TARP head confirms substantial pay cuts looming

[October 22, 2009]  WASHINGTON (AP) -- The chairman of the panel that oversees the $700 billion federal bailout fund said Thursday the Obama administration is ready to order substantial cuts in the salaries of executives of companies that took money from the government.

Appearing on a nationally broadcast interview, Ellen Warren said reports of pending slashes in executive salaries are "real."

Asked on CBS's "The Early Show" whether reports of the rollback amounted to a hoax or public relations stunt, Warren, heads the Targeted Asset Relief Program's oversight committee, replied, "It's real in the sense that it says, 'Guys, you have to understand that you can't party on like it's 2007. If you're going to take taxpayer dollars, then the game has to change. In that sense it's real.' "

Warren's appearance came amid reports that the Treasury Department is expected in the next few days to order companies that received huge government bailouts last year to slash the base salaries of their top executives by an average of 90 percent and cut their total compensation in half.

A person familiar with the matter said the cuts apply to the 25 highest paid executives at the seven companies that received the most assistance. The person spoke on condition of anonymity because the decision has not been announced. Smaller companies and those that have repaid the bailout money, including Goldman Sachs Group Inc. and JPMorgan Chase & Co., are not affected.

Kenneth Feinberg, the special master at Treasury appointed to handle compensation issues as part of the government's $700 billion financial bailout package, is making the pay decisions.

The seven companies are Bank of America Corp., American International Group Inc., Citigroup Inc., General Motors, GMAC, Chrysler and Chrysler Financial.

"I think the fact that the government has given so much in TARP money is going to make these executives think and think again" before they say no to Washington's demands to substantially lower executive compensation, Warren said.

She said that companies need to focus less on short-term, quarter-by-quarter profit-and-loss sheets and look more toward "the long-term health of the company and the long-term health of the economy."

"You really begin to wonder what it's going to take to get the attention of the people in charge of these very large corporations," Warren said. "They have taken taxpayer money ... and yet the executives want to say, 'I take your money when I make mistakes and I still want to compensate myself richly because I'm in charge of this big company' ... and I think that what this means is, you take the pain, in terms of the taxpayer."

[Associated Press; By MARTIN CRUTSINGER]

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