Ken Feinberg on Holding the Purse Strings

Kenneth Feinberg will evaluate the salaries of 25 executives at the seven largest firms receiving bailout assistance. Special master at the Treasury Department
AP Photo/Charles Dharapak

Kenneth Feinberg has a most unusual job, and a most unusual title to go with it: "Special Master" is what he's called. Richard Schlesinger is about to show us why . . .

To paraphrase the ad from a now-extinct financial firm, when Ken Feinberg speaks, Wall Street listens.

It has to. He controls what some of the top people there make.

But try not to call him the "pay czar."

"You don't like the term 'czar,' 'pay czar'?" Schlesinger asked.

"No," Feinberg said. "That implies that I'm issuing imperial edicts on pay."

Bankers probably have other names for him. Most recently, armed with a Congressional statute, he showed the Masters of the Universe the New World Order, slashing pay and perks at financial institutions that took federal bailout money.

But for a Czar, he's very unassuming.

"There was never any authority of mine beyond 25 people in each of those companies," he said.

But what a group of 25 they were - some of the richest men in the world, running some of the most powerful companies in the world . . . until Ken Feinberg.

"Well, they put on their jacket like you and I do," he said. "We try and implement the statute."

Just like that. Matter of fact. It's his style. And it's served him well over the past 25-plus years as he's carved out his role as the go-to guy for the very toughest jobs.

More than a learned attorney, he's become an expert assessor of the value of life itself. He wields the kind of power with which no politician would ever be trusted.

His Massachusetts roots are as obvious as his accent. He was born in a working class section of Brockton, outside Boston.

"My father was a tire salesman in Brockton," Feinberg said. "My mother was a bookkeeper at the local community center. You learn about friendship in a small town like that, and you learn how important it is to respect other people."

Before long, other people began to respect him . . . important people. He became Ted Kennedy's chief of staff before he left to become a Washington lawyer.

He became a star as a mediator in 1984. Vietnam veterans had sued the manufacturers of the defoliant Agent Orange; they said it made them sick. The companies denied it all.

After an eight-year legal fight yielded nothing, Ken Feinberg negotiated a settlement in just 6 weeks.

"The first day that I mediated that case, I said to them together, 'Chemical companies, what are you willing to put up?' They said together, 'All eight of us will put up $25,000.' Then I asked the Vietnam veterans. They said, 'We want $1.2 billion.'"

"If it were me, Day One, one side said $25,000 and the other side said $1.2 billion, I would think . . . "

"You know, you have to be a little bit better chess player, Richard," Feinberg said. "If one side says $25,000 and one says $1.2 million, there's plenty of room to move. They're here to participate."

But that case was nothing like what came next. After the 9/11 attacks, he volunteered to decide how much money each family of victims would get from a compensation fund Congress set up.

Feinberg was used to dealing with lawyers representing victims. Here he came face-to-face with unfiltered emotion and anger.

"You have an arrogance about you that is so painful you can't possibly believe it.".

"Oh, I misjudged that," he said. "For the first year, I was at odds with these families. I had a lawyer's disposition in trying to deal with families in grief and anger."

Congress ordered Feinberg to use each victim's earnings to help establish the value of every life lost. The lives of a banker and busboy were valued differently, even though they both ended the same way.

"Money equals economic value; it does not equal moral worth," he said. "I tried to explain to these families, quite unsuccessfully, that I was not attempting at all to value the moral integrity or the intrinsic worth of any individual. I was simply applying that cold calculus."

"I think he was caught off-guard emotionally and personally by how affected he was by 9/11," said Michael Feinberg, the oldest of his three children. "And it changed him, I think. Any free time he had was spent listening to music."

Ken Feinberg explained, "Because from 7:00 in the morning to 7:00 at night, you are dealing with the fallout from the most barbaric, the most callous tragedy in American history. You got to escape somehow from that or you'll go mad."

"And when he would come to his friends or his family members, he would bring issues that he had and he would say, 'How would you solve this?'" Michael said. "He was always looking for ways to solve the problem."

"It was not his job to leave my three children and myself alone for the rest of our lives," one family member said.

He worked for almost three years, never took a penny in pay, and gave out about $7 billion. All but a handful of families eventually decided Ken Feinberg represented their best option.

"Although it is difficult, Mr. Feinberg, the fund has treated my family very reasonably and very fairly," one family member said.

But he's still haunted by one woman who couldn't handle any of it.

"She lost about $2 million tax-free by being so paralyzed by grief she couldn't even sign the application that I brought to her doorstep," he said. "How do you forget stories like that?"

"But that one seems to have been one the one that really sticks with you," said Schlesinger.

"It sticks with me because I failed, you see."

But he got high enough marks for handling the 9/11 fund that about 3 years later, when a student gunman killed 32 people and himself at Virginia Tech, authorities turned to Feinberg once more to decide who deserved how much,

"Virginia Tech involved the serendipitous, haphazard nature of death," Feinberg said. "Here's a school, rural Virginia. You say to yourself, 'Nowhere are you assured of being safe, no matter what you do.'"

And now the man who dealt with people who lost so much . . . is dealing with people who WANT so much.

When Congress bailed out the banks, it ordered the Treasury Secretary to control the pay of the top executives. And Secretary Timothy Geithner went to the go-to guy . . . Ken Feinberg.

"It doesn't have the same impact as 9/11 or Virginia Tech. How could it?" Feinberg said.

"How do you avoid looking at these guys on the other side of the table and say, 'You're just a bunch of greedy so-and-so's," asked Schlesinger.

"No. You don't say 'They're greedy so-and-so's.' You say, 'You're vastly overpaid.'"

However he says it, few bank executives want to hear it, even from a man who's been given so much credibility by so many people. Feinberg, using his judgment and a team of experts, has set salaries far below what the bankers wanted.

"One banker who does not want to be named to you, but who I expect you know, said that you are punishing all of these banking executives for the actions of a relatively small number of people," Schlesinger said.

"I think that's a myopic view," Feinberg said. "I'm not prepared to say that I'm punishing anybody, first of all."

"You're taking a lot of money away from them," Schlesinger said.

"That doesn't mean that I'm punishing them," he said.

"It does to them."

"Well, that's their perception," said Feinberg.

The reality is, according to Feinberg, some financial chiefs have to get used to new rules and new limits on their pay - and he expects they will.

Because after all he's seen - greed, grief and grace - he's learned a few things about human nature.

"I feel good about the human condition in seeing how people respond, how they get up off the floor, how they take a punch and come back, how our society responds in time of need," Feinberg said. "It reaffirms your faith in human beings. It reaffirms your faith."