Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

Banks paid big $ to execs during crisis

By David Ellis, staff writer


NEW YORK (CNNMoney.com) -- Even during the darkest days of the financial crisis, nearly twenty financial firms managed to shell out an estimated $1.6 billion in "ill-advised" payments to their executives, according to a federal report issued Friday.

In his latest review of compensation practices at companies that were bailed out by American taxpayers, White House pay czar Kenneth Feinberg condemned those companies for how they rewarded employees between late 2008 and early 2009.

"These 17 exercised poor judgment," said Feinberg. "They shouldn't have made these payments."

The review was part of a previously-announced effort to shed light on whether any of the early recipients of funds under the Troubled Asset Relief Program, or TARP, made excessive payments to employees before Congress passed legislation in February of 2009 requiring greater oversight at bailed-out firms.

Those implicated in Friday's report included some of the biggest recipients of taxpayer aid. Wall Street investment houses like Morgan Stanley (MS, Fortune 500) and Goldman Sachs (GS, Fortune 500) were both cited as firms that made excessive payments to executives. More traditional lenders like PNC (PNC, Fortune 500) and Buffalo, NY-based M&T Bank (MTB) were included on the list, as was the troubled insurance giant AIG (AIG, Fortune 500) and small-business lender CIT Group (CIT).

Spokespeople for several of the 17 companies either declined to comment or were not immediately available.

But others said they supported Feinberg's efforts to reform compensation practices and said they planned to review the proposal.

"Getting our compensation structure right is a priority for us," said a statement issued by a spokesman for Citigroup (C, Fortune 500), which also made the list.

More than 400 companies underwent review, although less than half of that number actually warranted a closer look because their executives made less than $500,000. That was the cutoff point that was established when the program was announced last March.

Despite the breadth of the study, it offered few details about the size of payouts made by individual firms, or how much specific executives were paid -- although Feinberg said that several people received more than $10 million during that period.

In a briefing with reporters in Washington Friday, Feinberg said the payouts were "not illegal" and not "contrary to the public interest." He added that he did not have the power to force companies to claw back those payments to employees.

"His mandate was very limited," said Alan Levine, an executive compensation and benefits partner with the New York-based law firm Morrison Cohen.

Feinberg did however, encourage the 17 firms to adopt new rules that would allow them to restructure or cancel pay packages in the event of another financial crisis.

"That's all I can do," he said. Friday's report represents the latest, and perhaps the last, ruling by Washington's pay czar.

Last October, Feinberg slashed pay for top executives at the seven companies that were rescued more than once by the federal government -- AIG (AIG, Fortune 500), Citigroup (C, Fortune 500) , Bank of America (BAC, Fortune 500), General Motors, GMAC, Chrysler and Chrysler Financial.

Two months later, he capped salaries for lower-level executives at those same firms at $500,000. Both rulings served as a benchmark for employee pay levels in 2010.

His role at the Treasury Department however is expected to quickly come to a close. He was recently appointed to handle claims related to the BP (BP) oil spill. To top of page

Index Last Change % Change
Dow 24,651.74 143.08 0.58%
Nasdaq 6,936.58 80.06 1.17%
S&P 500 2,675.81 23.80 0.90%
Treasuries 2.36 0.01 0.38%
Data as of 10:41pm ET
Company Price Change % Change
Bank of America Corp... 29.04 0.31 1.08%
General Electric Co 17.82 0.18 1.02%
Oracle Corp 48.30 -1.89 -3.77%
Micron Technology In... 42.40 0.16 0.38%
Microsoft Corp 86.85 2.16 2.55%
Data as of Dec 15
Sponsors

Sections

More than 5% of DACA recipients have started their own businesses since enrolling the program, according to a recent survey. More

Republicans said their plan would make taxes easy to prepare, and indeed the final bill gets points for some simplification. But the whole story, like the tax code, is more complex. More

Uber is being sued by Waymo, Alphabet's self-driving car unit that was formerly part of Google. Waymo alleges that Uber stole trade secrets about its self-driving technology. More

Homeowners would be able to deduct interest on the first $750,000 of a new mortgage under the final tax bill -- down from the current $1 million threshold. More