Report: Geithner approved 'excessive pay' for execs at bailed out companies

Government dictating how much a private company can pay their employees seems like it should be illegal, but it isn't. These companies are in competitive industries and if they can't pay as much or more than the next guy, they lose the talent.

We might question whether some of these execs whose wild west gambling led to the financial meltdown are worth what they are being paid. But that's a matter for the Board of Directors and shareholders - not government.

Even if the taxpayers bailed them out? I would hope that taxpayers would understand that keeping good employees is necessary in order for the companies to pay back the US Treasury.

Associated Press:

The Special Inspector General for the Troubled Asset Relief Program said Treasury approved all 18 requests it received last year to raise pay for executives at American International Group Inc., General Motors Corp. and Ally Financial Inc. Of those requests, 14 were for $100,000 or more; the largest raise was $1 million.

Treasury also allowed pay packages totaling $5 million or more for nearly a quarter of the executives at those firms, the report says.

Also noted: A $200,000 raise was approved for an executive of Ally's mortgage-lending subsidiary Residential Capital LLC just weeks before ResCap filed for bankruptcy protection. Ally was GM's financial arm until it was taken over by the government in the bailout.

"We ... expect Treasury to look out for taxpayers who funded the bailout of these companies by holding the line on excessive pay," said Christy Romero, the special inspector general for TARP. "Treasury cannot look out for taxpayers' interests if it continues to rely to a great extent on the pay proposed by companies that have historically pushed back on pay limits."

The report says Treasury bypassed rules under the 2008 bailout that limited pay. Treasury approved raises that exceeded pay limits and in some cases failed to link compensation to performance, it notes.

Romero said the guidelines say compensation should not exceed the 50th percentile of pay for executives in similar positions at other financially distressed companies.

But pay surpassed that level for 63 percent of the executives whose pay was approved, according to the report.

AIG has already paid back the $182 billion it got in the bailout. The government's remaining stake in GM will be sold off - for a loss of probably $7 billion. Other companies are in various stages of paying back the taxpayer.

For this reason, it might be time for government to get out of the business of determining pay for executives. They wouldn't dare do it for unionized employees at GM. Why interfere at the executive level?