Bailout

Does Feinberg want to control bankers? pay or not?

By Felix Salmon

In the wake of that massive Steve Brill profile, Ken Feinberg is now appearing on Bloomberg TV, and saying something very odd indeed:

Feinberg said his ?biggest accomplishment? as pay special master is Citigroup and Bank of America?s repayment of U.S. aid.

?I find that to be the primary objective, and we achieved it,? he said.

The way this whole thing worked, of course, is that Citi and BofA were forced to get Feinberg’s approval for their executive-pay schemes — until they repaid the direct US aid. This was perceived to be a problem, especially at BofA, which was trying to hire a new CEO at the time, and so the banks moved heaven and earth to make those repayments, no matter how much they cost the bank and its shareholders, and no matter how much systemic risk was increased as a result. (After all, both banks are still too big to fail, which means they’re both still operating under an implicit government guarantee.)

It’s weird that Feinberg considers the repayment of aid to be his biggest accomplishment, because the day that repayment happened, he lost all control over executive pay on Wall Street — and he’s telling Bloomberg in the same interview that he wishes he had more control over that, rather than none at all.

Feinberg, it seems to me, can’t have it both ways. Either he wants control over pay, or he doesn’t. If he does want control over pay, he shouldn’t be encouraging banks to wriggle out from under his purview. If he doesn’t, then he shouldn’t be disappointed that his jurisdiction was so narrow.

Full post as published by Macroprudential on January 07, 2010 (boomark / email).