When Ken Feinberg, the guy Obama charged with reining in bonuses at bailed-out firms, asked AIG who its top-paid executives were, they couldn't answer. That place is a black hole of money.
The New York Times reviews Feinberg's "delicate dance"gett with AIG, Bank of America, Citigroup, Chrysler, and General Motors executives over how to fairly compensate them without their heads winding up on pikes and carried through streets filled with burning trash by enraged unemployed people. The solution was drastic—a 90% cut in cash pay for the top 25 executives and an average of 50% cut overall at each firm—and tough to get to. One reason is that AIG wasn't really sure how many millions in taxpayer dollars its executives were skimming into their own pockets:
A.I.G. refused to cancel some pay contracts that fell outside Mr. Feinberg's purview. At one point, A.I.G. executives expressed frustration with the contracts. A.I.G., they said, was having trouble identifying just who its most highly paid employees were.
Were they actually getting cash from the U.S. Treasury, and people were just carting it home in grocery bags, or something?
The failed executives fought back against the restrictions valiantly, but to no avail. How do you expect to retain your best failures if you don't pay them competitively?
Bank of America was particularly concerned that it might lose employees if Mr. Feinberg restricted pay. The bank was in the midst of integrating its operations with those of Merrill Lynch, which it agreed at the height of the crisis last year to buy.
When Bank of America submitted the names of top executives to Mr. Feinberg, its representatives pointed out that 45 of the top 100 employees at the bank and Merrill had left.
You see how that works, right? The only way to keep people is to pay them millions of dollars. If you stop paying them millions of dollars, they will leave. Bank of America's evidence of this is that 45% of the people to whom it was paying the most millions of dollars left. Q.E.D.
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