Pay Czar Ken Feinberg: No change in the compensation crackdown

Kenneth Feinberg, the federal government's so-called pay czar, Tuesday denied media speculation that he was considering backing away from his decisions to slash compensation for top Wall Street executives at companies that received bailout money.

The Obama administration's special master for executive compensation has ruffled many feathers on Wall Street including American International Group (AIG). Its CEO, Robert Benmosche, has threatened to quit after being on the job for just three months because of pay restrictions Feinberg ordered. Others have claimed that the compensation guidelines will cause an exodus of top Wall Street talent to hedge funds and other companies not subject to government control.

Feinberg has repeatedly denied the naysayers, which is why he raised some eyebrows at a conference sponsored by Reuters on Monday when he was quoted saying, "If I saw some mass exodus, which I do not anticipate, that would require me to rethink some of the basic assumptions that have entered into my determinations."

What wasn't clear in the wire service story was that Feinberg was responding to a hypothetical question. He has repeatedly rejected arguments that the pay restrictions were onerous, though Bank of America (BAC) has complained its employees are being poached. "I believe that I was stating the obvious is response to a hypothetical question," he tells DailyFinance. In other words, nothing has changed.

Wall Street Versus Public Opinion


Under Feinberg's direction, the government has ordered pay cuts averaging 50% for the top 25 executives at companies that took bailout money, such as AIG, Citigroup (C) and BofA. He will rule by the end of the year on pay of the next 75 highest-paid employees at those firms.

Feinberg isn't oblivious to the ramifications of his decisions. Last week, he told a conference sponsored by Bloomberg News that he was "very cognizant of the concerns expressed by these companies." Still, politicians want more. They find it tough to justify to their constituents why Wall Street firms should pay out any bonuses at all, especially at firms that got billions in government aid to avoid insolvency.

Balancing the competing needs of Wall Street for competent workers and the public's desire for a pound of flesh is a job that few people other than Feinberg would be willing to do. He's a proven his ability to handle thankless jobs such as determining the payouts to families of 9/11 victims. He's also smarter than the Wall Street firms and the media apparently believe. With a few strokes of his pen, Feinberg will rewrite Wall Street compensation practices for years to come.


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