(Scolding Wall Street: The president calls for finance executives to help out with reform on Wall Street during a fundraising trip to New York City. NBC’s Savannah Guthrie reports.)
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White House slashes pay for Wall Street executives
The Obama administration stunned Wall Street on Wednesday by ordering massive pay cuts for top executives at seven financial firms that still hold billions in U.S. government bailout funds.
The move – which would lower average cash compensation by 90 percent — means the administration is making a frontal assault on Wall Street’s gold-plated compensation culture at a time of growing public anger over the firms’ massive pay and bonuses.
And the plan by pay czar Kenneth Feinberg comes in a week in which the White House has been increasingly aggressive in calling on Wall Street to stand down in its opposition to its regulatory reform proposal for the financial industry.
At the seven firms, total average compensation for many executives would be cut in half, according to an administration official. At AIG, no top executive will receive more than $200,000 in total compensation – a humbling comedown for the once high flying insurance executives at the firm.
Along with AIG, the firm affected are Citigroup, Bank of America, General Motors, Chrysler and the financing arms of the two automakers, GMAC Financial Services and Chrysler Financial.
The news came on a day in which President Barack Obama said big Wall Street banks no longer need federal help – signaling he plans to wind down the $700 billion Troubled Asset Relief Program and tighten the screws on the companies that remain inside it.
The development, first reported by the New York Times, caught the financial industry by surprise. On K Street, financial lobbyists were scrambling to figure out what exactly the plan meant for their clients, and how best to respond to it.
“I don’t think that’s healthy, and I don’t like it,” said Camden Fine, president of the Independent Community Bankers of America. “These are decisions for boards of directors to make, not the government. I think this is a very slippery slope.”
And the announcement also prompted concern in the auto industry that car makers are being swept up in the administration’s attempt to squash Wall Street’s high living.
Auto officials cautioned that they want to see an official proposal before responding in detail. “We are currently in discussions with Mr. Feinberg's office regarding executive compensation,” said Greg Martin, the director of policy and Washington communications for General Motors. “We will have further information and comments once those discussions have concluded.”
One longtime critic of steep executive pay praised Feinberg’s move.
“We commend the pay czar and the administration for telling the people who crashed the economy that they need to make the same sacrifices main street and real America have been forced to take on as a result of the economic crisis,” said Dan Pedrotty, director of the AFL-CIO Office of Investment. “The American people are fed up with watching Wall Street play by a different set of rules and pretend like the economic crisis which they created is for everyone else to suffer through and not them.”
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Sources: Politico, MSNBC, Google Maps
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