The Treasury Department ignored its own guidelines on executive pay at firms that received taxpayer bailouts and last year approved compensation packages of more than $3 million for the senior ranks at General Motors, Ally Financial and American International Group, according to a watchdog report released Monday.The report singles out Treasury's acting special master for compensation, Patricia Geoghegan, as primarily responsible, charges that Geoghegan, responded to by saying "the audit is riddled with inaccuracies and mischaracterizes the data provided to the inspector general." Those objections ring a little hollow when the report points out that all of the 18 people the companies proposed get excessive raises got excessive raises. That includes a $200,000 pay raise for an employee of an AIG subsidiary that filed for bankruptcy just weeks after this pay raise was approved, and "a $100,000 pay raise for an executive at GM’s European unit, despite that unit experiencing significant losses."
The report from the special inspector general for the Troubled Assets Relief Program said the government’s pay czar signed off on $6.2 million in raises for 18 employees at the three companies. The chief executive of a division of AIG received a $1 million raise, while an executive at GM’s troubled European unit was given a $100,000 raise. In one instance, an employee of Ally’s Residential Capital was awarded a $200,000 pay increase weeks before the subsidiary filed for bankruptcy. [...]
“Treasury made no meaningful reform to its processes,” the special inspector said in the latest report. “Lacking criteria and an effective decision-making process, Treasury risks continuing to award executives of bailed-out companies excessive cash compensation without good cause.”
According to the report, Treasury approved total pay packages exceeding the 50th percentile by more than $37 million for nearly two-thirds of the top 25 employees of AIG, GM and Ally. The three firms combined received nearly $250 billion in TARP funds. Only AIG has fully repaid its $182 billion bailout.
Geoghegan might be the point person who is ultimately responsible for this rather large failure to look out for the interests of the American taxpayer. But this problem isn't new. This report highlights the fact that the previous inspector general's report covering 2009-11 found the same issues. It's indicative of a larger problem at Treasury, a department that's been just a little bit to deferential to the industry it is supposed to be watchdogging. That's the culture that Lew should be pressed to change when the Senate considers his nomination.