Tuesday, March 16, 2010

Pay Czar Limits Exec Pay At Struggling GMAC

The Obama administration's pay czar is limiting 2010 compensation for top executives at GMAC Inc. because the auto finance giant continues to lose money and can't yet repay its $16.3 billion taxpayer bailout, according to people familiar with the negotiations.

Only one of the top 25 earners at GMAC will earn more than $500,000 in cash, and CEO Michael Carpenter will receive only stock compensation and no cash, said the people, who spoke on condition of anonymity because they were not authorized to discuss the talks.

The agreements follow months of wrangling with Kenneth Feinberg, the Treasury Department's special master for executive compensation. They reflect his concern that GMAC has no plan to return to profitability or repay its bailout.

Feinberg is expected next week to announce 2010 pay packages for the top 25 earners at companies that continue to rely on "extraordinary assistance" from the government, including GMAC, American International Group Inc., General Motors and Chrysler.

Last year, Feinberg allowed two GMAC executives to exceed the $500,000 cash cap, and granted Carpenter an annual pay package worth $9.5 million. After becoming CEO in November, Carpenter earned about $1.2 million, including about $120,000 cash, for six weeks' work.

Officials in the Bush and Obama administrations said GMAC had to be rescued along with automakers General Motors and Chrysler because GMAC provides crucial financing for auto dealers.

But the company's biggest financial problems come from subprime mortgages and other risky loans it financed in the years leading up to the financial crisis.

A watchdog report last week blasted the bailouts, saying officials might have saved taxpayers billions by putting GMAC's non-auto businesses into bankruptcy and saving only the crucial auto finance arm.

The report also questioned Feinberg's approval of Carpenter's generous 2009 pay package.

The White House; US Treasury; Bloomberg; WSJ.

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