensation was a main cause of bankers’ reckless risk-taking in the first place by rewarding short-term performance rather than more sustainable long-term gains.
The damning IG report, issued January 28, outlines a pattern of the Treasury Department’s acting pay czar, Patricia Geoghegan, approving excessive compensation for the corporate executives who took public funds while ignoring previous recommendations from the special IG’s office to implement polices to restrain their pay.
Treasury’s continuing approval of the excessive salaries contradicts President Obama’s vow to rein in bank pay in the wake of bankers’ outrageous bonuses after the bailout. “It does offend our values when executives of big financial firms that are struggling pay themselves huge bonuses even as they rely on extraordinary assistance to stay afloat,” the president said in 2009.
Geoghegan, a retired lawyer for the white-shoe Wall Street corporate law firm Cravath, Swain & Moore, justified her approvals for three companies, AIG, GM and Ally Financial Inc., citing the companies’ concerns [for losing the executives while they worked to get their firms out of debt to the TARP program as quickly as possible. rephrase] AIG has since paid back its TARP money; GM and Ally remain in the program.
Geoghegan approved huge pay hikes for executives overseeing units of the companies that were not doing well – and even going bankrupt.
While her predecessor set guidelines that barred cash salaries at the bailed-out firms exceeding $500,000 except for good cause, the IG found that Treasury in 2012 approved salaries of $3 million or more for 54 percent of the top 69 bailed-out bank executives, while another 23 percent got salaries of $5 million or more.
In her report, the special inspector general, Christy Romero concluded: “While taxpayers struggle to overcome the recent financial crisis and look to the U.S. Government to put a lid on compensation for executives of firms whose missteps nearly crippled the U.S. financial system, the U.S. Department of the Treasury continues to allow excessive executive pay.”
Rather than develop her own analysis of the company’s request for compensation, Geoghegan merely parroted what the company said to her. According to the report, “[Geoghegan’s decisions] were largely driven by the companies’ pay proposals, the same companies that historically, and again in 2012, proposed excessive pay, failing to appreciate the extraordinary situation they were in, with taxpayers funding and partially owning them.”
If the pay czar won’t question the firms’ salaries request, “who else will protect the taxpayers?” Romero asked.
Obviously not the Treasury Department, which was given a chance to address the Inspector General’s criticisms. In its written response, the Treasury Department disagreed with the IG’s findings and conclusions and did not agree to implement any of its recommendations.
The Treasury Department shouldn’t be allowed to thumb its nose at taxpayers in such a flagrant manner, or at the president’s clearly stated wishes. Or does Treasury’s cave-in to the bankers indicate that President Obama changed his mind?
We should demand that Congress conduct a thorough and public investigation into who thwarted the president’s efforts to scale back pay at bailed-out firms.
A great place to start would be contacting the members of the Senate Banking Committee to demand they look into it.