The US official tasked with overseeing pay practices at the country's large financial institutions has criticized 17 banks for over compensating their executives during the financial crisis in late 2008 and early 2009. But the banks say there are reasons why they paid employees big bonuses.
Kenneth Feinberg, charged with reviewing the pay practices of large U.S. financial institutions, found that 17 banks made a total of $1.6 billion in payments to their top executives after receiving emergency loans from the government.
Feinberg, the Obama Administration's special master for executive compensation, looked at more than 400 banks. "At the time these payments were made they were ill advised - bad judgment on the part of these companies, but they didn't violate any statute. They didn't violate any regulation at the time," he said.
But many Americans say they are outraged that executives were getting big bonuses while taxpayer dollars were keeping the firms alive. "The taxpayer has the right to be outraged," said Feinberg. "Who wouldn't be?"
Damon Silvers represents the US labor federation, the AFL-CIO. "When a firm is in trouble especially a financial firm, cash is the whole deal. Paying out lots of cash, unless you really have to, is not in the interest of the firm and is not in the interest of the public," he said.
Scott Talbott is spokesman for Financial Services Round Table. The organization represents 100 of the largest financial services firms in the U.S. "You have to provide incentives for employees to work hard. And yes, the pay structure for Wall Street vs. the rest of America looks a bit out of wack. But this is a select group of people that can handle or process or engage in these types of activity," he said.
Talbott says special compensations to bank employees were all authorized by third-parties ahead of time. "They're all approved by the shareholders as well as the independent compensation committees in each one of the companies," he said.
Feinberg does not have the authority to force the banks to return any of the money. He says 11 of the 17 companies have already re-paid their government loans with interest. He is encouraging banks to adopt new rules to limit payments to top executives in future crises.
President Barack Obama says the lavish bonuses to bank executives show the need for the financial reforms he signed into law earlier this week.
He says the reforms will eliminate the need for future taxpayer bailouts of financial firms.