President Obama complained about Wall Street "fat cats" on CBS's 60 Minutes, but actions taken this past week by pay czar Kenneth Feinberg won't lessen the weight gain.
Earlier this fall, Feinberg laid down the law to executives of financial companies that had been bailed out by taxpayers. As with all government regulations the rules were complicated, but essentially meant that executives would be "capped" or limited to $500,000 in cash salary. AIG executives, including CEO Robert Benmosche, who got special dispensation to earn $10.5 million a year, threw a tantrum about the regulations and threatened to resign. Faced with so much resistance, Feinberg backed down, despite his tough reputation.
"Due to the unique financial circumstances currently found to exist at AIG," restructuring the 2009 contracts would not be in the public interest, said Feinberg's recent report. AIG will be permitted to pay retention bonuses to top executives deemed "particularly critical."
Feinberg's report said 12 executives will be exempt from the salary cap. The biggest firms affected by the cap are: Citigroup, which is about to pay off its TARP loans so it shouldn't be a problem in the future; and GMAC and General Motors. GM is searching for a new CEO who presumably, like Benmosche, will not be bound by the $500,000 salary cap.
So that leaves AIG. Since the insurer isn't going to pay off the $61 billion it owes taxpayers, its executives had to take a different tack. Their threat to abandon the executive office set Feinberg back on his heels, and essentially made Obama's threats to curb Wall Street's bad behavior an empty one. Not even a recession can separate executives from their big paychecks.