Latest Feinberg report raps Citigroup, other banks

July 23, 2010 | By Jim Kim

We knew it was coming, and now it has arrived. Kenneth Feinberg's parting shot as pay czar--he is about to assume his duties as BP claims czar--is a doozy. The New York Times reports that he will name 17 financial companies that "made questionable payouts totaling $1.58 billion immediately after accepting billions of dollars of taxpayer aid."

The group includes some big names: Goldman Sachs, JPMorgan Chase, and AIG. But the biggest offender back in 2008 was Citigroup. That reflected the Andrew Hall situation. Roughly two-thirds of the outsize payouts identified were from bonuses awarded to Hall and another trader who were part of the bank's Phibro energy trading unit--which has since been sold amid great controversy.

Feinberg (Kenneth Feinberg news) was looking for three things mainly: Cases of unwarranted payouts; too generous exit packages; or a failure to provide clear rationale or criteria for the payouts.

Feinberg's solution given his limited power was to ask these banks to adopt a "brake provision," that would simply "allow their boards to nullify or alter any bonus payouts or employment contracts in the event of a future financial crisis." None have adopted such a provision, but all will consider it, how seriously we do not know.

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