Banks Paid $1.6 Billion in bonuses while recieving tarp money

Bankers overpaid by $1.6bn

By Justin Baer in New York

Published: July 23 2010 19:47 | Last updated: July 23 2010 19:47

Citigroup, Bank of America and 15 other bailed-out financial services companies overpaid their top executives by $1.6bn during the height of the financial ­crisis, according to a review by the White House’s ­special master on Wall Street compensation.

Kenneth Feinberg, who was appointed last year by Barack Obama, president, to oversee the pay policies at the companies that received the greatest government support, began in March his latest inquiry into top executives’ compensation from late 2008 to early 2009.

While the payments were legal at the time, Mr Feinberg said on Friday, they would have fallen foul of restrictions the government set for participants in its troubled asset relief programme (Tarp).

Citi topped the list on excessive pay, thanks in large part to the compensation of several star employees at the bank’s Phibro commodities trading unit, people familiar with the matter said. Citi sold the business to Occidental Petroleum last year.

“Getting our compensation structure right is a priority for us,” a Citi spokeswoman said. “Since the crisis, we have done a lot of work to make sure it is performance-based and we look forward to reviewing the special master’s recommendations.”

The other companies cited by the special master were: American Express, American International Group, Boston Private Financial Holdings, Capital One Financial, CIT Group, JPMorgan Chase. M&T Bank, Morgan Stanley, Regions Financial, SunTrust Banks, Bank of New York Mellon, Goldman Sachs, PNC Financial Services Group, US Bancorp and Wells Fargo.

While Mr Feinberg no longer had the authority to police compensation at those that had paid back the government’s investment, he used a “look back” provision in the statute to ask for more information about their pay during a window between the start of the Tarp and when new restrictions on executive pay took effect.

Mr Feinberg reviewed what the 419 companies that received government assistance before February 2009 had paid their top 25 executives. The institutions were required to submit details on employees who earned more than $500,000.

Eleven of the 17 companies cited by the special master have repaid the government for its assistance during the crisis. And, while Mr Feinberg conceded that none of the retention awards, bonuses, golden parachutes and other payments that appear excessive today was “contrary to the public interest”, he proposed the companies adopt a new policy that would supersede pay guarantees granted to executives.

Mr Feinberg implored companies to give their boards’ compensation committees the right to restructure, reduce or cancel payments to executives during times of crisis.

In October, he had moved to slash the 2009 cash compensation of the top executives at the seven companies within his jurisdiction by an average of 90 per cent from a year earlier.

In December, Mr Feinberg took aim at a second tier of managers, setting a $500,000 salary limit for hundreds of employees at the companies that were still under his thumb. The White House last month appointed Mr Feinberg as administrator of BP’s fund to pay claims from the oil company’s devastating spill. He will leave his current post as “pay tsar” in August.

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