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.

The Paulson who's been most in the news over the last few years has been former Treasury Secretary Hank. But the Paulson who has made the most money during that time is a fellow you've probably never heard of -- another Harvard Business School graduate in the hedge fund industry -- John. Through his Paulson & Co., John Paulson pulled in a $4 billion pay check in 2007 -- that's more than J.K. Rowling, Oprah Winfrey and Tiger Woods combined.

How did he pull it off? The Wall Street Journal reports that it was Paulson's share of Paulson & Co.'s $20 billion profit from betting on a drop in the subprime mortgage market. He spent $1 billion in 2006 to buy insurance on what he then saw as risky mortgage investments. This was not a surprise to everyone back then -- that December, I had suggested betting against subprime mortgage lender NovaStar Financial (NOVS), and its stock has since fallen more than 99% from $116 to $0.99.

The Glass-Steagall Act -- a law passed in 1933 that separated investment banking from commercial banking with the aim of preventing another Great Depression -- was repealed exactly 10 years ago today at the urging of Sandy Weill so that Citicorp and Travelers (TRV) could merge and from Citigroup (C).

Weill, at the time the CEO of Citicorp, got then-Treasury Secretary Robert Rubin's support for what turned out to be a disastrous regulatory change, one that was finally passed as Rubin passed the baton to his successor -- Larry Summers (now director of President Obama's National Economic Council). That's because the repeal freed Citi to combine commercial, consumer and investment banking into a one-stop shop -- and created a recipe for financial disaster.

You may find it hard to believe, but the Congressional Oversight Panel released its monthly report Friday and said that it had found no "significant flaws in Treasury's implementation" of TARP bailout programs. In fact, the panel found that so far, the Treasury Department has collected $17.4 billion in fees and taken only up to $2 million in losses from the Debt Guarantee Program that backs the debt which banks issued.

At the height of the program, the federal government (and ultimately U.S. taxpayers) guaranteed or insured $4.5 trillion in face value assets, with the majority of the guarantees backing money market accounts that held high concentrations of government debt in the form of Treasury securities. So the added exposure was not for the full face value, since government debt is already backed by the full faith and credit of the U.S. government.

I would like to congratulate the Obama administration for drawing the right line in the sand. Unlike the Bush administration, Obama did not permit a $639 billion bankruptcy -- Lehman Brothers -- whose collapse nearly caused social chaos as people lost confidence in their money market funds. With today's CIT Group (CIT) bankruptcy filing, the U.S. will lose $2.3 billion in TARP money, but with $71 billion in assets, CIT will keep operating and global panic will not follow.

As I posted previously, CIT Group makes loans to about a million small businesses like Dunkin' Brands franchises. Those businesses need capital to operate and they can't get it very easily by accessing public debt and equity markets. So lenders like CIT Group really matter to them. But the company got distracted by subprime mortgages and student loans and it is likely to scale back to its core business of lending to small and medium sized business.

Slipping consumer confidence sent U.S. stocks tumbling Friday, nearly ending a six-month-long sprint that saw major indexes climb steadily and dramatically in the face of recession. The drop, on the last trading day of a wildly volatile October, capped a month of stock-price swings that whipsawed investors as the markets raced between wins and losses in response to positive then negative economic news.

Friday's sell-off was spurred by a disappointing Commerce Department report showing a 0.5 percent drop in consumer spending last month. The bad news was further bolstered by a University of Michigan survey that showed Americans were less optimistic about the economy in October than in the previous month. Stocks reacted dramatically, erasing all gains made Thursday, when markets rallied in response to a strong third-quarter GDP report.

Several sources are saying that GMAC, the former lending arm of GM, is negotiating with the Treasury to get as much as $5.6 billion more in bailout money. The financial firm has already received $13.5 billion from the federal government.

The main reason for helping GMAC is obvious; GM relies on the company to provide auto loans to dealerships and individual consumers. If its ability to lend were compromised, GM could be badly hurt. A lack of leasing options is already being blamed for much of Cadillac's 44 percent drop in sales during the first nine months of this year. While GMAC might survive without the government funds, its ability to make new loans would be crippled.

The federal government could soon have the right to seize control of troubled financials institutions that are deemed "too big to fail," fire their top executives, wipe out shareholders and rewrite the institution's loan agreements. These are among the provisions in a new bill that Representative Barney Frank is likely to introduce this week, according to a report in Monday's New York Times. If Frank's bill makes it though the legislative process, bankruptcy court would no longer be the ultimate decision maker for giant financial institutions whose collapse could jeopardize the financial system. Instead, the government would take that role.

Bankers have become more and more adroit at shooting themselves in the foot this year. Congress, the Administration and the public are already upset by actions that they believe caused the credit crisis, forcing the government to pump hundreds of billions of dollars into the financial system. Goldman Sachs (GS) has drawn tremendous criticism because it will probably pay out record bonuses this year.

Now, it turns out that the the managements of flailing firms Bank of America (BAC) and Citigroup (C) paid themselves extravagant sums in 2008. According to documents obtained by Bloomberg from reports by pay czar Kenneth Feinberg, Citi paid 21 of its managers a total of $390 million and B of A shelled out $227 billion to 17 executives. The average of all that compensation is about $18 million per person.

Americans can be excused for thinking that executives at the seven companies receiving TARP bailout funds would see a pay cut this year, following yesterday's news that the U.S. Treasury's pay czar would slash executive compensation by as much as 90 percent starting next month.

But at least one chief executive among the troubled automotive and banking companies is getting a raise -- Fritz Henderson, who replaced Rick Wagoner as General Motors CEO in March. Henderson (pictured) will see his total annual compensation rise to nearly $5.5 million under guidelines imposed on top executives at companies that received funds under the federal government's bailout plans, Bloomberg News reported, citing a person familiar with the matter.

The U.S. Special Master on Compensation, Kenneth Feinberg, is unleashing the public's furor over Wall Street compensation on 25 lucky executives. Of course, were it not for the grace of the American taxpayer, those companies would not exist.

So, the executives at those companies should be grateful to have their jobs. But until they can pay back that TARP bailout money, their companies are going to feel the burn. And their competitors will leap with joy as they hire their best people.

Top executives looking to ascend to the CEOs chair shouldn't count on getting there through their companies' succession plans. According to executive search firm Heidrick & Struggles (HSII), only 55 percent of Fortune 1000 companies choose to hire their successors from within.

Heidrick & Struggles pointed out that, of the 80 new CEOs who were appointed among Fortune 1000 companies in 2008, only 44 were promoted from within. This shocking statistic raises an interesting question: if corporate boards are only successful 55 percent of the time in identifying capable internal candidates to handle the most important job at the company, it's worth asking if they can effectively prepare for other critical matters that a company might face.

Wall Street may be bitching about the Democrats, but it's still giving them money. Investment banks, hedge funds, insurers, and real estate companies have donated $35.4 million to Democrats and $23.8 million to Republicans for the 2010 election cycle, according to the Center for Responsive Politics. That amounts to 60 percent of donations going to Democrats, up from 44 percent in 2006, and an equal and opposite loss for the GOP.

"Wall Street is giving more money to Democrats than Republicans," David Levinthal, a spokesman for the Washington-based group, tells DailyFinance. "Typically, that's been the reverse."

Disappointing earnings reports from Citigroup (C) and Goldman Sachs (GS) caused stocks to waver for most of Thursday's session before ultimately finishing higher.

The blue-chip Dow Jones Industrial Average ($INDU) rose 47 points, or 0.5 percent, to close at 10,063, while the broader S&P 500 ($INX) added 5 points, or 0.4 percent, to 1,097. The tech-heavy Nasdaq Composite ($COMPX) gained a point to finish at 2,173.

Shares in Citigroup fell more than 5 percent on disappointing results and concern that the financial giant is falling behind rivals JPMorgan Chase (JPM) and Goldman Sachs. Shares in Goldman dropped 2 percent on declining revenue from its investment banking business.

For more on stocks making moves today, be sure to check out BloggingStocks' market wrap up.

Corporate dealmaking, securities trading and stock and bond underwriting have powered Wall Street's earnings this year, and that's bad news for Citigroup (C), some analysts say. Citi posted a $101 million profit in the third quarter, excluding dividends on preferred stock and costs related to a debt exchange that gave Washington a 34 percent stake in the company, but it may stand to lose ground to healthier rivals.

"We expect Citi will struggle to hang onto market share as more strongly capitalized players without meaningful operating limitations can respond to market opportunities more quickly," wrote William Tanona, a former Goldman Sachs analyst now with Collins Stewart in New York, in a note to clients Thursday.