WASHINGTON (Reuters) – The U.S. pay czar on Thursday slashed compensation for top earners at seven bailed-out companies for the final two months of the year, and was immediately slammed by the country’s largest bank which claimed the cuts could send talent fleeing.
Many of the firms, which have together received more than $300 billion in taxpayer aid, issued conciliatory statements, but Bank of America said the ruling would put it at a disadvantage in competing with companies not under the pay czar’s thumb.
“People want to work here, but they want to be paid fairly,” said BofA spokesman Scott Silvestri.
Pay czar Kenneth Feinberg said competitive concerns and public outrage both played a role in how he reworked pay contracts for the 25 highest-paid employees at the five financial firms and two automakers who are the biggest recipients of government aid. He said their cash compensation rates for the remainder of 2009 would drop 90 percent compared to 2008. Their overall compensation rates for those two months would on average be cut in half. But he added he will not claw back payments already made. “I’m not going to go back and ask everybody to repay what they’ve already earned,” Feinberg said.
The companies affected are American International Group Inc, Bank of America Corp, Citigroup Inc, General Motors Co, Chrysler, GMAC and Chrysler Financial.
U.S. officials have said Wall Street pay practices must be reformed to rein the excessive risk-taking that fueled the crisis that pushed the financial system to the brink of collapse last year.
Huge pay packages for banks and other financial firms have ignited public anger at a time the U.S. unemployment rate is at a 26-year high and seen climbing.
If they were so damned talented…maybe we wouldn’t be in this mess. I say they can all resign, go out and work for a living like the rest of us.
I’m with you there! It was talent that got us into this mess in the first place!
Big whoop. Their pay is getting cut for two months. I’d bet money that in January they give themselves bigger bonuses to make up for it.
I’m all in favor of limiting obscene salaries in companies we bail out, but more permanently, until they get off the government dole. Two months is nothing.
I’m pretty sure that the people who want to work there want to be paid UNfairly. Otherwise this adjustment wouldn’t upset them.
For good or bad, they asked for the devil’s money and now they get to deal with the strings that it has attached. In my opinion, as it was our money they gave them, we should get to have more say than this in their doings.
Beyond that, if these talented people are so great, surely there will be some other company looking to pay them outrageous sums. What’s that? There are no companies paying like that that are still free of bail-out money? Oh.
There’s always the health insurance trade…
If Hank Paulson had not forced these banks to accept bailout money in the first place….
I thought the bank bailouts were a bad idea to begin with.
With or without this, the bank bailouts wasted about a trillion for little to nothing to show for it.
Typical BigGovernmental procedure. First regulate in such a way that business can’t follow good practices (in this case, force banks to lend to whoever but watch for upcoming carbon or health care mandates). Than when the whole sector is in trouble, burden us, taxpayers to pay for it. Finally, claim our money as BigGovernmental money and control the sector by “czars” who we didn’t elect and over whose decisions we do not have any powers. Of course, place blame on greedy “others”.
I’d accept their “new regulation” if it and the Czar are put to referendum vote and if the most responsible for starting this crisis (Frank, Dodd,…) by forcing insane banking practices are sent to jail with their comrade Madoff.
I want to cut the congress pay by 90% they have done nothing but spend us into oblivion and take payoffs
lets see what those worthless bastards think of this idea
BFD, I have had my pay cut 100% since November.
Saved + Created = LESS THAN ZERO
Like with sports salaries, if the pay is too high, where should the money go then, to the owners? Having BofA retain the money in the asset column is just as bad. If it doesn’t go to lower consumer rates (or ticket prices in the analogy), then I say let the employees have it.
You’re fired!
Pretty sure B of A didn’tneed to take the money, so boo hoo on them. That being said, I wonder how rock solid the bailout agreement was, and if B of A could sue the US Government to prevent these pay cuts?
It seems to me the only reason these firings and pay cuts work are because the affected companies took government money. Even so, I’m not sure I like the idea of the Obama Administration, or any other for that matter, firing and hiring who they want at some of the largest companies on Earth.
Didn’t BofA’s troubles come as a result of Paulson/Bernanke persuading them to buy up Merrill Lynch?
#15, Alphie,
Government regulation is not the same as government ownership. Even though the government does have a lot of stock in these banks currently.
*
I have a hard time understanding how any flight of “talent” will hurt any of these banks. That “talent” either screwed up the investments and / or allowed the bad investments to occur in the first place. They have shown themselves to be incompetent. Instead of bonuses, they should be shown the door.
If any executive needs to earn several million a year plus huge bonuses, they have a spending problem. I am a little surprised that the right wing nuts that claim America spends too much thinks it is fine if a group of people rape their company, take huge amounts of money for it, and expect the taxpayer to bail them out.
#6 Stop hyperventilating about czars, they’re just people with long job titles appointed by the president to serve in the executive branch. They’re not elected officials, never have been. So chill, OK? Presidents have had “czars” for a while. Bashing Obama for doing what presidents have been doing for a long time just makes you look like an Obama basher. Surprise, surprise.
And we’re in this trouble because we relaxed regulation on the big banks and they went and did stupid and greedy things… even Alan Greenspan admitted as much. And he has a libertarian leaning so for him to admit this is big.
And as many have said before, talent? What “talent” are they scaring away? They ran the economy into a ditch, I think they should be scared away.
#16 Sea Lawyer – thought-provoking post, but not ALL their troubles… Friends tell me consistently they have all had bad experiences with BofA and if BofA was the only game in town, they would resort to a coffee can before doing business with that organization again.
#15 BUT I agree with you…they should sue… not meekly roll over for more Government sex.
There you go with that anal sex thing again alfie… Rush would be proud. 😉
If the BofA had been bought out in a hostile takeover by a private firm, do you think the new owners would have left pay rates the same?
#6, dusan,
Not only is your post full of garbage, you you are obviously behind the times on the news.
The “czar” overseeing executive pay is appointed by the President and approved by the Senate. He reports to the Secretary of the Treasury. He is acting under an Act of Congress. But yes, calling him a “czar” sounds so much better.
I fail to understand why you blame Frank and Dodd for the economic collapse. Bush was the President and was responsible for the administration of the government. Bush was the one that forced Fanny Mae to accept the toxic paper.
I visited your web site. Your photos are as inspiring as Alphie’s posts. You really should study a little composition before thinking you are a photographer.
they either take a pay cut, or serve on the front lines in afganistan..
enough said
A little advice to those at BofA who don’t think they’re paid enough: Quit. I’m sure we can find a replacement.
And, after you quit, if you have difficulty finding a new job, why not jump off a building?
BertDawg, yeah, your friends’ lousy service experience at a bank branch is of equal significance to BofA agreeing to buy a large investment banking firm about to go bankrupt at the behest of the government, with the promise of government backing as a safeguard. And when BofA does the government a favor, now the government “pay czar” is telling their executives that they make too much money.
What country pays the highest TOP wages in the world??
USA.
10- 10000 TIMES as much as MOST other countries, even comparing to the other countries BASIC pay all the way up..The TOP gets more money per capita them Anywhere else.
IF’ half the companies in the USA would cut the TOP wages and drop prices on goods accordingly. GUESS WHAT…we could save this country, FAST.
Serves them right. First they get us into this mess with playing along with the toxic asset scheme, and then they want to add an additional 18.25% interest on top of my 18% interest rate on the credit card I do not use and have been paying down for the last two years that I had to get to pay for college because BOA did not approve me for a college loan. On top of it all they would not allow me to cash a third party check from a roommate who was present with me for money owed to me on rent. What the hell is a bank for any how? Then they hold on to my automatic deposits until three more with draws or deductions processes so that I am always in the fricking hole, and then post the deposit and take out their fees. I work three jobs and for what? The bank to take my money. I have finally changed to a credit union, and have had no problems. After 10 years of BOA I only gotten poorer. The only reason I had BOA was because I traveled abroad quite often. F**k ’em!
This move is fiscal irresponsible.
What if this causes one or more of the executives to default on his mortgage?
I mean, haven’t we seen enough home foreclosures as it is?
#12. BUSH didn’t deregulate the banks. CLINTON did, with the help of a republican congress in 1999
But don’t let the facts interrupt you.
OOps. that was for #22. and I thought he was blaming Bush for deregulation… but he wasn’t.
Retracted!
Alfred, You keep using that word (fascism). I do not think it means what you think it means.
Here is Obama’s appointee trying to deflect attention from Obamacare, by demonizing something, that in the grand scheme of things means nothing.
It wouldn’t matter if every cheif executive in all the fortune 500 companies were suddenly required to give all their income to the government for a year. Obama has spent so much, its now a drop in the ocean.
This is a redirection scheme guys, and most of you, even the neolibs, deep down know it. The only lasting impact this will have is a further erosion of private business rights.
I may not agree with everything Alfred says, but he is right on thing, this will not stop at the bailout companies, and it won’t stop with large corporations either. Now that you guys have given this power to the government, it will be used in all sort of creative ways.
Its amazing how we humans continue to shoot ourselves in the foot, over stupid things like jealousy. In the end we deserve what we get.
I was on a comment thread at a fairly middle of the road site about the big bonuses that Goldman announced a few days ago. In just the comments I read, the word ‘guillotine’ was used nearly two dozen times. References to hanging them off of lampposts, perhaps a dozen times. Tarring and feathering was more prominent even then that.
These whiny titty babies may not realize it, but Obama probably saved their worthless lives with this move. People are not going to tolerate having their lives destroyed, their credit pulled, and their homes foreclosed upon while these super-entitled jackasses continue to shit in the tall cotton forever. Frankly, if these idiots can’t see the rising ill will against them, they are obviously not clever enough to run banks. They aren’t even clever enough to save their own hides.