Top executives at General Motors and Ally Financial, both of which received bailouts from the United States Treasury Department in 2009, were paid excessively even as taxpayers lost money, according to a special inspector general report. http://www.nytimes.com/2014/09/25/business/report-rebukes-treasury-for-bailout-pay-packages.html?ref=us
The report, released Wednesday, criticized the Treasury Department for loosening its own restrictions on executive pay for G.M. and Ally year after year. These limits had been imposed on the companies in exchange for money that they received at the height of the financial crisis from the Troubled Asset Relief Program, or TARP, that was started by President George W. Bush and continued by President Obama. The special inspector general acts as a watchdog over that program.
The department, for example, in 2013 signed off on at least $1 million in pay for each of the top 25 employees at both G.M. and Ally, and approved $3 million in pay raises for nine G.M. employees, the report said. The department also allowed the tripling of the number of G.M. and Ally financial employees who received cash salaries exceeding $500,000 from 2009 to 2013.
The Treasury Department holds a 13.8 percent stake in Ally Financial and sold the last of its G.M. shares in December. The special inspector general’s office said taxpayers had lost $11.2 billion on G.M.’s rescue, as well as $1.8 billion on the sale of some Ally Financial common stock.
The Treasury Department said that taxpayers had recovered almost $18.1 billion on the Ally investment, almost $900 million more than the original $17.2 billion investment.
But taxpayers are not only entitled to the original investment that the Treasury Department made in these companies, the special inspector general’s office argued, but also to whatever dividends and interest had accrued over the years.
The office said G.M., which emerged from bankruptcy in 2009, and Ally Financial had not repaid the bailout money in full because the Treasury Department had to sell some of its shares in the companies on the open market at a loss.
The special inspector general’s office released reports in 2012 and 2013 that also castigated the Treasury Department for failing to limit executive compensation at companies receiving bailouts.
“Treasury has been refusing to implement our recommendations,” Christy Romero, the special inspector general for TARP, said in phone interview. She said the department had “gutted the restrictions” on executive pay and was too deferential to the companies it was charged with overseeing.
“That’s the only voice they are listening to,” Ms. Romero said, adding that the department should set up more objective criteria for making decisions about pay.