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Kenneth Feinberg didn’t recoup $1.6 billion in bank compensation.
WASHINGTON — The Obama administration’s pay czar said Friday that he did not try to recoup $1.6 billion in lavish compensation to top executives at bailed-out banks because he thought shaming the banks was punishment enough.
Kenneth Feinberg said 17 banks receiving taxpayer money from the $700 billion financial bailout made “ill-advised” payments of $1.6 billion to their executives. But he stopped short of calling them “contrary to the public interest” — language that would have signaled a fight to get the money back.
Feinberg couldn’t force the banks to repay the money. But the law instructed him to negotiate with banks to return money if he determined that allowing them to keep it was not in the public interest.
He said such a fight could have exposed banks to lawsuits from shareholders trying to recapture the executives’ money. Feinberg said his public shaming of the 17 banks was sufficient.
“I’m not suggesting we should blink, or turn the other cheek,” Feinberg said in an interview with The Associated Press. “These 17 companies were singled out for obviously bad behavior. The question is, at what point are you piling on and going beyond what is warranted?”
By avoiding using the strongest language in his report, he could criticize the banks without endangering the weak economic recovery, Feinberg said.
“Certain aspects of the financial system still confront fragility,” he said in an interview. “I’m not looking to compound that fragility beyond what I thought was necessary.”
Among the companies he let go are two whose bailouts will cost taxpayers billions: American International Group Inc. and CIT Group Inc.
Rather than demanding they return the money, Feinberg invited the 17 banks to give their boards of directors more power to withhold pay during future crises. The request was voluntary.