Obama quiets, but ‘pay czar’ to hit bonuses

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The Obama administration, which only months ago was blasting Wall Street for paying huge executive bonuses at failing companies, has quietly toned down its rhetoric in recent days about outsized corporate pay packages.

But the White House hasn’t abandoned its push to curb executives’ compensation at financial institutions that received taxpayer bailouts. Instead, it has handed off the task to its “pay czar,” Kenneth Feinberg, who has worked behind the scenes to draft compensation guidelines for the top employees at several struggling financial firms.

Mr. Feinberg’s role as an outside overseer helps insulate the White House from the appearance of meddling in the private sector while capitalizing on populist rage aimed at bailed-out firms like Citigroup and insurance giant American International Group (AIG).

“It’s a savvy approach in a host of ways,” said Norm Ornstein, a political specialist with the American Enterprise Institute for Public Policy Research, a conservative Washington think tank.

“You don’t want to make it look as if government is stepping in and running business. … At the same time, you can’t sit back and let companies that have been bailed out by the government follow their old compensation practices without getting in an enormous public populist backlash.”

When news broke last week that AIG President and Chief Executive Officer Robert Benmosche had been given an annual salary of $7 million plus long-term incentive awards worth up to $3.5 million a year, the administration’s reaction was unexpectedly subdued.

“The president has talked about we’re not micromanaging these companies,” White House press secretary Robert Gibbs said. “Government’s not making these decisions.”

Mr. Gibbs’ comments were in sharp contrast to White House rhetoric in March after AIG revealed that it had paid at least $165 million in bonuses to top executives - a move that Mr. Obama at the time called an “outrage.”

Mr. Feinberg, appointed in June to serve as executive compensation “special master” for corporate recipients of the $700 billion Troubled Asset Relief Program, this month began a 60-day review of pay packages at seven companies that received “exceptional” government assistance: AIG, Citigroup, Bank of America, General Motors, Chrysler and the financing arms of the two automakers.

Mr. Feinberg will review - and eventually accept or reject - the companies’ compensation packages for their top 25 employees. Later, he will review broader compensation formulas for the 75 next highest paid workers at each company.

Obama senior adviser Valerie Jarrett, in a recent interview with Bloomberg News, said that the administration hasn’t been briefed on Mr. Feinberg’s negotiations and that neither the president nor his staff will be involved in Mr. Feinberg’s decision.

“The expectation is that Ken will do his own independent assessment,” said Ms. Jarrett, Mr. Obama’s chief liaison to the business community. “His charge is to really balance retaining talent, aligning compensation appropriately with performance and making sure that we protect our investment.”

Mr. Feinberg, a high-profile lawyer and mediator who received praise for running the government’s fund for families of Sept. 11 victims, was the perfect choice for pay czar, Mr. Ornstein said.

Mr. Feinberg “is able to find a kind of sweet spot here - understand the larger political problems and the sensitivities, empathize with the people involved, but make sure that you keep things within some reasonable range,” he said.

Scott Talbott of the Financial Services Roundtable, a trade group representing some of the nation’s biggest financial services firms, agreed that the administration’s selection of Mr. Feinberg to broker compensation agreements was a good idea.

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