Report: Obama slashes pay for bailed-out financial firms

Oct 21, 2009, 20:52 GMT

Washington - US President Barack Obama's administration plans to force a drastic cut-back in salaries at companies that have accepted massive government bail-outs, US media reported Wednesday.

The Treasury Department will demand cuts in compensation from the top 25 executives at seven financial firms that are most indebted to the government, The Wall Street Journal reported, citing people familiar with the matter.

Kenneth Feinberg, the Treasury official charged with overseeing salaries at bailed-out firms, will force executives to cut their total compensation packages by an average of 50 per cent, while salaries will be slashed 90 per cent.

The restrictions apply only to those firms still receiving government loans, including American International Group, Citigroup and Bank of America. Also included are carmakers General Motors, Chrysler and their two financial arms, GMAC Inc and Chrysler Financial.

The cuts will apply to 175 executives in total. Feinberg will also force a series of corporate governance reforms at the companies, according to the reports.

The move comes after widespread public anger over bonuses paid to Wall Street executives who share blame for pushing their industry to the brink of collapse last autumn. Wall Street's crisis nudged the wider global economy into its worst recession since World War II.

The financial turmoil forced the US to approve a 700-billion- dollar rescue package that went to banks in stress. But the new compensation rules will not apply to financial firms that have since paid back the government loans, like Goldman Sachs and JPMorgan Chase.