Oct 22 2009
Feinberg Aims to Cut Pay at “TARP Seven”
Pay czar Kenneth Feinberg plans to use the authority granted him by Congress in February. He wants to cut the compensation of the 25 top executives at each of the seven companies that still hold TARP money. The affected companies are AIG, Bank of America, Chrysler, Chrysler Financial, Citigroup, General Motors and GMAC.
Feinberg recommends trimming 2009 salaries by 90 percent and reducing total compensation–most notably bonuses–by 50 percent per person. He’ll consider 2010 at a later time.
Under the law passed by Congress, he could have trimmed pay at any company that receives federal funding. However, he has chosen so far to leave alone corporations, such as Goldman Sachs and JP Morgan, that have repaid TARP funds.
Predictably, many pundits are decrying the proposal. They say it’s a slippery slope and another case of government intervention gone too far.
They’re wrong. No one would bat an eye if Warren Buffett, Donald Trump or Sir Richard Branson bought majority ownership of a failing company and then hired someone to clean house. Better that than letting the whole corporation collapse, like Lehman Brothers.
That’s exactly what is happening here. The U.S. government owns controlling interest in the seven companies through mutual agreement. President Obama, leader of the majority shareholder group (the U.S. taxpayers), has hired someone to streamline operations.
There is no such thing as “too big to fail.” These companies should have allowed to wither and die if they could not function within the free market. Better that than to let the government grab these tar babies. How is separation going to be possible?
Finally, a lot of experts believe cutting pay will cause the “best and brightest” to go to other companies. Those individuals have already proven they can fail spectacularly. Let them do it on someone else’s dime next time. Not mine.
Big Shots, don’t let the door hit you as you leave. To be high enough on the corporate ladder as to be affected by Feinberg’s recommendation means you had a hand in the worst economic crisis since the Great Depression. You’ve already been given more sympathy and mercy than you deserve. If you want to join your unemployed brethren, go for it. If you want to fix the mess you created, stop whining and get to it.
