An internal government watchdog on Monday accused the U.S. Treasury Department of approving “excessive” pay packages for bailed-out companies.
The Special Inspector General for the Troubled Asset Relief Program released a report slamming Treasury officials for signing off on 18 pay raises and other 2012 compensation packages for executives at General Motors Co., Ally Financial Inc. and American International Group Inc.
Executives for the taxpayer-rescued companies “continue to rake in Treasury-approved multimillion-dollar pay packages that often exceed guidelines” set in place by TARP officials, according to the report by Special Inspector General Christy Romero’s office.
The Treasury Department said the report was littered with errors and defended its actions, saying it has to maintain a balance between limiting compensation for executives at taxpayer-rescued companies and allowing the companies to “remain competitive.”
Still, the Treasury Department will examine its policies and “consider whether any changes are appropriate,” said Patricia Geoghegan, acting special master for TARP executive compensation, in a written response to the report.
The criticism is sure to trigger a fair amount of sighing at GM headquarters, where executives have repeatedly said that government pay restrictions have hampered the company’s ability to recruit talented top executives. The report revealed that GM CEO Dan Akerson asked Treasury Secretary Timothy Geithner in March to remove the executive pay restrictions for the automaker.
In December, the government spelled out a plan to sell the rest of its GM stock within 12 to 15 months after agreeing to immediately sell 200 million shares back to GM in a $5.5 billion transaction. At the same time, the government eliminated some restrictions on GM, including prohibitions against traveling on company-owned jets.
But a Treasury Department official told the Detroit Free Press that the government does not plan to lift the pay restrictions until it has sold all of its shares. The U.S. owned about 19 percent of GM at the end of 2012.
AIG has repaid all its TARP loans, and the government has sold its shares in the insurance company at a $17.7 billion profit.
The watchdog report recommends that the Treasury Department annually decide whether to slash compensation for the top 25 highest-paid executives based on the previous year’s pay packages. It also said the government should establish procedures for monitoring pay and should tie more compensation to performance. The Treasury Department said it was already taking both of these actions.
“One lesson of this financial crisis is that regulators should take an active role in monitoring and regulating factors that could contribute to another financial crisis, including executive compensation that encourages excessive risk-taking,” the Special Inspector General reported.