WASHINGTON—The United States Treasury Department continued to approve “excessive” pay raises for top executives at General Motors Co. (GM) and its former consumer finance arm, both of which received taxpayer-funded bailouts during the financial crisis, a new government report says.
The government watchdog that oversees the US$475-billion bailout said Treasury approved cash salaries exceeding US$500,000 last year for 16 of the 47 top executives at GM and Ally Financial Inc.
Treasury allowed total pay packages, including company stock, of at least US$1 million for every top executive at the two companies, according to the report released Sept. 24 by the special inspector general for the Troubled Asset Relief Program.
It said the government approved US$3 million in pay raises, from four per cent to 20 per cent, for nine GM executives, most of whom had previously gotten raises several years in a row. The government sold its last shares of GM in December.
“Treasury loosened its own pay restrictions for senior executives at General Motors and Ally Financial year after year, even as taxpayer losses in these companies mounted,” Christy Romero, the special inspector general, said in a statement. By doing so despite her office’s repeated urgings not to, Romero said, “Treasury could be sending the message that much-needed reforms coming out of the financial crisis are no longer necessary or required in exchange for TARP dollars.”
A report issued in April by Romero estimated that taxpayers lost US$11.2 billion on the bailout of GM, up from a previous estimate of US$10.5 billion. The automaker needed the US$49.5 billion in aid to survive its bankruptcy restructuring in 2009. GM went public again in November 2010.
Detroit-based Ally, formerly called GMAC Inc., was the auto loan and mortgage arm of GM until it was taken over by the government in 2008 in the bailout. Ally has repaid about US$12 billion of the US$17.2 billion in aid it received. The company went public again in April in an initial public offering in which Treasury sold a chunk of its stock and raised US$2.38 billion.
The government currently owns a 17 per cent stake. The new report estimates that taxpayers lost US$1.8 billion on Ally.
President Barack Obama said last year that top executives at the seven companies that received the biggest bailouts would have their annual cash salaries capped at US$500,000. Any additional compensation would come from company stock that can’t be cashed in until the companies repay their bailouts.
The report said Treasury failed to comply with that limitation in approving executive pay for GM and Ally executives in 2013. Treasury put only a “minimal” amount of restricted stock into pay packages last year and eliminated it completely from 2014 packages, it said.
Patricia Geoghegan, the Treasury official who approved the raises, disputed the findings of the report. Geoghegan said that for all the seven companies receiving the most aid, Treasury has had to find a balance between limiting compensation and approving pay packages that are competitive with executives in similar jobs.
The government gave US$352 billion in aid to those companies and recovered US$377.6 billion, according to Treasury.