The Treasury Department has been vilified by a federal watchdog for allowing General Motors Co. and its financing arm Ally Financial Corp. to give huge pay raises to leading executives while the companies were still in the middle of federal bailouts,
The Wall Street Journal reports.
The review by the inspector general for the Troubled Asset Relief Program condemned the Treasury for letting GM and Ally hand out bonuses worth at least $1 million in 2013 to the top 25 executives at each firm.
The report also revealed that the two companies paid executives an average of $3 million annually in 2013, which was an increase of 28 percent over 2009, while struggling to exit the TARP program.
"Treasury loosened its own pay restrictions for senior executives at General Motors and Ally Financial year after year, even as taxpayer losses in these companies mounted," said Christy Romero, the inspector general.
The Treasury sold off its GM holdings in December 2013 for a loss of $10.5 billion, according to Treasury figures cited by the Journal, which noted that Ally is the last major company to still have a government investment through TARP.
Earlier this month, the Treasury said it had sold nearly 9 million shares in the auto financing firm, cutting its share in the company to 13.8 percent. Although the government only invested $17.2 billion in Ally, it has recouped about $18 billion, the newspaper said.
In his report, Romero criticized the pay increases at GM and Ally while pointing out that the two firms had been in the 2008 federal rescue program far longer than other big companies, according to the Journal.
However, Patricia Geoghegan, who runs the office at the Treasury handling executive compensation for TARP firms, defended the raises and compensation packages at GM and Ally.
She said the Treasury "has fulfilled its obligation to balance limiting executive compensation with allowing companies to repay taxpayer assistance.”
The bonuses and pay hikes for bosses at faltering companies that received TARP funds has been a bone of contention with the public ever since it was revealed that executives at American International Group (AIG) had been given huge raises after getting the government cash boost.
But Treasury officials claim the bailed-out firms had to keep pace with job incentives from other firms, while also noting that it has received $25 billion more than it initially invested in the seven firms that received major federal assistance during the financial crisis, the Journal reported.
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