Christy Romero, the special inspector general overseeing the bailout, said that the Treasury Department allows such high compensation for executives at bailed-out auto companies as to create an incentive for other companies to seek bailouts.
“Absolutely,” Romero replied when Rep. Kerry Bentivolio, R-Mich., asked her if the Treasury Department had created a “moral hazard” by approving so many pay increases. “It shouldn’t be comfortable or luxurious to be in TARP.”
Romero noted that shows that the Treasury Department had approved numerous raises ranging between $30,000 and $1 million. Romero also reminded Congress that ”executive compensation did play a material role in the financial crisis” that made the bailouts necessary because executives lacked the long-term incentives to make responsible long-term decisions about the company.
“Treasury approved raises at GM of 15 percent to 23 percent without any further detail or analysis for four employees “on the basis that they were among the individuals that GM’s CEO most relied on, and they had received significant promotions or increased job responsibilities,” the Detroit News quoted the audit as saying. House Oversight and Government Reform Committee chairman Darrell Issa, R-Calif., suggested that President Obama’s “you didn’t build that” remark is true of General Motors, given that the company is so dependent on taxpayer support.
Patricia Geoghegan, the Treasury Department official responsible for approving or rejecting the pay raises, defended her decisions. “The regulation makes clear that we must consider market forces,” Geoghegan said. “By no means do we approve ever compensation package that’s put in front of us . . . In some cases, pay raises are totally justified. In other instances it is not unusual for [companies] to come to us and recommend that an executive receive a pay decrease.” Twenty-three executives received pay increases that raised their salary above $500,000, while three saw their pay cut, but not below $450,000. “As time goes by, the companies are getting more and more of what they want,” Romero said.
