Obama administration pay czar Kenneth Feinberg plans to review past compensation at 419 companies that received bailout funds, including JPMorgan Chase
Feinberg will look back at any pay for the top 25 earners that totaled more than $500,000 from October 2008, when companies first received funds from the Troubled Asset Relief Program, though February 2009, when legislation was passed attaching pay restrictions to the funds.
That period includes 2008 end-of-the-year bonus payments.
Feinberg will judge if any payments were contrary to the public interest and can request that individuals give money back. But he cannot force such repayments, the source said, speaking anonymously because the letters will not go out to companies until Tuesday.
Also on Tuesday, Feinberg will issue his rulings for the pay packages of the top 25 earners at the five companies that have received exceptional taxpayer assistance and have not substantially repaid the funds.
Those companies are AIG
Feinberg's latest move to look back at pay is a bold expansion of his review of pay, and could send a signal that Wall Street cannot return to big bonus payments without intense public -- and governmental -- scrutiny.
Rose Marie Orens, a consultant with Compensation Advisory Partners, called the timing of Feinberg's letters peculiar.
What is it they are fishing for, said Orens, noting that many government agencies have requested compensation information from her financial clients. I don't know any organizations that I'm working with that accelerated compensation with any intent. The performance was so bad. It was what it was in 2008.
Cornelius Hurley, director of the Morin Center for Banking and Financial Law at Boston University, thought Feinberg's look-back plans are better late than never.
If the notion was to see who had their hand in the cookie jar when the crisis was unfolding, then that should be revealed, Hurley said.
PAY CZAR'S POWER
President Barack Obama appointed Feinberg in June 2009 after public anger exploded over high pay at companies that received bailout money.
Feinberg, a Washington lawyer who previously oversaw the distribution of funds for victims of the attacks of September 11, 2001, said last August that the law gave him wide authority to attempt to recoup money paid to employees at companies that received TARP money. He has not yet tried to use such powers.
Public discontent has continued to simmer as Wall Street profits and bonuses bounced back in 2009.
The New York State comptroller released a report last month showing that bonuses on Wall Street rose 17 percent last year to $20.3 billion.
Representatives from Goldman Sachs, JPMorgan and Morgan Stanley
The threshold was set at $500,000 to reduce the administrative burden on smaller recipients of TARP funds.
The source did not elaborate on how the pay czar's office will determine if a payment was not in the public interest, but said the office will be looking at the size of the pay packages, the mix of cash and stock, and the circumstances of the payments.
Feinberg will try to renegotiate any payments deemed excessive, but has no power to file a lawsuit or issue a subpoena seeking repayment, the source said.
However, public exposure can be a powerful tool, as indicated by the slow but largely successful repayment of retention bonuses to former employees of AIG's Financial Products unit.
Wall Street might be immune to shame, said Russell Roberts, an economics professor at George Mason University and research fellow at Stanford University's Hoover Institution.
If the goal is to shame executives, there is not much shame on Wall Street, and I doubt it would have much effect if that is his only lever, Roberts said.
(Reporting by Karey Wutkowski in Washington and Steve Eder in New York; Additional reporting by Jonathan Stempel in New York. editing by Leslie Gevirtz, Maureen Bavdek and Steve Orlofsky)