WASHINGTON (CNNMoney) -- When Congress bailed out big banks, it also limited the pay of CEOs at those banks -- one of the main reasons why banks wanted out of the bailout program.
But nearly three years later, a watchdog over the $700 billion Troubled Asset Relief Program found that the special pay czar Kenneth Feinberg -- whose job it was to cut pay -- failed to "effectively" rein in executive compensation.
In a report released Tuesday, the Deputy Special Inspector General for TARP Christy Romero doesn't blame Feinberg. Instead, she blames pressure from those banks -- and from the Treasury Department -- aimed at keeping the CEOs in their jobs, which was thought to be the best way to get banks to repay the bailout quickly.
Companies pressured him to let the companies pay executives enough to keep them from quitting, and Treasury officials pressured him to let the companies pay executives enough to keep the companies competitive and on track to repay TARP funds," the report said.
Feinberg tried to shift CEO pay away from large cash salaries and toward stock tied to company performance. But he still approved multimillion-dollar compensation packages for many of the top 25 bank CEOs, the report said.
Treasury's Office of the Special Master for TARP executive compensation defended Feinberg's work limiting CEO pay, saying that on average, he cut average compensation for the top 25 CEOs at banks that received tens of billions from the TARP program by more than 50%.
"Our office was effective at limiting compensation at the seven companies over which it had authority, while ensuring the companies were well-positioned to pay back the taxpayers' investments," wrote Patricia Geoghegan, acting special master for TARP executive compensation.
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