Top pay at bailed out US cos to be cut

The plan calls for halving overall compensation,and cutting cash salary payouts by an average of 90 per cent.

Top earners at financial and auto companies bailed out by the US government will see their pay slashed under an Obama administration plan aimed at addressing public outrage over eye-popping paychecks,two sources familiar with the matter said on Wednesday.

The plan calls for halving overall compensation,and cutting cash salary payouts by an average of 90 per cent,said the sources,who requested anonymity because they were not authorized to speak publicly about the matter.

The sweeping cuts,being negotiated by US pay czar Kenneth Feinberg,would mark a bold move for an administration that has railed against excessively high pay on Wall Street.

White House economic adviser Lawrence Summers told the Reuters Washington Summit on Wednesday that he believed Feinberg’s review would “produce an outcome where they will be very substantially reduced.”

White House spokesman Bill Burton,traveling with President Barack Obama in New Jersey,said,”The president put Ken Feinberg in place in order to be an advocate for taxpayers and it appears that Mr. Feinberg is doing what the president put him in place to do.” Otherwise,Burton said,he would not comment ahead of the report,due October 30.

The companies affected are: AIG,Bank of America,Citigroup,General Motors,Chrysler,GMAC and Chrysler Financial. They all declined to comment.

A Treasury Department spokesman also declined to comment.

Blockbuster earnings and bonuses at Goldman Sachs Group Inc and other companies that received taxpayer assistance have stoked public anger over compensation as the United States grapples with a 9.8 per cent unemployment level and little assistance for homeowners struggling to pay mortgages.

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Feinberg,whose actions only impact companies that received “exceptional assistance” from the government,said on Tuesday that he may publicly disclose his rulings before the October 30 deadline. He could not be reached for comment on Wednesday.

The Wall Street Journal reported that he also planned to demand broader corporate governance changes,including splitting the roles of chairman and chief executive officer.

AIG UNIT EYED

The sources said the top earners at AIG’s financial products unit,largely blamed for risky bets that threatened the stability of the insurer,would not receive more than $200,000 in total individual pay.

That unit became the illustration of Wall Street insensitivity when it was revealed that its employees were receiving $165 million in retention bonuses,after taxpayers had pledged up to $180 billion to keep the company afloat.

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In an interview with Reuters in August,Robert Benmosche,who became AIG’s chief executive this summer,railed against efforts to regulate pay and criticism leveled at his employees,arguing,”You still need to pay people competitively.”

Feinberg told a group of corporate directors on Tuesday that the bailed out companies have delivered to him a “consistent message” that they need to keep their pay competitive.