The pay czar’s power grab
What is pay czar Kenneth Feinberg up to these days? He’s claiming broad, unlimited power to retroactively “claw back” executive compensation paid to employees of TARP recipients. Open sky. L’czar c’est moi.
Via Reuters, here are the details of the confiscatory special master’s new designs:
Kenneth Feinberg, the Obama administration’s pay czar, said on Sunday he has broad and “binding” authority over executive compensation, including the ability to “claw back” money already paid, and he is weighing how and whether to use that power.
Feinberg told Reuters that Citigroup Inc included the contract of energy trader Andrew Hall in submissions due Friday by seven major companies still locked in the federal government’s TARP Program.
Feinberg said he hasn’t looked at Hall’s contract, which reports have said could pay him as much as $100 million this year.
“Whether I have jurisdiction to decide his compensation or not, we will take a look and decide over the next few weeks,” Feinberg said after speaking at a public forum in Martha’s Vineyard, Massachusetts, part of a newsmaker series hosted by the Martha’s Vineyard Times newspaper.
Feinberg has been consulting with seven companies that have yet to pay back money they borrowed from the government, including Citi, American International Group Inc, Bank of America Corp, Chrysler Financial, Chrysler Group LLC, General Motors Co and GMAC Inc.
Those companies faced a deadline of Friday of submitted proposals to Feinberg for their top 25 employees.
Feinberg said on Sunday that decisions he makes will be “binding,” but the law limits his power over contracts signed before February 11, 2009.
He also said he has the authority to use a “clawback” provision to go after compensation for executives from any company that received money from the U.S. Treasury’s Troubled Asset Relief Progr.am (TARP).
It appears that the regs he is talking about are here.
And it appears that no one can stop him from interpreting those regs any way he pleases:
“I have the discretion, conferred upon by Congress, to attempt to recover compensation that has already been paid to executives not only in these companies, but in any company that received federal assistance,” Feinberg said during his remarks.
Asked by Reuters if he could use that ability to target a firm like Goldman Sachs Group Inc, which paid back $10 billion in bailout money, Feinberg said: “Anything is possible under the law.”
Citigroup is claiming exemptions for two executives, and the White House is in a pickle:
On Friday, Citigroup, which is facing a government deadline, submitted the pay packages for its 25 senior executives and highest-paid employees. People involved in that process said Citi advised the Treasury that an energy trader named Andrew J. Hall, due $98 million, was exempt from federal review, and so was a second unidentified trader who received more than $30 million.
Mr. Hall, 58, and the other trader were paid under an employment contract signed last October, said a person briefed on the contract who was granted anonymity because of not being authorized to disclose the information. That was before a law went into effect instructing the Treasury secretary, Timothy F. Geithner, to examine the pay packages of top executives at companies that received exceptional bailout assistance from the government.
In recent weeks, Treasury officials had warned top Citigroup executives that the administration would reject the contract, hoping to persuade the bank to rewrite it. Now the bank’s decision presents the administration with an awkward political choice between doing little or doing nothing about the contract.
Treasury officials could issue a nonbinding advisory opinion critical of the pay package that that would carry no legal weight but could ameliorate some of the expected political fallout. Or it could do nothing and face the wrath of the public and Congress, which will consider legislation to limit executive pay after its August recess.
Chapter 6 of Culture of Corruption details the myriad ties between Citi, the Obama White House, and the Obama Treasury Department.
Stay tuned. And let this be a continuing lesson to corporations considering federal bailout money in the future:
Government strings are like STDs. They last forever.
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Categories: czars
Doug Ross @ Journal
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Gee, what’s the problem with the government exercising power retroactively? I’m sure it will stabilize the stock market too.
This reminds me of the old Eagle’s song, “Hotel California” lyric:
“You can check out any time you like, but you can never leave.”
Another disgusting example party over country. The Legislative Branch should be all over the Executive Branch for the power grab going on.
But since “their guy” is in power, Checks and Balances can be ignored.
You mean the market that is dropping like a rock today?
Doesn’t that kind of go against the whole idea of laws in the first place?
For that matter, the Constitution enumerates powers that – sorry. I guess I got carried away. The government knows best after all.
(And for those few people who have trouble understanding the obvious: /massive sarcasm)
Depending on any job offers to him from those companies, of course.
I feel confident that any executive who finds himself under scrutiny for excessive pay will find it in his best interests to contribute freely to the DNC and related parties, thus bringing the matter to a mutually agreeable and socially satisfactory conclusion.
O/T:
Speaking of power grabs, have any of you seen the NewsBusters’ footage of Rachel Maddow usurping the hosting duties from David Gregory on yesterday’s MTP?
Priceless how she completely emasculated Gregory, but egregious how Gregory allowed her to mis-characterize, take out of context and wildly extrapolate the words and affiliations of Dick Armey.
Case in point! Unlike the book title the market generally does not thrive on chaos, and this administration is becoming more and more chaotic, among other qualities.
The public option is on, no it’s off, no it’s on… Government by trial balloon. At some point the balloon pops.
Anything is possible under the law? Doesn’t he mean any power grab is possible and any corruption is possible under the Obama administration?
What he means is, if they can ram something through Congress called “Health Care Reform”, they’ll interepret it any way they want to, no matter what it says.
It means the government holds itself above the law. It means they are our Overlords.
like std’s. excellent point. i wonder if this leach could claw back some of the fannie and freddie golden parachutes for those slugs like raines and his cronies. why are they seemingly exempt from this mess. they took big money to bail them out. yet i see no cap on their compensation proposed.
I just read the book “The Forgotten Man” by Amity Shlaes and I recommend it to everyone here. In the book, it discusses how FDR prolonged the depression with policies that made corporations and investors hesitate to invest their money or hire workers. FDR’s response? Invoke a retroactive Unused profits tax so that Corporations weren’t allowed to save money. FDR demonized the corporations and then was “shocked” that they wouldn’t go along with the program and pay artificially high wages or hire people for non-existent jobs. Of course, in Chicago, I guess that is normal.
Ya know, I hope Kenneth Feinberg claws back big time and soon. It’s the only way we are going to get the people with real power up in arms and loud and vocal about the complete subversion of the Constitution by the Iwon Administration.
Unfortunately because of the “ties” that bind, I believe that this is merely a threat to make sure these big guys stay in line and tote the Iwon garbage.
You beat me to it.
“The law means what I need it to to get what I want” is a natural outgrowth of the “Living, Breathing Constitution(TM)” philosophy so favored by the left.
And do whatever the hell I want anyway.
[imitating Edward G. Robinson] Yeah, see? I’m Edward G. Robinson, see? Now here’s the deal!
Regulus:
ABSOLUTELY! And THAT is why I am so angry at liberals.
What scares me more than anything else is the decision in MO, concerning smoking, that anything can be considered illegal or can be made illegal if something is not clearly defined as legal or allowed. In other words, if Potato Chips are not clearly defined as being legal to purchase and eat, then they can be banned and declared illegal.
Not even SCOTUS? I am not familiar with Supreme Court protocol, since I don’t practice law, so does anyone know; can the Chief Justice ask for, or initiate investigations into unconstitutional actions by the government?
It seems to me that they are truly the only “untouchables.” It seems so many attorneys fear retribution if they initiate legal action against the sitting president, or the powerful organizations supporting him. Otherwise, since much of what The One is doing is blatantly unconstitutional to the layman, why hasn’t anyone taken him to task, for anything other than the question of his birth? What are our counselors waiting for?
The Constitution? You mean that living, breathing document?
If you take TARP money then you should be subject to the conditions set forth in the agreement.
It is no different from welfare recipients not being allowed to purchase tobacco and alcohol with their stipend.
When you take the money you have to follow the rules. Don’t take the money and you will not have to follow the rules.
If you take TARP money then you should be subject to the conditions set forth in the agreement.
It is no different from welfare recipients not being allowed to purchase tobacco and alcohol with their stipend.
When you take the money you have to follow the rules. Don’t take the money and you will not have to follow the rules.
Let me guess: Coburn and Inhofe will, once again, be the only Republicans with the gumption to speak up. Micheal Lead (oops, I mean Steele) will say nothing. John McCain and Lindsey Graham will walk across the isle (oops, I mean reach across the isle) to work out a “compromise.”
Thanks for a great laugh. Welfare recipients sell their food stamps and buy tobacco, alcohol and drugs on the street.
Yeah, they all follow the rules.
Oh,you silly knuckle-dragging,Bible thumping gunslingers.Can’t you see that the facist was Boooosh,not our beloved Bambi?/sarc.
This current administration is the definition of facism.
can we “retro-actively” undo the election?
my guess is yes…Will be Coburn’s town hall next week…should be interesting…not many dims in this state so it should be interesting to see how many actually show up. We had 3 at Rep. Fallin’s town hall out of almost 1000…
Ayn Rand wrote about this in “Atlas Shrugged”. The government provided assistance to Taggart Transcontinental. Several chapters later the government pulled the purse strings to force the railroad’s hand.
What is apparent is that BIG BRO has no respect for…
law…
contracts…
or the Constitution.
Show me the article in the Constitution that says it’s a living document.
If the welfare recipients were contractually obligated to buy tobacco, perhaps you might come close to what is happening here. Otherwise this is a strawman.
TARP happened because the government decided that the banks were “too big to fail”. Failure would have meant bankrupcy which would have allowed the banks to void the contracts that included the bonuses. The government rushed to give the money without considering what circumventing bankruptcy might do.
Now they’re back-peddling by giving an unelected bureaucrat (czar) “binding” authority to dictate how companies can spend the money and then claim that this is not a form of government control?
Milton Friedman won a Nobel Prize for his work on that theory. Krugman’s prize had nothing to do with depression-era economics. His was for a trade theory.
At least one state allows recipients to withdraw cash from their stipends.
Again the same old con game. Create an “crisis” and move in to fix it; to cheers from the useful idiots. Meanwhile, in “fixing the problem”, government grabbed more control and power over business and the economy. One day, people, you’ll wake up and find government controlling everything and no liberty anywhere. Just as Stalin said…and it’s working here. You don’t think these “czars” are a threat? Guess again.
Your point is well made and I agree that the salary contracts pre-existed the bailout, which yes, was rushed and poorly executed.
Part of this, is that the salaries are the tail wagging the dog. Much is made of it, but relatively speaking it is small potatoes. The question of salaries is far more about appearances, atmospherics, feelings and emotions.
All that being said, it is short sighted to not appreciate that those salaries would have been lost, had the alternative happened. (Yes, those due the agreed upon salaries could have sued.)
Yep, the horse has left the barn and the Government is now closing the barn door. They are attempting to do now what they should have done before providing the TARP money. Considering all the facts and the great point you made, it is something that has to be done, if it can be done, eventhough it stinks.
Then again, the salaries can be preserved if the TARP money is given back. Then the question becomes moot. Though, I would then wonder if it would be wise to save the tail if the dog is lost? And, then yes, the tail would be lost, too.
A secondary question, maybe more of a hypothetical, and curious speculation: Would the banks have agreed to a bailout if it came with salary limitations?
And it is downright blind to fail to appreciate that a guy CAN EARN multiples…and presumably DID EARN…MULTIPLES of his net pay by either–
1. making profit, or
2. preventing losses, or
3. some combination of both.
People with that ability do not grow on trees…regardless of what THE ONE may think…and they are only secured via COMPETITION in a marketplace.
On this we agree. Talking about contractual bonuses to executives only promotes feelings of class warfare without really making a dent in the numbers even if the bonuses were completely recovered. The economy didn’t tank because executives bonuses were too big. It’s all smoke and mirrors to cover the fact that TARP was doomed to fail from the beginning.
But it was oh so VITAL that we get that approved now, now, now. Who has time to debate? We’re in a crisis, don’t you know?
Hmm… Party A gives a high risk loan to Party B and is then surprised when Party B cannot pay it back? This sounds oddly familiar. Almost like how it all started in the first place.
Very hypothetical, but it’s probably a solid “maybe” and would have heavily depended on the likely outcome. Otherwise, what would be the motivation? At least one of these executives (that I know of) had a $1 base salary.
This has all been debated on previous threads (probably back in September), but many executives had only stayed with the failing banks because of their contractual bonus. There are several examples where an executive came on after the problems started to try and help deal with the fallout.
Point being: It’s just as possible that the crew would have abandoned the ship once they knew their contracts were worthless.
It’s a darn good thing the founding fathers provided for czars in the Constitution, right? Oh, didn’t they? Then were is the authority to create a czar, again? In TARP legislation, or just Obama-land? And I think it’s time someone test the constitutional validity of TARP — but that’s just me.
Do we as citizens of the republic have the authority to retroactively “claw back” the salary paid to Obama administration officials such as this idiot, Marxist Tsar?
I mean they are establishing a precedent here…
So, let me get this straight. I am an extremist if I call the Obama WH fascist or nazi. But, Obama’s WH gets to decide who gets paid what in much of the private sector.
Can’t see anything ironic there…