Federally Financed Largesse

Republicans criticize Treasury officials for giving bailed-out execs excessive pay
Special Inspector General for TARP Christy Romero /

Special Inspector General for TARP Christy Romero /


A House Oversight subcommittee rebuked the Treasury official who oversees executive pay for federally supported companies at a hearing on Tuesday.

The Subcommittee on Economic Growth, Job Creation and Regulatory Affairs of the House Committee on Oversight and Government Reform held a hearing examining executive pay at companies that received bailout money from the federal government.

Christy Romero, special inspector general for the Troubled Asset Relief Program (TARP), and Patricia Geoghegan, acting special master for TARP Executive Compensation, both testified before the subcommittee.

Romero testified that Geoghegan approved excessive pay for many of the executives at the companies and disregarded many of the guidelines that her predecessor had set for curbing executive pay.

Through TARP, the federal government sought to prop up businesses that were at risk of failing because of the 2008 financial crisis. After several of the bailed-out businesses gave their executives large bonuses in 2009, President Barack Obama announced regulations that curbed executive pay at all TARP-supported companies, including capping immediate cash compensation at $500,000 and limiting greater compensation to stocks.

The Treasury Department then created guidelines that governed how compensation would be regulated. Those guidelines included limiting cash compensation to $500,000, emphasizing that stocks cannot be cashed until the TARP funds are repaid, and tying total compensation to the current market rate.

Romero testified that 70 percent of the top executives at the companies in TARP were paid more than $500,000 in cash in 2012 and 94 percent were paid $450,000 or more in cash, despite the regulations.

“As both Mr. Feinberg and I have consistently stated, these are guidelines rather than rigid formulas,” Geoghegan wrote in her submitted written testimony.

Romero took great issue with the effectiveness of these guidelines.

“We found too many exceptions to the guidelines to make the guidelines meaningful,” she said in her opening statement.

Republican lawmakers tore into Geoghegan’s testimony, even laughing audibly at one point when she said TARP has been a success.

Subcommittee Chairman Jim Jordan (R., Ohio) took a special note of the number of executives who received cash pay above the $500,000 threshold.

While in 2009 there were six executives among the seven companies in TARP who received more than $500,000, in 2012 there were 23 among the three still in the program.

Jordan also noted that all 18 requests for a pay raise for executives were approved and that the companies provided the market data on which their executive compensation packages are based.

Romero testified that she made eight recommendations to the special master and only the recommendation on improving documentation of market data has been adopted.

She said the conditions companies face when in TARP should not be comfortable.

“You want it to be uncomfortable so there’s an incentive to get out and never ask to get back in again,” she testified.

Jordan pointed out that the high rate of approved raises is “not exactly making these guys sweat, right?”

Geoghegan defended her office’s work throughout the hearing. She argued that her office has had to keep executive pay at the companies still in TARP at a competitive market rate or else face losing competent executives. She said a big priority is regaining the federal government’s investment in these companies.

The Democrats at the hearing defended the TARP bailout on the grounds that it forestalled a total financial collapse.

“We held our noses and bailed out these companies so that millions of jobs wouldn’t be lost,” Rep. Matt Cartwright (D., Penn.) said in his opening statement.

“The president said one thing and they’re doing something different,” Jordan said after the hearing.

Andrew Evans   Email Andrew | Full Bio | RSS
Andrew Evans is an assistant editor at National Affairs and a former reporter for the Washington Free Beacon, where he covered government accountability and healthcare issues.

Get the news that matters most to you, delivered straight to your inbox daily.

Register today!