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BAILOUT REWARDS: THE TREASURY DEPARTMENT’S CONTINUED APPROVAL OF EXCESSIVE 

PAY FOR EXECUTIVES AT TAXPAYER–FUNDED 

COMPANIES 

HEARING 

BEFORE THE

SUBCOMMITTEE ON ECONOMIC GROWTH, 

JOB CREATION AND REGULATORY AFFAIRS 

OF THE

COMMITTEE ON OVERSIGHT 

AND GOVERNMENT REFORM 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

FEBRUARY 26, 2013 

Serial No. 113–4 

Printed for the use of the Committee on Oversight and Government Reform 

( 

Available via the World Wide Web: http://www.fdsys.gov 

http://www.house.gov/reform 

(II) 

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM 

DARRELL E. ISSA, California, Chairman 

JOHN L. MICA, Florida 

MICHAEL R. TURNER, Ohio 

JOHN J. DUNCAN, JR., Tennessee 

PATRICK T. MCHENRY, North Carolina 

JIM JORDAN, Ohio 

JASON CHAFFETZ, Utah 

TIM WALBERG, Michigan 

JAMES LANKFORD, Oklahoma 

JUSTIN AMASH, Michigan 

PAUL A. GOSAR, Arizona 

PATRICK MEEHAN, Pennsylvania 

SCOTT DESJARLAIS, Tennessee 

TREY GOWDY, South Carolina 

BLAKE FARENTHOLD, Texas 

DOC HASTINGS, Washington 

CYNTHIA M. LUMMIS, Wyoming 

ROB WOODALL, Georgia 

THOMAS MASSIE, Kentucky 

DOUG COLLINS, Georgia 

MARK MEADOWS, North Carolina 

KERRY L. BENTIVOLIO, Michigan 

RON DESANTIS, Florida 

ELIJAH E. CUMMINGS, Maryland, Ranking 

Minority Member 

CAROLYN B. MALONEY, New York 

ELEANOR HOLMES NORTON, District of 

Columbia 

JOHN F. TIERNEY, Massachusetts 

WM. LACY CLAY, Missouri 

STEPHEN F. LYNCH, Massachusetts 

JIM COOPER, Tennessee 

GERALD E. CONNOLLY, Virginia 

JACKIE SPEIER, California 

MATTHEW A. CARTWRIGHT, Pennsylvania 

MARK POCAN, Wisconsin 

TAMMY DUCKWORTH, Illinois 

DANNY K. DAVIS, Illinois 

PETER WELCH, Vermont 

TONY CARDENAS, California 

STEVEN A. HORSFORD, Nevada 

MICHELLE LUJAN GRISHAM, New Mexico 

VACANCY 

LAWRENCE J. BRADY, Staff Director 

JOHN D. CUADERES, Deputy Staff Director 

ROBERT BORDEN, General Counsel 

LINDA A. GOOD, Chief Clerk 

DAVID RAPALLO, Minority Staff Director 

SUBCOMMITTEE ON ECONOMIC GROWTH, JOB CREATION AND REGULATORY AFFAIRS

JIM JORDAN, Ohio, Chairman 

JOHN DUNCAN, Tennessee 

PATRICK T. MCHENRY, North Carolina 

PAUL GOSAR, Arizona 

PATRICK MEEHAN, Pennsylvania 

SCOTT DESJARLAIS, Tennessee 

DOC HASTINGS, Washington 

CYNTHIA LUMMIS, Wyoming 

DOUG COLLINS, Georgia 

MARK MEADOWS, North Carolina 

KERRY BENTIVOLIO, Michigan 

RON DESANTIS Florida 

MATTHEW A. CARTWRIGHT, Pennsylvania, 

Ranking Minority Member 

TAMMY DUCKWORTH, Illinois 

GERALD E. CONNOLLY, Virginia 

MARK POCAN, Wisconsin 

DANNY K. DAVIS, Illinois 

STEVEN A. HORSFORD, Nevada 

(III) 

C O N T E N T S 

Page 

Hearing held on February 26, 2013 ....................................................................... 1 

WITNESSES 

The Honorable Christy Romero, Special Inspector General for the Troubled 

Asset Relief Program, U.S. Department of the Treasury 

Oral Statement ................................................................................................. 5 

Written Statement ............................................................................................ 7 

Ms. Patricia Geoghegan, Acting Special Master for TARP Executive Compensation, U.S. Department of the Treasury 

Oral Statement ................................................................................................. 28 

Written Statement ............................................................................................ 30 

APPENDIX 

The Honorable Matthew Cartwright, a Member of Congress from the State 

of Pennsylvania, Opening Statement ................................................................. 66 

Mr. Kenneth R. Feinberg, Author, Who Gets What, Fair Compensation After 

Tragedy and Financial Upheaval ........................................................................ 68 

(1) 

BAILOUT REWARDS: THE TREASURY DEPARTMENT’S CONTINUED APPROVAL OF EXCESSIVE PAY FOR EXECUTIVES AT TAXPAYER– 

FUNDED COMPANIES 

Tuesday, February 26, 2013, 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON ECONOMIC GROWTH, JOB CREATION & 

REGULATORY AFFAIRS, 

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM, 

Washington, D.C. 

The subcommittee met, pursuant to call, at 10:05 a.m., in Room 

2154, Rayburn House Office Building, Hon. Jim Jordan [chairman 

of the subcommittee] presiding. 

Present: Representatives Jordan, McHenry, Lummis, Collins, 

Meadows, Bentivolio, DeSantis, Cartwright, Connolly, Pocan, Davis 

and Horsford. 

Also Present: Representative Issa. 

Staff Present: Ali Ahmad, Majority Communications Advisor; 

Alexia Ardolina, Majority Assistant Clerk; David Brewer, Majority 

Counsel; Caitlin Carroll, Majority Deputy Press Secretary; Katelyn 

E. Christ, Majority Professional Staff Member; John Cuaderes, Majority Deputy Staff Director; Linda Good, Majority Chief Clerk; 

Tyler Grimm, Majority Professional Staff Member; Christopher 

Hixon, Majority Deputy Chief Counsel, Oversight; Scott Schmidt, 

Majority Deputy Director of Digital Strategy; Rebecca Watkins, 

Majority Deputy Director of Communications; Jedd Bellman, Minority Counsel; Jaron Bourke, Minority Director of Administration; 

Devon Hill, Minority Research Assistant; Jennifer Hoffman, Minority Press Secretary; Jason Powell, Minority Senior Counsel; and 

Brian Quinn, Minority Counsel. 

Mr. JORDAN. All right, the subcommittee will come to order. Today’s hearing is on the Treasury Department’s continued approval 

of excessive pay for executives at companies that are currently 

being funded by the taxpayer. 

I want to welcome our witnesses today. Thank you for being 

here. As I mentioned to you just a few minutes ago, we will try to 

be done by noon; hopefully a little earlier, if we can. But it is an 

important hearing and you have to listen to us give a few statements before you get to talk; it is just sort of the way this thing 

goes. So I will do an opening statement, then the gentleman from 

Pennsylvania, Mr. Cartwright, will do his, and then we will hear 

from you all. You get five minutes to give your testimony and then 

we will get right into questions. 

2 

Today’s hearing is about understanding why the Treasury Department continues to abdicate its responsibility to taxpayers, 

breaking a firm promise our President, President Obama, made to 

the American people. 

In 2009, when it was discovered that executives at bailed-out 

firms were enriching themselves on the backs of taxpayer support, 

the President went on national television and stated that these actions were the height of irresponsibility and declared them shameful. He said he would not tolerate it as President. 

To remedy the situation, he promised top executives at firms receiving extraordinary help from U.S. taxpayers will have their compensation capped at half a million dollars, a fraction of the salaries 

that they had been reported. 

The person currently in charge of enforcing these restrictions is 

with us today, Ms. Patricia Geoghegan. She is the Acting Special 

Master for TARP Executive Compensation and is responsible for 

approving compensation at firms that have been given extraordinary assistance from the Federal Government. 

The latest audit from the special inspector general for TARP 

shows that compensation for executives at bailed-out firms is egregiously out of line with what the President committed to the American people. 

Of the 69 executives for whom Special Master Geoghegan had re- sponsibility to approve compensation, all but one received pay of $1 

million. In fact, 16 of these executives were paid over $5 million. 

We are here today to fulfill the committee’s mission of bringing 

transparency and accountability to the American people. 

Treasury’s failure to protect taxpayers is part of a disturbing pattern in which this Administration makes promises to the public, 

but then does not live up to them. We saw it with the stimulus; 

we were promised unemployment would never exceed 8 percent, 

and it exceeded 10 percent. We saw it with ObamaCare; the President said premiums would go down, and they have gone up. 

When the President’s promises do not materialize, he and his administration simply stick their heads in the ground and offer little 

to the American people by way of answers. Hopefully, this morning, 

Special Master Geoghegan can explain to us how things got so out 

of control and provide a plan to correct executive compensation for 

firms that continue to operate with taxpayer support. 

With that, I would yield to the gentleman from Pennsylvania for 

his opening statement. 

Mr. CARTWRIGHT. Thank you, Mr. Chairman. 

I would like to thank our witnesses for appearing before the committee today. I look forward to hearing your testimony on the executive compensation at companies that received exceptional taxpayer assistance during the Government’s response to the 2008 financial crisis. 

Like most Americans, I was troubled to learn how the structure 

of compensation packages on Wall Street helped to create incentives for taking the unnecessary and excessive risks that led to the 

financial crisis in the first place. Too often, executives received 

huge cash salaries, discretionary raises, exorbitant bonuses, and 

golden parachutes, with little to no reason to care about their behavior’s effect on the long-term consequences to the company and 

3 

the Country because their compensation wasn’t tied to the longterm health of the company. 

With the economy collapsing, the taxpayers bailed out these companies; not because we wanted to, but because we had to. Millions 

of middle class jobs, blue collar manufacturing jobs would have 

been gone; millions of people out of work through no fault of their 

own, just because a bunch of traders on Wall Street didn’t feel the 

need to think about the long-term consequences of their actions. 

This was hard to stomach when the taxpayers, who saved these 

companies, are often struggling themselves to make ends meet. But 

it was a necessary thing to do and the right thing to do to save 

the jobs of millions of innocent, middle class people who had nothing to do with causing that financial crisis in the first place. 

With these bailouts came conditions, and rightly so. One of the 

many conditions was that the Treasury Department would appoint 

someone to oversee executive compensation at these companies. 

This compensation was to be structured in a way that would 

incentivize long-term growth over risk taking and personal gain 

and, most importantly, get these companies back on their feet 

again by attracting and retaining quality employees that would 

keep these jobs safe so that they were able to pay back the taxpayers as quickly as possible. 

TARP has been, overall, a success story. According to the Treasury Department, as of January 31, 2013, Treasury has recovered 

all or substantially all of TARP funds disbursed to date. Four of the 

seven companies we are talking about today, who received the most 

TARP funds, have already paid us back and exited the program. 

Now, I would like to point out here a great irony that we will 

see in this room today. The same people who argued that they 

would rather have gone over the fiscal cliff because a 4.6 percent 

increase in taxes on the wealthiest 0.7 percent in our Nation would 

destroy the economy are the same people who are now saying that 

these specific 0.7 percenters are making too much money. 

Now, I know we will be getting into the minutiae today, and I 

welcome that discussion; however, it is important to recognize the 

big picture here. We held our noses; we bailed out these companies 

so that millions of middle class jobs wouldn’t be lost. This program 

was an overall success and millions of people are employed in this 

Country who otherwise wouldn’t have been. 

I thank the chairman for calling this hearing and I look forward 

to a productive dialogue on these issues. I yield. 

Mr. JORDAN. I thank the gentleman. 

I would just point out that this hearing is about following the 

law and about an administration keeping their word. They told us 

one thing. In fact, we are going to play what the President said. 

We have statements they said they were going to limit compensation, that it would be the rare and it would be the exception for 

executives who were receiving taxpayer dollars to go above half a 

million dollars in compensation, and it has been anything but that. 

So this is about following the law and having this administration 

do exactly what they told the American taxpayers they were going 

to do when the American taxpayers ponied up the money for these 

various companies. 

4 

With that, I would yield to the chairman of the full committee, 

the gentleman from California. 

Mr. ISSA. Thank you, Mr. Chairman. I will be very, very brief. 

I think the ranking member will recognize that in this particular 

case we agree on what excess compensation is, and perhaps for a 

reason that you didn’t note. To quote President Barack Obama, if 

you have a business, you didn’t build that; somebody else made 

that happen. Now, that quote doesn’t ring particularly true to me 

as an entrepreneur and a job creator, but it rings very true when 

it comes to General Motors and other companies who still owe us 

their very existence, their very existence depending upon the federal relief, a bailout for which, in the case of General Motors, we 

are still about $20 billion upside down. And I repeat, you don’t take 

a bonus when, in fact, your investors are in the negative. 

That is what we are talking about here today. I think that is exactly where we have to be. And I note that the chairman and ranking member together noted that not every company that is on this 

excess compensation list fits that bill, and I hope that we will concentrate on companies who were not able to exit TARP because, in 

fact, they have not paid us back. Once they exit TARP, I am one 

of those people who believes that it is up to the board of directors 

and stockholders to determine compensation, and I really am willing to support whatever they support as the owners of the company. But today America is a major owner of the company and, ultimately, without the United States Treasury there would be no 

General Motors and several other companies. 

With that, Mr. Chairman, I thank you for that opportunity. 

Mr. JORDAN. Thank you. 

Is there anyone else on the committee wishing to make an opening statement? 

[No response.] 

Mr. JORDAN. All right, members have seven days to submit opening statements for the record. 

We will now recognize our panel. We are pleased to have with 

us the Honorable Christy Romero, who is the Special Inspector 

General for the Troubled Asset Relief Program, and Ms. Patricia 

Geoghegan, who is Acting Special Master for TARP Executive Compensation. 

Ladies, I need you to stand up. Raise your right hand. 

Do you solemnly swear or affirm that the testimony you are 

about to give will be the truth, the whole truth, and nothing but 

the truth? 

[Witnesses respond in the affirmative.] 

Mr. JORDAN. Let the record show that the witnesses answered in 

the affirmative. 

And we will just start with Ms. Romero. You will be given five 

minutes, more or less, and then we will go right to Ms. Geoghegan. 

Ms. Romero, again, thank you for being here and you are recognized for your five minutes. 

5 

WITNESS STATEMENTS 

STATEMENT OF THE HONORABLE CHRISTY ROMERO 

Ms. ROMERO. Chairman Jordan, Ranking Member Cartwright, 

Chairman Issa, members of the committee, it is my honor to 

present SIGTARP’s report. I thank the committee for bringing 

transparency and oversight to this use of taxpayer dollars. 

Executive compensation did play a material role in causing the 

financial crisis. Pay was not tied to long-term performance; employees took too much risk in the short-term, and eventually that 

caught up with them. The companies would have failed, but taxpayers saved them with a bailout. Taxpayers stepped up because 

we were told that the entire economy would collapse. The bailout 

was supposed to protect taxpayers, not line the pockets of executives. 

After TARP companies paid huge bonuses, the President announced reforms for seven companies receiving extraordinary bailouts. Executive compensation would be capped at $500,000, with 

anything additional paid in stock that can’t be cashed until taxpayers are repaid. Treasury’s Office of the Special Master determines each person’s pay within the top 25 employees at these companies under six Treasury principles that are vague, conflicting, 

and so broad that almost any pay could be justified. 

Former Special Master Feinberg developed guidelines in the 

public’s interest to balance the conflicting principles, give incentives to repay, and address mistakes of the past, and he testified 

before Congress that they were: first, ‘‘pay should generally not exceed the 50th percentile,‘‘ meaning pay that is right in the middle; 

second, ‘‘cash salaries should rarely exceed $500,000 and should be, 

in many cases, well under’’; and, third, incentive pay should be tied 

to long-term performance metrics and only cashed out as TARP is 

repaid. 

SIGTARP found in our first report that the special master reduced pay from pre-bailout times, but approved pay worth millions. 

The special master lacked strong criteria policies and procedures to 

apply its guidelines, and ended up making many exceptions when 

companies pushed back, claiming they were unique and needed the 

pay for retention. That is the same argument that Fannie and 

Freddie made. 

In 2012 we did a followup. We found that Treasury made no 

meaningful reforms on our recommendations. Treasury approved 

excessive pay at AIG, GM, and Ally that exceeded its own guidelines, chipping away at the important changes that Mr. Feinberg 

had made, largely based on what the companies wanted. Every employee except one was paid $1 million; many were paid much more. 

Half were paid $3 million or more; one quarter were paid $5 million or more. Treasury approved two-thirds of these employees to 

be paid above the 50th percentile, meaning they got pay not at the 

middle of the pack, but above that. 

The companies wanted raises for 18 employees, and that is what they got, ranging from $30,000 to a $1 million pay raise. There was 

no criteria for who would get a raise. Employees got raises at companies with profits, companies with losses, and even a company in 

bankruptcy. There was no criteria for who would be paid cash salaVerDate Aug 31 2005 15:16 Mar 14, 2013 Jkt 000000 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 C:\DOCS\79741.TXT APRIL
6 

ries over $500,000. Seventy percent were paid cash of $500,000 or 

more; 94 percent were paid $450,000 or more in cash. For half of 

the employees, Treasury removed long-term restricted stock, removing pay that is tied to individual performance and that gives 

the employee a personal stake in the company repaying TARP. 

Treasury claims they are not bound by their guidelines, but we 

found too many exceptions to the guidelines to make the guidelines 

meaningful. Treasury has to be held to the standards they create 

and under which they make decisions. It is necessary for transparency, consistency, and oversight. 

It should be a bare minimum to reduce pay from the ridiculous, 

out of control pre-bailout pay. The question is not how much should 

these employees be paid if it was business as usual. It is not business as usual; taxpayers own part of these companies. The question 

is what is the appropriate size of pay given the taxpayer ownership 

and how should that pay be structured to avoid repeating the mistakes of the past. 

Mr. Feinberg said that the answer was in his guidelines. If 

Treasury does not follow the guidelines, taxpayers will subsidize 

excessive pay and Treasury risks turning back the clock to the 

compensation that contributed to the financial crisis. 

Thank you again, and I am happy to answer any questions. 

[Prepared statement of Ms. Romero follows:] 

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Mr. JORDAN. Thank you, Ms. Romero. We appreciate that. 

Ms. Geoghegan, you are recognized for five minutes. 

STATEMENT OF PATRICIA GEOGHEGAN 

Ms. GEOGHEGAN. Chairman Jordan, Ranking Member Cartwright, Chairman Issa, and members of the subcommittee, I thank 

you for the opportunity to testify today on this important topic. My 

name is Patricia Geoghegan and I serve as the Acting Special Master for TARP Executive Compensation. 

In the fall of 2008 our economy stood at the brink. The financial 

institutions and markets that Americans rely on to protect our savings, finance our homes and college educations, and fund our businesses were threatened as at no time since the Great Depression. 

Congress acted by passing the Emergency Economic Stabilization 

Act, which created TARP and included important restrictions on 

executive compensation at businesses that received TARP assistance. Those restrictions were designed to ensure that compensation 

of top executives was aligned not only with the interests of shareholders, but also with the interests of taxpayers in preventing excessive risk-taking and in recovering TARP assistance. 

Treasury acted quickly to implement these restrictions through 

a regulation that, among other things, created the Office of the 

Special Master. Established in June 2009 under the leadership of 

Kenneth Feinberg, the responsibility of the office is, each year, to 

review and either approve or modify the pay packages proposed for 

the top 25 employees of the seven companies that had received exceptional assistance under TARP. The special master has no jurisdiction to review pay packages at any other companies. All our determination letters are available publicly on our Web site. 

As Mr. Feinberg noted almost four years ago before the full committee, the office has worked to achieve a balance between limiting 

compensation, while at the same time keeping pay at levels that 

enable the exceptional assistance companies to remain competitive 

and repay taxpayers. The regulation makes clear that we must consider market forces in determining pay levels. 

In implementing the regulation, we established a number of 

guidelines that were the foundation of the initial determinations. 

These guidelines are not rigid formulas. Each pay determination 

requires the exercise of discretion and judgment that takes into account the specific facts and circumstances of each company and 

each employee. A careful look at our record shows that the office 

has struck an appropriate balance. Pay has been cut and taxpayers 

are being repaid. 

Starting in 2009, we cut average cash pay for the top 25 executives at the seven companies by more than 90 percent and average 

total pay by more than 50 percent. Taken together, the original 

seven companies under the jurisdiction of the special master have 

returned the $352 billion in total assistance provided plus an additional positive return to date of more than $6 billion. 

For the 2012 determinations we followed the same guidelines established by Mr. Feinberg in 2009. We continue to review and 

evaluate market data to make sure that pay does not exceed the 

levels paid for similar positions at similar companies. 

29 

In 2012, AIG’s average pay packages for its top 25 employees 

were at the 48th percentile compared to similar positions at similar 

companies. GM’s were at the 50th percentile and Ally Financial’s 

were midway between the 50th and the 75th percentiles. 

We continue to require that most pay be in the form of stock, the 

ultimate value of which will reflect the performance of the company. Ninety-four percent of the pay packages we approved in 2012 

contained a majority of stock, rather than cash, up from 74 percent 

in 2010. We continue to limit cash salary. In 2012, the average 

total cash pay approved for AIG, GM, and Ally Financial was 63 

percent lower than the median for total cash pay for similar positions at similar companies. We continue to require that incentive 

pay be awarded only on the achievement of pre-established performance goals and we continue to limit perks. 

Today, TARP is in wind-down. In December 2012, AIG exited 

TARP. Thus, only two companies, GM and Ally Financial, remain 

under the jurisdiction of the office, and for these companies we will 

continue to follow the framework and guidelines we have used for 

the 2009 through 2012 determinations until they have exited 

TARP. 

Thank you, and I welcome your questions. 

[Prepared statement of Ms. Geoghegan follows:] 

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Mr. JORDAN. Thank you, Ms. Geoghegan. 

I will now turn to the gentleman from California for five minutes. 

Mr. ISSA. I appreciate that. 

Would you play the short video? 

[Video shown.] 

Mr. ISSA. Ms. Geoghegan, did you fully live up to the words the 

President said in that speech? 

Ms. GEOGHEGAN. Chairman Issa, if you recall, after the President’s speech, Congress amended EESA. 

Mr. ISSA. Okay, and since my name is normally pronounced 

Essa, I will interrupt at this moment. 

I agree; the statute does not exactly match the President’s statement. So let’s get into what the statute is supposed to do. You are 

authorized to provide such compensation. And I have done executive compensation actually greater than the $10 million that we are 

talking about for the top. You are authorized to get them, effectively, to the median, but you are also required to have a deferral. 

They are not allowed to receive it all in cash. Is that essentially 

what a layperson would think about the law relative to GM and 

the old GMAC, which is the only two entities we are talking about 

really here today? 

Ms. GEOGHEGAN. Chairman Issa, I agree. Our two main guidelines would be to make sure that the compensation does not exceed 

the levels paid for similar positions at similar companies, on the 

one hand, and we want to make sure that most of the compensation is in the form of stock so that it is paid over time and reflects 

the performance of the company over time so that the executives 

are not encouraged to look at short-term results and are not encouraged to take excessive risks. 

Mr. ISSA. And if you are an executive making $500,000, $1 mil- lion, $2 million, the truth is it is not a negative, it is a positive, 

to receive your compensation on a deferred basis, correct? In other 

words, companies routinely do not pay their top executives in large 

amounts of cash; just the opposite, executives typically want a deferred compensation package, and many of the compensation that 

top executives get are in non-cash deferred systems, including their 

pensions and so on. Isn’t that true? 

Ms. GEOGHEGAN. Chairman Issa, that is correct. In our case, 

however, the cash portion of the packages is a much smaller portion than is normal for similar positions at similar companies. 

Mr. ISSA. I took the opportunity to look at General Motors’ chief 

competitor, Ford. And when you look at Ford, it outperformed GM. 

When you look at the total compensation, I found it to be substantially similar. The difference is Ford has much lower debt, owes the 

Government nothing, is in fact, competing against General Motors, 

who got a bailout, isn’t that correct? 

Ms. GEOGHEGAN. Generally speaking, I believe that you are correct in describing their compensation. 

Mr. ISSA. And because America chose, or the Treasury chose to 

have a substantial portion of that bailout in stock, it is particularly 

significant because it doesn’t appear as debt on the balance sheet 

but, rather, stock that is currently under water by about $20 billion, right? More or less. 

36 

Ms. GEOGHEGAN. The stock that we own at current market prices 

is not sufficient for GM to repay us fully, that is correct. 

Mr. ISSA. Well, let’s understand something. General Motors is a 

public company, so we have lost that much money. If we take that 

money and we sell it and we put it into Apple or we put it into 

gold futures or anything else, we may or may not make money. The 

truth is, today, we have lost that much money, and the only way 

we get it back is through stock appreciation, correct? 

Ms. GEOGHEGAN. It is true that the only way we will get the remaining investment in GM is through the value of our stock, that 

is correct, Chairman Issa. 

Mr. ISSA. Okay. Now, I have sat on the board of a public company, even as a member of Congress, and I am very sensitive to 

what moves the value of stock. Since your compensation package 

was deferred almost not at all. In other words, they vest in three 

year increments; a third, a third, and a third. 

Can you sit here today and tell the rest of us, who do not always 

deal in these kinds of things, that they are really linked to the 

long-term future? Long-term future is next year, the year after, 

and the year after, long-term; or is in fact three years three years 

after the bailout, or six years after the bailout, nearly. Is it in fact 

long-term or are we dealing with a relatively short horizon, one in 

which the CEO, for example, is likely to still be the CEO or barely 

exiting? 

That is the question I really have for you here today. It is not 

the total compensation, which I have some concerns about whether 

it is fair based on their performance relative to their peer who 

didn’t have the assistance. But even if it was reasonable, why 

wouldn’t that compensation, the so-called TARP stock, be more 

linked to us getting out of the red on that very stock? 

Ms. GEOGHEGAN. Chairman Issa, the task that the Office of the 

Special Master has under the law is to achieve a balance between 

limiting compensation on the—— 

Mr. ISSA. Well, my time has expired, but maybe because you are 

not exactly answering the question, if you could simply say did you 

have the authority to go beyond a third, a third, and a third? Not 

could you exercise it, did you choose to, but did you have the authority to have their compensation further out and more linked to 

the long-term performance than you did? 

Ms. GEOGHEGAN. Chairman Issa, we did select three years as the 

appropriate long-term measure. 

Mr. ISSA. I appreciate that you selected it. 

Mr. Chairman and ranking member, if you would give me a little 

indulgence. 

Did you have the authority to have their compensation more 

linked to where the company would be when it exits us being on 

the hook and upside down and currently having lost, potentially 

forever, our investment, did you have the authority to make it 

longer than essentially a third of it maturing in one year? 

Ms. GEOGHEGAN. Chairman Issa, we could have made it longer 

and we could have made it shorter, you are correct. 

Mr. ISSA. Okay. Mr. Chairman, ranking member, hopefully I 

have set the stage a little bit. One of my concerns today is exercise 

of authority, was it reasonable. Thank you. I yield back. 

37 

Mr. JORDAN. Thank you. 

The gentleman from Pennsylvania is recognized for five minutes. 

Mr. CARTWRIGHT. Thank you, Mr. Chairman. 

Now, one thing that we have been doing so far is referring liberally to the statements and opinions of Mr. Kenneth Feinberg, and 

one thing I would like to do, since a lot of those statements and 

opinions were made, he came out with a book, called Who Gets 

What: Fair Compensation After Tragedy and Financial Upheaval, 

in 2012, and I would like to submit for the record not the entire 

book, Mr. Chairman, but chapter chapter 5 of that book, which 

runs from pages 85 through 123. 

Mr. JORDAN. We too have a budget. 

Without objection. 

Mr. CARTWRIGHT. Thank you. 

Now, Ms. Romero, I want to thank you for your work and your 

testimony today. I appreciate the work that SIGTARP does. 

Ms. Geoghegan, I also want to thank you for your work and your 

testimony. 

Now, Congress required that Treasury prohibit bonus payments 

and retention awards for companies receiving exceptional assistance under TARP. Ms. Romero, do you have any indication at this 

point that Treasury failed to do that? 

Ms. ROMERO. So the cuts that Ms. Geoghegan was referring to 

in her earlier testimony, there were definitely cuts made in 2009 

from the pre-bailout time. Much of that cut actually comes from 

Congress prohibiting those cash bonuses and that compensation. 

Mr. CARTWRIGHT. Thank you. Thank you. 

Now, Ms. Geoghegan, have you done that, have you prohibited 

bonus payments and retention awards? 

Ms. GEOGHEGAN. The statute has a small—has the opportunity 

to provide for incentive compensation up to one-third of the total 

package, and it is only permitted in the form of long-term restricted stock. 

Mr. CARTWRIGHT. As you said. 

Ms. GEOGHEGAN. And we do permit long-term restricted stock 

strictly in accordance with what the statute permits. 

Mr. CARTWRIGHT. All right. Congress also required that Treasury 

prohibit golden parachutes, or exorbitant departure payments, to 

senior executives. Ms. Geoghegan, have you done that? 

Ms. GEOGHEGAN. Yes. Golden parachutes are prohibited for the 

top 10 executives at all TARP recipients. 

Mr. CARTWRIGHT. Okay. 

And back to you, Ms. Romero. Do you have any indication that 

Treasury has failed to do that? 

Ms. ROMERO. Golden parachutes? No. 

Mr. CARTWRIGHT. Okay. 

Now, in the statute, despite whatever video clips we want to 

show people, Congress did not include a specific dollar limit to impose on individual executives. 

Now, Ms. Geoghegan, tell us what considerations are you required to weigh under the law? 

Ms. GEOGHEGAN. Under the law, the specific principle in the 

Treasury regulations, Congressman Cartwright, states that comVerDate Aug 31 2005 15:16 Mar 14, 2013 Jkt 000000 PO 00000 Frm 00041 Fmt 6633 Sfmt 6633 C:\DOCS\79741.TXT APRIL
38 

pensation should be consistent with, and not excessive, taking into 

account amounts paid for similar positions at similar companies. 

Mr. CARTWRIGHT. Well, I think it is fairly clear that Treasury 

has upheld the law that Congress passed on limiting executive 

compensation of companies receiving assistance from TARP. Still, 

the SIGTARP report calls into question the decisions the special 

master made when approving or modifying executive compensation. 

Ms. Geoghegan, how do you evaluate executive compensation 

proposals from the companies that you oversee? Do you look at 

data; do you conduct interviews? 

Ms. GEOGHEGAN. In performing our task of the balance between 

limiting compensation and making sure that the companies have 

sufficient pay to remain competitive and to repay taxpayers, we 

look at a lot of information. We gather an enormous amount of 

market data. We have on-staff executive professionals who have 

years of experience in the area, executive compensation professionals who have years of experience in the area, and they help us 

evaluate the market data, gather it, and decide where the pay proposals that the companies have given us fall within that range. 

Mr. CARTWRIGHT. Okay. 

Ms. GEOGHEGAN. By no means do we approve every compensation package that is put in front of us. 

Mr. CARTWRIGHT. I understand that. My last question is when 

considering a company’s proposal to pay an individual executive 

cash salary in excess of $500,000, which is allowed under your office’s guidelines for ‘‘good cause,’’ what analysis does the Office of 

Special Master conduct to determine whether or not there is in fact 

good cause? 

Ms. GEOGHEGAN. Congressman Cartwright, we look at the facts 

and circumstances of the company and of the individual; we look 

at that individual’s responsibilities; we look at where the cash salary of that individual falls, comparing it to amounts paid for similar positions at similar companies; and, in fact, in our 2012 pay 

packages, our total cash for the pay packages that we approved 

was, overall, 63 percent lower than median for similar positions at 

similar companies. So we have definitely followed our guideline of 

restricting cash pay. 

Mr. CARTWRIGHT. Thank you, Ms. Geoghegan. My time is up. 

Mr. JORDAN. I thank the gentleman. 

I recognize the gentleman from Michigan for five minutes, Mr. 

Bentivolio. 

Mr. BENTIVOLIO. Chairman Jordan, Ranking Member Cartwright, thank you for holding this important hearing. Billions of 

dollars of taxpayer money have been used to bail out companies 

that were failing largely due to their own poor decisions. Taxpayer 

money should not be used to enrich the executives of these companies. 

I remember a long time ago a teacher told me that I don’t care 

how talented you are, how smart you are, there is always somebody 

a little bit better, and our importance to any organization is directly proportionate to the hole you leave when you take your hand 

out of a bucket of water. 

What I don’t understand is how we can do this, reward people 

for failure. 

39 

But my question is for Ms. Romero. SIGTARP has admitted that 

increased moral hazard had been a byproduct of TARP. Thus far, 

the Dodd-Frank Act has also failed to have solved the perception 

problem that the markets expect large institutions to receive government support if they falter. 

By accepting company requests for salaries above prescribed limits, the Office of the Special Master has set a precedent that may 

encourage future companies to seek bailouts. Does SIGTARP believe that increased moral hazard is a byproduct of a bailout? 

Ms. ROMERO. Absolutely. 

Mr. BENTIVOLIO. By relinquishing its pay-setting authorities to 

bailed out companies, do you think Treasury has potentially 

incentivized other companies to seek bailouts in the future? 

Ms. ROMERO. Absolutely, even the companies who are still in. It 

shouldn’t be comfortable or luxurious to be in TARP; you want it 

to be uncomfortable so there is an incentive to get out and to never 

ask to get back in again. 

Mr. BENTIVOLIO. Is it true, as noted in footnote 4 of your recent 

audit, that Citicorp and Bank of America exited TARP so quickly 

in part not to have to follow OSM’s pay restrictions? 

Ms. ROMERO. Yes. 

Mr. BENTIVOLIO. In your opinion, what does this entire experience say about the Federal Government’s involvement in making 

pay decisions for private companies? 

Ms. ROMERO. Well, I think whether it is required by law or rule, 

Treasury didn’t actually implement TARP through law. For example, there is nothing in any law or any Treasury rule related to 

Treasury’s standards it follows for cash injections in banks, which 

is most of TARP. So when Treasury sets guidelines, they have to 

follow them; and the guidelines are really important here. The 

guidelines actually protect the public; and without them the balance shifts to what the companies want, and that is very dangerous. 

Mr. BENTIVOLIO. Thank you very much. 

Mr. Chairman, I yield back my time. 

Mr. JORDAN. I thank the gentleman. 

All right. The gentleman, Mr. Davis, is recognized for five minutes. 

Mr. DAVIS. Thank you very much, Mr. Chairman, and I want to 

thank you for calling this hearing. 

I also want to thank our witnesses for coming and for sharing 

their expressions with us. 

Like many of my colleagues, in several instances I voted to help 

find a solution and a direction to what I considered to be a very 

serious financial crisis that we were facing, and the seriousness 

that some of our companies were having difficulty making it. I am 

also pleased that when we look at what has been the success of 

some of them, where they were able to turn around their businesses. 

But like many Americans, I didn’t vote to line the pockets of any 

executives or to provide bonuses where it didn’t appear to me that 

bonuses were warranted. 

So just to try and make sure that my assessment is fair, when 

I look at your efforts to limit executive compensation, while also 

40 

considering the ability of TARP recipients to perform as stable enterprises, let me ask you, Ms. Geoghegan, in a letter received by 

the committee just this morning, the former TARP special master, 

Ken Feinberg, wrote, ‘‘The market and economy have changed since 

the Office of the Special Master was established. The instability of 

the market and the economic recession posed particular problems 

for the special master when it came to calculating compensation in 

individual cases. Today the market and Wall Street-related competitive compensation are much different than they were when I 

was the special master. Wall Street-related executive compensation 

has increased since 2009. Accordingly, compensation decisions 

made by the special master must take into account this fact in 

making individual compensation decisions that will assure ongoing 

competitiveness in the marketplace. The initial pay prescriptions 

promulgated during my tenure may still be valid and credible, but 

waivers and exceptions are to be more frequent and expected in 

light of changing markets.’’ 

Would you respond to that statement, or would you agree? 

Ms. GEOGHEGAN. Congressman Davis, thank you for the opportunity to address that statement. I certainly would, in general, 

agree with what my predecessor, Ken Feinberg, says about current 

compensation. Nevertheless, the Office of the Special Master adheres very closely to the same principles we have always followed 

and our guidelines. 

We believe that we are following all the guidelines that were initially established, and we don’t believe that we have issued additional waivers or have increased, in general, the level of compensation. We have looked to make sure that the compensation is consistent with market practice; we have limited cash; we have made 

sure that incentive compensation is awarded only on the basis of 

pre-established performance goals; and we have made sure that all 

the packages, as many as we can get, are mainly in the form of 

stock. In fact, 94 percent of our pay packages in 2012 were majority 

stock, up from 74 percent in 2010. 

So while I appreciate Mr. Feinberg’s view on the economy as a 

whole and where Wall Street compensation has gone, the fact is 

that we have remained extremely careful in limiting compensation. 

That is the balance we have to achieve. We limit compensation 

while, at the same time, permitting the companies to have pay levels that will keep them competitive so that they can succeed. And 

I don’t believe that we should think about the companies as if they 

are failing; these companies are succeeding. 

Mr. DAVIS. Thank you very much. 

And thank you, Mr. Chairman. I yield back. 

Mr. JORDAN. I thank the gentleman. 

Ms. Romero, when Mr. Bentivolio was asking his questions, he 

talked about the moral hazard, and you mentioned uncomfortable, 

we should make these companies feel uncomfortable so that there 

is not this incentive to take taxpayer money. How many pay packages did the special master look at last year? 

Ms. ROMERO. Sixty-nine. 

Mr. JORDAN. Sixty-nine. And the way it works, the companies 

send those, they send in what they would like to pay their executives and then Ms. Geoghegan gives it the thumbs up or the 

41 

thumbs down. How many of those 69 did the special master turn 

down? 

Ms. ROMERO. Not that many. I mean, what we found was the pay 

that they got was largely based on what they had—— 

Mr. JORDAN. So 69 executives asked to pay a certain amount and 

they didn’t change any of them? 

Ms. ROMERO. I think they made some changes, but they gave 18 of 18 pay raises that were requested, $30,000 to $1,000,000 without, I mean, look at these pay raises. Only four of them are under 

$100,000. You see like $650,000 pay raise, $200,000 pay raise, even 

where the company is taking a loss; $100,000 pay raise. 

Mr. JORDAN. So not exactly making these guys sweat, right? 

Ms. ROMERO. No. 

Mr. JORDAN. And I read through your testimony last night. At 

some point I have to ask, do you feel like you are pulling your hair 

out? I saw on page 9 you talk about despite SIGTARP’s January 

2012 report identifying serious concerns with the special master’s 

pay-setting process, Treasury continued to use the same process for 

setting 2012 pay without significant change. Then you said on the 

next page, SIGTARP previously warned that Treasury lacked robust criteria, policies, and procedures to ensure these guidelines 

are met. Treasury made no meaningful reform to its processes. 

Then I look at page 12: Treasury did not establish any meaningful criteria for having good cause to award cash salaries greater 

than half a million dollars. Page 18, finally, you said, the second 

report by SIGTARP to warn the Office of Special Master after four 

years still does not have robust policies, procedures, or criteria to 

ensure that for executives at TARP exceptional assistance companies stays within the OSM guidelines. 

So how many times do you have to tell them put in place some 

policies that actually make some sense? 

Ms. ROMERO. That is why this hearing is so important. We talk 

about, say on pay. The taxpayers get a say on pay, too. If we own 

part of the company, we speak through the special master. 

Mr. JORDAN. And I think even in your opening remarks, I jotted 

this down, you said they haven’t even held to the standards they 

created. So it is not only they need better policies, but what policies 

they do have, they haven’t even followed those in the course of this 

process. Is that correct? 

Ms. ROMERO. That is correct. 

Mr. JORDAN. Now, Ms. Geoghegan, you cite in 2009 you actually 

had the executives, you cut their pay. Well, of course you cut their 

pay; that is the year they got all the money. That is the year they 

come to the taxpayers, hat in hand, saying we need money. Well, 

I hope their pay was cut then; they were living off the taxpayers 

then. So to use that as the standard for, well, we have made these 

folks uncomfortable, I would argue it is a lot less about what happened in 2009 and what has happened since 2009. 

And since 2009, if my numbers are correct, Mr. Feinberg, in 

2009, only approved executive pay compensation above half a million for six, at that point we had seven companies in the program, 

and I think when he approved six of those, we were focusing on 

five companies who were in the exceptional assistance category. 

Only six of those individuals received pay above half a million. 

42 

Today what is that number, Ms. Geoghegan? 

Ms. GEOGHEGAN. In 2012, Chairman Jordan, 23 individuals—— 

Mr. JORDAN. Wait, wait, wait. So it went from 6 to 23? 

Ms. GEOGHEGAN. Well, in 2012 we approved one additional pay 

package over the amount—— 

Mr. JORDAN. No, no, no, no. In 2009 it was six, right? 

Ms. GEOGHEGAN. That is correct. 

Mr. JORDAN. Yes. And how many companies were you looking at 

in 2009? 

Ms. GEOGHEGAN. In 2009 it was seven companies. 

Mr. JORDAN. All right. And today how many executive pay packages are above half a million? Twenty-three? 

Ms. GEOGHEGAN. In our 2012 determinations there are 23 above 

$500,000 cash salaries, which is one more than the amount if 2011 

and one more than the amount in 2010. 

Mr. JORDAN. But I am going from where we started. 2009, six 

above half a million. And today it is how many? 

Ms. GEOGHEGAN. Today it is 23. 

Mr. JORDAN. Okay. And how many companies were you evaluating in 2009? 

Ms. GEOGHEGAN. In 2009 there were seven. 

Mr. JORDAN. And how many companies are you evaluating 

today? 

Ms. GEOGHEGAN. In 2012 we evaluated three companies. 

Mr. JORDAN. So only six above half a million in 2009, when you 

were looking at seven companies. That is 25 executives that you 

can look at at each companies, and only six out of all seven of those 

companies. And today, when you have three companies, you have 

23. 

Let me ask, the one company, I think I am correct with ResCap, 

the one company has gone bankrupt, is that right? Have they filed 

for bankruptcy? 

Ms. GEOGHEGAN. Chairman Jordan, I want to clarify one point. 

Mr. JORDAN. Have they filed for bankruptcy? 

Ms. GEOGHEGAN. Ally Financial has not filed for bankruptcy. 

Mr. JORDAN. ResCap? 

Ms. GEOGHEGAN. They have a mortgage subsidiary as one of 

their strategic steps in make—our investment in Ally Financial 

is—— 

Mr. JORDAN. Has ResCap filed for bankruptcy? 

Ms. GEOGHEGAN. They have done a Chapter 11 proceeding. 

Mr. JORDAN. And is the head of ResCap, Mr. Merino, is he one 

of those 23 receiving compensation over half a million dollars? 

Ms. GEOGHEGAN. Cash salary? I am afraid, Chairman Jordan, I 

don’t feel that I can address specific pay packages for specific individuals. 

Mr. JORDAN. We have that information. It says he is. It says he 

is one of the 23. So here is what the taxpayer sees, and think about 

it in the context of what Ms. Romero said; we want to make this 

uncomfortable because we have taxpayer money at risk. So in 2009, 

six executives, when you are looking at seven different companies, 

received pay above half a million dollars. Today you are looking at 

three companies and you have 23 executives receiving pay above 

43 

that threshold, and one of those individuals at one of those companies, ResCap, is going bankrupt, and yet he is still one of the 23. 

Do you think the taxpayers are a little nervous about that? And 

back to Ms. Romero’s point, do you think that is making these folks 

uncomfortable? 

Ms. GEOGHEGAN. Chairman Jordan, I understand that the American people—— 

Mr. JORDAN. And when you look at the pattern of 69 folks you 

evaluate and you didn’t turn down any of them, basically you take 

what the company tells you. They offer, here is what we would like 

to pay our executives, all that, that is fine; check the box, that is 

fine. 

Ms. GEOGHEGAN. Chairman Jordan, by no means do we approve 

every pay package that is put in front of us. We have turned down 

many proposals. 

Mr. JORDAN. How many of those 69 did you turn down last year? 

Ms. GEOGHEGAN. In our packages for last year, we required 

many increases in long-term restricted stock. We denied virtually 

every request for increased cash salary last year. AIG did not ask 

for any net increase in compensation; AIG asked for a new decrease 

in compensation. 

Mr. JORDAN. Okay. 

Ms. GEOGHEGAN. Their pay proposals, their one raise that they 

requested was more than offset by the pay decreases that they proposed for other people. 

Mr. JORDAN. But this year AIG is not still in the program. 

My time has expired. I now go to, I believe, the gentleman from 

Virginia, and then we go next to the gentleman from North Carolina. 

Mr. Connolly. 

Mr. CONNOLLY. Thank you, Mr. Chairman. 

Welcome to both of our witnesses. 

Ms. Geoghegan, by the way, did TARP lose money for the taxpayers of the United States? 

Ms. GEOGHEGAN. Congressman Connolly, TARP has been a great 

success, so it is very difficult to answer that question. We have not 

yet received back all of the investments made under TARP, but we 

have received back an incredibly large number of them; I believe 

roughly 93 percent of the investments. But, overall, TARP itself 

was an incredible success; it averted a financial calamity and prevented a second Great Depression. 

Mr. CONNOLLY. Now, let me ask both you and Ms. Romero are 

you familiar with a letter addressed to Mr. Jordan and Mr. Cartwright, dated today, from Mr. Feinberg? 

Mr. Chairman, I would ask that this letter be entered into the 

record. 

Mr. JORDAN. Without objection. 

Mr. CONNOLLY. I thank the chair. 

He makes two points in response to queries from the subcommittee, and the reason you haven’t seen it is he only got our 

letter yesterday. But he says the pay prescriptions promulgated 

during my tenure at Department of Transportation should be applied in a flexible manner and should not be used to strictly limit 

each individual executive’s compensation. 

44 

He goes on to say that when one examines the statute, the statutory directive guiding the special master, in calculating compensation, he says there are different statutes that are conflicting. He 

says, for example, there are conflicting statutory directives. For example, make sure the Treasury compensation decisions ensure the 

ongoing competitiveness of those companies subject to Treasury 

oversight, while also making sure that such pay decisions promote 

overall company economic growth and avoid excessive risk. These 

conflicting directives guaranty the special master must exercise a 

fair amount of discretion in deciding compensation. 

The second point he makes is that the circumstances that existed 

in 2009 are different than the circumstances that exist today and, 

therefore, they have to be taken into account in terms of current 

actions by the special master. He says compensation decisions 

made by the special master must take into account this fact in 

making individual compensation decisions that will ensure ongoing 

competitiveness in the marketplace. 

Would you comment on the two points he is making, one that 

there is, apparently, before I got here, there were even some illusions to the breaking of the law? Ms. Romero, I assume that the 

special inspector general doesn’t concur with that. You found no 

breaking of the law, did you? 

Ms. ROMERO. No. I found a lack of adherence to the Office of the 

Special Master’s own guidelines. 

Mr. CONNOLLY. Well, that is what you say, but here is one of the 

special masters of all special masters saying, well, first of all, there 

is conflicting statutory guidance here, and the special master has 

to try to navigate his or her way through this conflicting statutory 

guidance. 

Ms. ROMERO. Sure. I am very happy to talk about that. So because there is conflicting statutes, there is a lot of discretion in the 

Office of the Special Master. And what we have said is come up 

with the criteria, because that is what is necessary for consistency, 

transparency, and effective oversight. You have to set some standards. And this is why our initial recommendations were so important. Tell us what the criteria is under which you are going to 

make decisions for who gets a pay raise, for who gets cash over 

$500,000. And without the criteria there is no way to have effective 

oversight, and I would think this committee, as an oversight committee, would want that. 

But I want to raise the competitive point. The competitive part 

that you raised, of the marketplace, is already embedded in the 

guidelines if they are followed. 

Mr. CONNOLLY. Wait, wait. You just said there weren’t any 

guidelines. 

Ms. ROMERO. No, I said there were guidelines; they weren’t adhered to. 

Mr. CONNOLLY. Well, I heard you say come up with guidelines. 

Ms. ROMERO. He came up with, well, criteria. 

Mr. CONNOLLY. Criteria. 

Ms. ROMERO. So he came up with guidelines, three guidelines 

that I mentioned in my opening. But what we said is there is no 

criteria or policies and procedures to ensure those guidelines are 

met. And the market and what happens with the market is already 

45 

embedded in those guidelines if they are adhered to, because pay 

is supposed to not exceed 50 percent of what their peers are, so 

that already takes into account rising tide. 

Mr. CONNOLLY. Okay. All right, I am running out of time. 

Mr. Chairman, could I ask for just 30 or 40 more seconds to ask 

Ms. Geoghegan to respond? 

Mr. JORDAN. Sure. 

Mr. CONNOLLY. I thank the chair. 

Ms. Geoghegan, what about Ms. Romero’s point, that they have 

been asking for criteria to go along with guidelines and your office 

has failed to provide such criteria, which compromises transparency? 

Ms. GEOGHEGAN. Thank you, Congressman Connolly. We have 

our guidelines. Our guidelines are extremely useful ways of implementing the somewhat conflicting principles under the Treasury 

regulations, but we try to carry out all those principles and that 

is why we have our guidelines. The fact is, as Mr. Feinberg would 

tell you, we have to exercise discretion; we have to exercise judgment in looking at the exact facts and circumstances of each executive and each company. That is what the principles say and that 

is what we do. 

Mr. CONNOLLY. Well, what about Ms. Romero’s criticism that you 

have yet to adopt clear criteria that all of us can then measure and 

see whether you are abiding by them reasonably or not? 

Ms. GEOGHEGAN. Thank you. Congressman Connolly, we believe 

that if you were to look at our determination letters, we explain 

how we view market data; we explain our policies and procedures, 

which are incredibly robust; we explain all of how we go about examining all of the information that the companies submit. We believe that we have adequate policies and procedures for making the 

decisions that we have to make. 

On the point of raises, if I might address that briefly, it is important to understand we do not always approve raises. But it is also 

important to understand that the companies are constantly evaluating the performance of their executives, and with respect to some 

executives they give them promotions, they give them added responsibilities, and that is why, in some cases, pay raises are totally 

justified. In other instances it is not unusual for them to come to 

us and to suggest that executives receive a pay decrease. 

So I think you have to think of things in terms of the real packages that we see. It is not a question of the companies coming to 

us and simply asking for pay raises. Those pay raises are related 

to things like promotions and added responsibilities. 

Mr. CONNOLLY. My time is up and I thank the chairman for his 

indulgence. 

Mr. JORDAN. I thank the gentleman. 

Real quickly before going to the gentleman from North Carolina. 

Ms. Romero, of the requests for pay above half a million dollars, 

as you evaluated what the special master did last year, of those requests, how many did they turn down and say, no, you cannot 

make above half a million dollars? 

Ms. ROMERO. I think it was only a couple. 

Mr. JORDAN. Couple out of how many? 

Ms. ROMERO. So there were 23 given. 

46 

Mr. JORDAN. Twenty-three out of 25. 

Ms. ROMERO. I think it was 26. 

Mr. JORDAN. Excuse me, two out of 25 they turned down? 

Ms. ROMERO. I think it was three. I think the number was three 

that were turned down and 23 that were given. 

Mr. JORDAN. And did they take them from half a million down 

to $499,999, or what did they do? 

Ms. ROMERO. Basically, everyone gets cash at $450,000 or more. 

Mr. JORDAN. Oh, so this is not like they are going way down; 

they are just dropping them a dollar or two. 

Ms. ROMERO. Ninety-four percent. 

Mr. JORDAN. Again, making them uncomfortable so that we don’t 

have this continue. 

Ms. ROMERO. Right. Right. 

Mr. JORDAN. I got it. I got it. 

Ms. ROMERO. Well, give them some skin in the game. I mean, 

that is why you want to limit cash. You want an employee to have 

some skin in the game, not be paid for just showing up. You want 

pay for performance. 

Mr. JORDAN. I was being sarcastic, but sometimes it doesn’t 

work. 

The gentleman from North Carolina. 

Mr. MCHENRY. My sarcasm often doesn’t work. 

Thank you both for your service to our government and to the 

American people. 

The question for you, Ms. Romero, is in light of my colleague’s 

questions, Mr. Connolly’s questions. So what you outline is, as an 

inspector general, as a special inspector general for TARP, you are 

there to critique the program to make sure the American people 

are taken care of and the taxpayer isn’t further put the screws to; 

that there is transparency, there is consistency; you have a rulesbased approach rather than an ad-hoc approach. What you outline 

in your report today is that the special pay master doesn’t have a 

consistent application of the rules and guidelines that they have 

outlined and, furthermore, they are overly broad in the guidelines 

they use, which gives them such great discretion. 

Obviously, they disagree. This is very often the case with inspectors general when they put critiques out. This is not uncommon, 

based on the experience that I know you have had with this program for the last five years. 

Now, I ask this question because doesn’t that ad-hoc basis raise 

and up the ante on moral hazard? Now, many of us disagreed with 

the bailouts, and I certainly appreciate Ms. Geoghegan’s saying 

TARP was a great success. Now, the fact is the taxpayer, at current accounting, is going to lose about $70 billion on TARP. I appreciate you saying it is a great success. I appreciate you upping 

the ante. 

I know it is your responsibility, as an administration official, to 

defend this Administration. You have done a yeoman’s task today, 

even to the point where, when you called TARP a great success, I 

laughed. It wasn’t a snicker; it was actually a genuine laugh. It is 

ridiculous. But that is your perspective. 

47 

The question I have for the American people and for the taxpayer, Ms. Romero, why does this matter? It is 69 people getting 

paid. It is how many companies now? 

Ms. ROMERO. Three 

Mr. MCHENRY. Three. 

Ms. ROMERO. Well, two for 2013. 

Mr. MCHENRY. All right, who cares? Why does this matter? Tell 

me why it matters. 

Ms. ROMERO. Two reasons. One, you are paying for it. That is the 

first reason. So if there is excessive compensation, all taxpayers are 

subsidizing it. Then there is a more important reason, which is executive compensation played a material role in causing the financial crisis. When you have high cash, when you don’t use long-term 

restricted stock tied to individual pay performance, you risk returning back to the very type of pay that got so out of hand that it 

caused these companies to nearly collapse, and all of us had to step 

in. 

Mr. MCHENRY. So it is not the principles outlined by the original 

special pay master, Mr. Feinberg, that is the issue; it is their unwillingness to put a rules-based approach to judging these pay 

packages, is your critique. 

Ms. ROMERO. Right. I mean, I think applying those guidelines, 

Mr. Feinberg said, was supposed to get that balance, where you 

don’t have excessive compensation, but the companies keep competitive. You rip away those guidelines, you chip away at those 

guidelines, all you are left with is the companies in the ear of the 

special master saying this is what we want; and we are seeing 

more and more, each year, as time goes by, that the companies are 

getting more and more and more what they want. 

Mr. MCHENRY. So you reference a report that both Citi and Bank 

of America exited TARP faster, in an accelerated way, based on the 

pay restrictions. 

Ms. ROMERO. Right. 

Mr. MCHENRY. So it does have an impact on getting people off 

the taxpayer dime and getting them back to independent entities 

again, does it not? 

Ms. ROMERO. Absolutely. 

Mr. MCHENRY. Okay. So, look, the question here is not about private sector pay, right? 

Ms. ROMERO. Right. 

Mr. MCHENRY. As you mentioned, say, on pay by shareholders, 

I think that is an important principle that we adhere to. Now, 

what I am concerned about is the American people and the taxpayer be on the hook for this pay. We have written a law in such 

a way that we should have principles adhered to by the special pay 

master. 

And I would hope that your office, Ms. Geoghegan, would actually read the report, look at ways that you can change and improve, and actually stand up for the American people and the taxpayers that are paying not only your freight and my freight, but 

still own the greater portion of these companies. 

Now, final question, and just so we have this on the record. How 

much has TARP been paid back from General Motors? 

48 

Ms. ROMERO. From General Motors, about half. It was $50 billion. They are still owed about $20 billion. I want to also point out, 

because I think this was raised earlier, the Government expects a 

loss in TARP, and about $20 to $25 billion of that is in the auto 

companies. 

Mr. MCHENRY. Thank you, and thank you for noting that for the 

record. 

Thank you, Mr. Chairman, for your leadership. 

Mr. JORDAN. I thank you. 

The gentleman from Georgia, Mr. Collins, is recognized. 

Mr. COLLINS. Thank you, Mr. Chairman. I appreciate this. 

What is amazing about this discussion, and I have been in Washington now all of probably eight weeks, as I was told, however, on 

January the 3rd, I became part of the problem. What I will fight 

back on, though, is the fact that I believe that we are all in this. 

And I think, Ms. Romero, you made the comment just a minute 

ago why this is important is that you are paying for it. I think that 

just needs to be the theme that we hit here all along, is that we 

lose track in the numbers and the guidelines and everything else 

about who actually and why actually this is important, because 

there is a trust factor out there, if you have you not noticed. People 

don’t trust us anymore. They don’t trust us on the level to spend 

their money properly. They don’t trust us to get the budget 

straight. They don’t trust us on so many different levels. And then 

when we come to an issue like this, it is amazing. 

One of the other things that I have been amazed about since I 

came here is hyperbole. 

Ms. Geoghegan, to say that TARP was this excessive and great 

success and that it avoided the next Great Depression, I am just 

curious here, did it also cure the common cold? Did it also do all 

these other great things? Hyperbole here does not help us. The Administration wants to say that it was this and explain that, and 

as my colleague said, that is your opinion and you are having to 

sit here and endure this. 

The questions that I have, though, sort of the basis of it is when 

we endure the issue of lack of adherence to guidelines, we don’t follow the rules or we make them up as we go, or really what I think 

it is is time sort of cures all ills. In other words, time is progressing 

here. People get tired of hearing about this, so it becomes very easy 

for the special master to listen and say, well, maybe we need to approve this. 

The concern, however, for me is this: when you look at the question, and you have stated you understand the 50 percent guidelines, Ms. Geoghegan, is that correct? You understand that process. 

However, we have over-exceeded on several occasions, and I will 

just use several lightly. 

Ms. GEOGHEGAN. Congressman Collins, I would like to clarify. 

We satisfied the guidelines as we have applied them to AIG, GM, 

and Ally Financial. We apply the same benchmark we have always 

applied to those three companies. 

Mr. COLLINS. But on the 50 percent rule, 63 percent of the time 

in 2012 you approved overage. 

Ms. GEOGHEGAN. Congressman Collins, the way we apply—— 

49 

Mr. COLLINS. Answer the question. Did you do it over 63 percent 

of the time? 

Ms. GEOGHEGAN. There is a range of compensation. The average 

of the compensation—— 

Mr. COLLINS. Again—— 

Ms. GEOGHEGAN. The guideline is not do we exceed it; the guideline is do the packages as a whole at the particular company average to the benchmark. That includes, as we describe in our determination letters, that means that some of the pay packages are 

above and some are below, but the average is at our benchmark. 

That is how we have always applied the guideline for market 

forces. 

Mr. COLLINS. Well, it seems like the averages that we are applying to, for the most part, are always on the side of approving. I 

mean, we are continuing this process. And, again, one of the things 

that was brought up, as we talked about it from a perspective of 

this being the taxpayer funding this, is that the Government is still 

on significant hook, especially GM and Ally, in a rate that we are 

not going to get paid back, that at the start process and others, 

that we are in for this. And I think what actually happens here is 

time progresses. And this is my concern, and it has been talked 

about here many times, of the fact that the guidelines and the adherence to those guidelines—you made an interesting comment. I 

will just have to ask; I am not sure. You mentioned pay decreases. 

How many of you approved pay decreases? This was in your own 

testimony just a few minutes ago. 

Ms. GEOGHEGAN. Yes. Congressman Collins, AIG, last year, when 

we were in the pay packages that they proposed, the pay decreases 

that they proposed well outweighed the one pay increase that they 

requested. In the case of Ally Financial, the pay decreases that 

they proposed outweighed the pay increases that they requested. 

Neither of those companies asked for a net pay increase in 2012. 

Mr. COLLINS. Well, I think the problem we have here is that they 

have become comfortable in the situation in which they are in. 

They have become comfortable where they are at. There is no incentive for them to get out of this and to find a way to pay this 

back or to get back—because they have become very comfortable. 

They can understand, well, if we do a little decrease here, get a little increase here, it begins to weigh out and nobody is paying attention. 

Ms. Romero, I have a question for you in the short time left. Who 

will safeguard the taxpayers’ money tied up in TARP, if it is not 

the special master? 

Ms. ROMERO. That is the question. I will try. I will do my best. 

Our entire office at SIGTARP will do our best. But we are not ones 

making the decisions. 

Mr. COLLINS. Because right now it looks like there is one, and 

your own comment just a minute ago, the company is in the ear, 

the company is making the progress, and that in the end we are 

sort of left on the hook with what the special master, in this ‘‘confusion of rules and guidelines.’’ 

I think the problem we have here, Mr. Chairman, and I know we 

are coming to an end, but this is the problem I have. The American 

people go to work every day, they look at these issues and they unVerDate Aug 31 2005 15:16 Mar 14, 2013 Jkt 000000 PO 00000 Frm 00053 Fmt 6633 Sfmt 6633 C:\DOCS\79741.TXT APRIL
50 

derstand things that are grey at times, but they also understand 

process. They also understand rules. And what they do not want 

to hear from us is a continual, well, the rule says this, the statute 

differs here. 

Look, the American people are on the tax line for this; they are 

paying for it. They are frustrated by it. And to come before this 

committee and say, well, we have done it here and we didn’t do it 

here, and simply the guidelines are out of whack, that is not acceptable, and the taxpayer is paying for it. 

Mr. Chairman. 

Mr. JORDAN. Thank you, Mr. Collins. You are exactly right. The 

American people, what they hate is when they are told one thing 

and they see something else happen. The President said top executives at firms receiving extraordinary help from United States taxpayers will have their compensation capped at half a million dollars. 

Mr. Biden, always one to have a statement for the public, said 

I would like to throw these guys in the brig. This was all back 

when the Government was convincing the American people they 

needed to pony up their tax dollars to bail out companies that were 

failing, and then, of course, the Treasury secretary said base cash 

salaries should rarely exceed half a million dollars and should be, 

in many cases, well under half a million dollars. 

Well, we have heard from testimony today that is just not happening. The trend is exactly the opposite direction. Six executives 

in 2009, when there were seven companies in this exceptional assistance category, only six executives received pay above half a million dollars. Today it is 23 and we are only focusing on two companies today. So the trend has been like this, when the President said 

no one, no one should be receiving a compensation package above 

half a million dollars; and the trend is exactly the opposite direction. 

And we also heard from Ms. Romero today; she said, in fact, 

those who are below half a million dollars, they are right next to 

the ceiling, they are all making $450, $480, $499,999.99. That is 

where they are all at. And yet Mr. Geithner, who is your boss, Ms. 

Geoghegan, said it should be, in many cases, well under half a million dollars. 

So Mr. Collins is exactly right. The American taxpayers are like, 

we were told X and we are getting Y, and we are sick of it. We are 

sick of it from the politicians and we are certainly sick of it from 

other people who we are paying their salary to do their job. And 

frankly, Ms. Geoghegan, you are not doing it. You are not doing it 

and you are not doing it with companies they are bailing out in the 

process. 

Ally Financial, 74 percent owned by the American taxpayer, and 

their subsidiary, ResCap, going bankrupt, you just approved their 

CEO’s compensation package of over half a million dollars. So it is 

like what the heck is going on here. And it is no wonder Ms. Romero is ready to pull her hair out and so frustrated, because for 

several years now she has said get your act together, at least set 

some standards; tell us how you are making this thing work or how 

you are going to make it work. 

51 

In fact, how do you determine what the market rate is and what 

that median price? How do you determine that? What is the process in place that you have? 

Ms. GEOGHEGAN. Chairman Jordan, we gather an enormous 

amount of market data. We have in-house executive compensation 

professionals who review it. 

Mr. JORDAN. Is some of the data given to you by the very companies you are overseeing? 

Ms. GEOGHEGAN. From the beginning we have given companies 

instructions as to exactly what we need in terms of market data. 

Mr. JORDAN. So you are relying on the very company, Ally, the 

company 74 percent owned by the taxpayers, a subsidiary going 

bankrupt, you rely on some of the information they give you to determine what the market price is? 

Ms. GEOGHEGAN. We give them—— 

Mr. JORDAN. Is that what they do, Ms. Romero? 

Ms. ROMERO. Yes. 

Mr. JORDAN. That is exactly what they do? 

Ms. ROMERO. Yes. 

Mr. JORDAN. Well, no wonder you are approving everything. So 

they get to be the judge, jury, and the decider in the whole thing, 

and they are the very company getting the taxpayer dollars in the 

first place. So they are saying, you know what, we think the average is here and, oh, by the way, this is what we want to be paid, 

and they give you the information and you check it off. Well, how 

is the taxpayer being protected in that formula? 

Ms. GEOGHEGAN. Chairman Jordan, I would like to clarify. From 

the beginning we have asked the companies, they have the best access to the broadest and most comprehensive market data. Our executive compensation professionals have explained to them exactly 

what they need, and our professionals are—— 

Mr. JORDAN. This is amazing. This is like me asking, when my 

kids get in trouble, me asking them what kind of punishment do 

you want. This is amazing. Frankly, I didn’t realize it was this bad; 

that you are asking Ally, 74 percent owned by the taxpayer, subsidiary, you are asking them give us the information that shows us 

what you should be paid and we will make a decision, and what 

is your recommendation? 

Ms. GEOGHEGAN. Congressman Jordan, we have the expertise to 

evaluate that market data. 

Mr. JORDAN. You have the experts who take all the information 

from the very people you are supposed to be overseeing, and you 

are saying they are so expert that they can determine that, oh, that 

is not going to work? And yet we just heard from Ms. Romero you 

are approving almost every compensation package they ask for. 

Well, of course; they are giving you the data to make the decision. 

Ms. GEOGHEGAN. Chairman Jordan, we actually have the ability 

to evaluate the market data. We spend an enormous amount of 

time doing that. We do spend an enormous amount of due diligence. 

Mr. JORDAN. Ms. Romero, this is frustrating. Ms. Romero, how 

I have characterized it, is that accurate? 

Ms. ROMERO. The companies? Yes. The companies give market 

data. So, for example, for 2012, while the Office of the Special MasVerDate Aug 31 2005 15:16 Mar 14, 2013 Jkt 000000 PO 00000 Frm 00055 Fmt 6633 Sfmt 6633 C:\DOCS\79741.TXT APRIL
52 

ter looked at that market data, they went with the companies’ determination of the companies and the 50th percentile. 

There is another important point here. When you look at the 

companies that are in the peer groups, for example, for AIG, the 

companies are picking those, JPMorgan Chase is in the peer group, 

other large banks. They set the peer groups. And one of the things 

Special Master Feinberg testified before Congress is that in that 

competitive market data that the companies send, he said the companies were asking for more and more and more, and that was his 

congressional testimony. 

Mr. JORDAN. What is the remedy? Obviously, they are not going 

to listen to you. And we know GM and Ally are going to be in this 

for a while. We know what is happening with the stock; they are 

going to be here. So what is the remedy? Time and time again, I 

read your testimony where you over and over again say, come on, 

listen to me; set some standards, do something. Four years. How 

do we get at this? Are we going to have to look at some legislation? 

Ms. ROMERO. I have seven recommendations, and the remedy is 

to get those seven recommendations implemented. Every year to 

re-look at it. 

Mr. JORDAN. I read your recommendations. I get it. But what I 

am saying is are we going to have to look at legislation, introduce 

legislation, try to pass something to make this office accountable to 

the taxpayer? 

Ms. ROMERO. The fact of the matter is every time an IG puts out 

a report and puts out recommendations, an agency has an opportunity. They have two choices: they can completely ignore them 

and end up in the same situation that caused the report in the first 

place. 

Mr. JORDAN. And is that what you believe they have done? 

Ms. ROMERO. So far. 

Mr. JORDAN. Okay. 

Ms. ROMERO. Or what they can do is they can say we are going 

to implement every single one of those recommendations and work 

with you to do it in a way that is done right. That is what should 

happen. 

Mr. JORDAN. And that is what should happen not based solely on 

your good work, but that is what should happen based on what the 

leaders of our Government told the American people they were 

going to do when they started this program. 

Ms. ROMERO. Absolutely. 

Mr. JORDAN. So it is not just your good work at your office, which 

has been exceptional; it is because that is what the people in 

charge of our Government told the American taxpayer they were 

going to do, and it is not being done. 

Ms. ROMERO. Absolutely. And, also, those guidelines were developed in the public’s interest. So if they are not going to be adhered 

to, how is the public’s interest going to be implemented? 

Mr. JORDAN. Okay, Ms. Geoghegan, who is your direct boss at 

Treasury? 

Ms. GEOGHEGAN. Ultimately, I report to the Secretary of the 

Treasury. 

Mr. JORDAN. Okay. And can you let me know, has the White 

House, has Mr. Geithner said that this stuff was okay? Has the 

53 

White House communicated to you through Mr. Geithner, in a direct fashion, saying it is okay to see this trend, where more and 

more executives are getting their pay approved above the half a 

million dollar mark? What kind of communication have you had 

with the White House, if any? 

Ms. GEOGHEGAN. Chairman Jordan, I have not had any communications with the White House. 

Mr. JORDAN. Has Mr. Geithner expressed any communications to 

you about this program that he has had with the White House? 

Ms. GEOGHEGAN. No, he has not. 

Mr. JORDAN. And is your direct Mr. Massad, Tim Massad? 

Ms. GEOGHEGAN. Yes, that is correct. 

Mr. JORDAN. Has he expressed any indication that he has communicated with the White House chief of staff, someone at the 

White House, or with Mr. Geithner about this program? 

Ms. GEOGHEGAN. Chairman Jordan, he has not, but may I clarify 

that the Office of the Special Master is an independent office in 

Treasury. 

Mr. JORDAN. But you said your boss was Mr. Massad, right? Who 

does he work for? 

Ms. GEOGHEGAN. I do brief the assistant secretary. 

Mr. JORDAN. And he is in the Treasury, right? He is employed 

by the Treasury. 

Ms. GEOGHEGAN. He is at the Treasury, but the decisions are 

made by the special master. 

Mr. JORDAN. How about Mr. Lew today, any conversation Mr. 

Lew has had with you or Mr. Massad relative to this program? 

Ms. GEOGHEGAN. I am not aware of any. 

Mr. JORDAN. So the President goes on national television, talks 

about no one should be paid above half a million dollars, and yet 

they don’t even talk to you about the fact that now we have all 

these people who are paid and the trend is this direction, and everyone who is below $500,000 is right next to $500,000? No conversations at all with the White House about this? 

Ms. GEOGHEGAN. No, Mr. Chairman. 

Mr. JORDAN. Man, we do need some controls put in place. The 

taxpayers are surely getting a bum deal here. 

With that, I will yield to the gentlelady from Wyoming, then I 

will come back to Mr. Cartwright for his second round. 

Mrs. LUMMIS. Thank you, Mr. Chairman. 

Following on the chairman’s line of questioning, Ms. Geoghegan, 

why not have an independent evaluation of these salaries, since 

they are being funded by taxpayers in no small part, rather than 

private sector, and since the New York Wall Street establishment 

has a network that sort of perpetuates a belief that what they do 

is worth more than what other people do? Why not have an independent evaluation? I managed billions of dollars when I was Wyoming State treasurer, and I got paid $92,000 a year, and I was 

managing $8 billion at the time. Why not have an independent 

evaluation, when taxpayer money is involved, of these kinds of salaries? 

Ms. GEOGHEGAN. Congresswoman, I believe that is what the Office of the Special Master is there to do, and we do do an enormous 

54 

amount of due diligence. We spend an enormous amount of time 

gathering market data and evaluating it. 

Mrs. LUMMIS. But is the market data using only the private sector money management as its standard? Because, as I said, I was 

managing public money and I was paid by the public, and we are 

managing, we are responsible for taxpayer money that bailed out 

private businesses. 

So no longer are we really talking about a private sector model; 

we are talking about the taxpayers being invested in this company 

and expecting that we will have oversight over how that money is 

handled. So when they only use a private sector model that is generated by their so-called peers like JPMorgan, that is really not a 

peer group for the situation that exists. So why not go outside, why 

not do independent evaluators? 

Ms. GEOGHEGAN. Congresswoman, the Office of the Special Master takes its responsibility as steward of taxpayer investments in 

these companies very carefully. We have worked hard at determining which are the correct comparative companies and we have 

told these companies—— 

Mrs. LUMMIS. But they are companies, right? See, here is the problem. When I was State treasurer, again, paid $92,000 a year, 

I was managing billions of dollars, but it was taxpayer money and 

the taxpayers were paying me. And I would suggest to you, since, 

when I started as State treasurer, we had $3.5 billion and when 

I finished a term limit as State treasurer we had over $8 billion, 

but I was responsible, very prudent in the manner in which I managed taxpayer dollars for $92,000 a year. 

Why isn’t that part of the pool, State treasurers that are managing billions of dollars? Connecticut’s State treasurer manages billions of dollars; North Carolina’s State treasurer does. Not all do, 

but there were a handful of us that managed billions. Why are not 

those public employees, why are they not part of the so-called market in this instance, where it is the hardworking taxpayers’ money 

that has bailed out these companies and not using a peer group 

that includes other Wall Street businesses that were not bailed 

out? 

Ms. GEOGHEGAN. Congresswoman, if we take, for example, AIG, 

AIG is in the private sector and its competitors include companies 

like MetLife, like Aetna, like Prudential; they include financial 

services companies like American Express. These are the people 

against, these are the businesses against which they compete and 

these are the businesses from whom they recruit their employees. 

Mrs. LUMMIS. And I understand that, but they are not competing 

on a level playing field right now. They are not the peer group anymore, because the taxpayers bailed them out. 

Now, if we had allowed them to go the way of Lehman Brothers, 

I would absolutely agree with you. If the moral hazard had been 

executed, I would absolutely agree with you. I think Barclays 

should be paying the people it kept after Lehman Brothers was acquired by Barclays. Then I would agree with you. That is the peer 

group from which they are hiring. 

But they are not in the same peer group anymore because the 

taxpayers of this Country, the little steel worker, the coal worker 

in my State bailed out AIG. So it is not the same peer group anyVerDate Aug 31 2005 15:16 Mar 14, 2013 Jkt 000000 PO 00000 Frm 00058 Fmt 6633 Sfmt 6633 C:\DOCS\79741.TXT APRIL
55 

more, and I would suggest to you, and I respectfully disagree with 

you that it is the same peer group. In my opinion, it is not. 

Mr. Chairman, I yield back. 

Mr. JORDAN. I thank the lady for her good line of questioning. 

I would yield now to the gentleman from Pennsylvania, and you 

can have a few more minutes than five, if you would like, Mr. Cartwright. 

Mr. CARTWRIGHT. Thank you, Mr. Chairman. 

So, again, thank you to the witnesses for coming today. We look 

at the big picture here, we roll back to the clock to 2008, when we 

had this enormous catastrophic financial calamity that occurred in 

this Country and threatened to throw us right back into the worst 

financial picture since the Great Depression, and maybe worse 

than the Great Depression. We saw that; we remember that. 

And in order to avert that the Federal Government, and all of 

the people at the highest reaches of the Federal Government, decided to hold its nose and engage in this TARP program, bailing 

out huge companies, in the process, obviously, successfully saving 

millions of middle class manufacturing jobs, jobs for people in all 

of our districts, jobs for people making cars in this Country, people 

making other things in this Country. Those jobs were saved as a 

result of the TARP program. 

We held our noses because it cost so much money, so much federal taxpayer money indebted us so deeply to do that, but it turned 

out to be a good gamble because we have recovered, as Ms. Geoghegan has said, 93 percent of this money. Probably the biggest reason 

that we held our noses while we did that TARP program was that 

we had to pay the people to run these companies. We had to pay 

the people to run the companies to make sure that those employees 

were still employed making things, building cars, keeping the 

American economy rolling. And we had to pay those people to run 

the companies so that the taxpayers would get that TARP money 

back, 93 percent of which we have gotten back. We held our noses 

because you have to pay people who run companies an awful lot 

of money; that is just the way the market is. Everybody knows 

that. Mr. Feinberg has said it; the witnesses have said it. 

So it is an unfortunate situation. It is something that we have 

been doing a lot of nose holding throughout the whole process, but 

it has been a success story. And what I want to know, what I really 

want to establish here is this the oversight panel, and the thing 

that I really care about is whether the law is being followed. Has 

the law been followed with respect to executive compensation? 

Now, Ms. Romero, I want to direct this question to you. 

Ms. ROMERO. Sure. 

Mr. CARTWRIGHT. The standard examined in your report that 

‘‘total compensation should target the 50th percentile for similarly 

situated employees at similarly situated entities and that cash salaries should not exceed $500,000,’’ that is not in the statute but it 

is within Mr. Feinberg’s ‘‘prescriptions,’’ am I correct in that? 

Ms. ROMERO. Mr. Cartwright, there is nothing in the TARP statute that talks about anything. If you remember, the TARP statute 

is October 2008, where TARP was supposed to be getting toxic assets off the books of banks. None of the 13 programs that are in 

56 

TARP are in the TARP statute, other than helping homeowners. 

There is nothing in the TARP statute. 

That is not how Treasury implemented it; Treasury implemented 

it through guidelines. And, as an oversight entity, I have to look 

at the guidelines they used to implement and they set the standards, and that is how I have to judge performance; otherwise, there 

is no standards at all for the bank bailout. There is zero. There is 

nothing in the statute. 

Mr. CARTWRIGHT. So they are guidelines, there are prescriptions, but it is not the law about $500,000 or 50th percentile. 

Ms. ROMERO. Well, what the TARP law says, ESSA says, that 

Treasury should implement executive compensation standards. So 

that is what the law says. Treasury did implement executive compensation standards, and those are the standards they should be 

held to. So actually, there is, in broad form, the delegation in the 

law to Treasury to set the standards. 

Mr. CARTWRIGHT. Now, at a February 25, 2010 Financial Services Committee hearing, Special Master Feinberg explained, ‘‘By 

application of the principles set forth in Treasury’s rule on executive compensation to the facts and circumstances underlying my 

determinations to date, I have developed a number of generally applicable practical prescriptions, including the following: guaranteed 

income is rejected except for cash salaries at sufficient levels to attract and retain employees; these generally should not exceed 

$500,000 per year except for good cause shown; total pay should 

generally not exceed the 50th percentile of total compensation for 

similarly situated employees.’’ 

Now, Ms. Geoghegan, you have statutory requirements. Your office also has more specific responsibilities dictated by Treasury’s interim final rule. Will you please place the Feinberg prescriptions in 

context for us? 

Ms. GEOGHEGAN. Thank you, Congressman Cartwright. Mr. 

Feinberg’s, what he calls prescriptions, what in all of our determination letters we call either standards or guidelines, were the 

general rules of thumb that the Office of the Special Master adopted to specifically apply the principles in the interim final rule. 

There are six principles; they are general principles, and in order 

to make them more specific when we are examining each pay package, the Office of the Special Master came up with what Mr. 

Feinberg sometimes called prescriptions, but which we usually call 

guidelines. 

And those are exactly the guidelines that we continue to use 

today. We do benchmarking on market data to make sure that the 

pay packages do not exceed the level for pay for similar positions 

at similar companies. We minimize cash pay; we maximize stock 

pay; we make sure that if there is incentive compensation, it is 

awarded only on the achievement of pre-established performance 

goals; and we limit perks. Those were the five prescriptions that 

Mr. Feinberg adopted and those are the five prescriptions or guidelines that we continue to follow today. 

Mr. CARTWRIGHT. Now, what do you believe was the intended use 

of those prescriptions or standards or guidelines? 

Ms. GEOGHEGAN. Congressman Cartwright, clearly, the task 

under the law of the Office of the Special Master is to achieve a 

57 

balance between limiting compensation and making sure that pay 

levels are such that companies can compete, can succeed, and will 

repay the taxpayer. And that is, I think, a look at our record shows 

that that is in fact what we have achieved and what we have accomplished, and these seven companies have done that and today 

we expect significant additional returns from our investments in 

both GM and Ally Financial. 

Mr. CARTWRIGHT. The executives receiving the compensation that 

you are overseeing and approving, were all of them around? Are 

these people who were responsible for the financial mess in the 

first place? 

Ms. GEOGHEGAN. Congressman Cartwright, I appreciate very 

much the opportunity to address that point. All three CEOs at 

these companies were hired by these companies after the taxpayers 

had made their investments in these companies. All three CEOs 

were hired in order to reform the companies, to restructure them, 

to lead them forward; and the top 25 individuals at each of the 

three companies whose pay packages we reviewed in 2012, virtually none of those people were there in 2009, for example. 

Almost all of those people have been promoted into those positions or, in a few cases, they have been newly hired. So we are 

talking about the people who are leading the companies, who are 

producing the results, and who are working toward the return of 

the taxpayer investment. Those are the people that we are evaluating, and we are not paying for failure; we are paying for their 

successful management of these companies. 

Mr. CARTWRIGHT. Finally, I don’t think I say it too strongly, Ms. 

Geoghegan, when I say that there have been accusations leveled at 

you, that you have rolled back application of guidelines aimed at 

curbing excessive pay. How do you respond to that? 

Ms. GEOGHEGAN. I think, Congressman Cartwright, in my oral 

testimony I went point by point through each of the five guidelines, 

or prescriptions, and showed exactly how, if you look at our numbers, if you look at our actual record carefully, it is clear that we 

have satisfied each of those guidelines in the 2012 determinations, 

and we will satisfy them in the 2013 determinations as well. 

Mr. CARTWRIGHT. Thank you so much. 

I will yield back the time. 

Mr. JORDAN. Thank you. 

Ms. Geoghegan, when we played the President’s statement, he 

said top executives at firms receiving extraordinary help from the 

United States taxpayers will have their compensation capped at 

half a million dollars; he did not say top executives at firms receiving extraordinary help from U.S. taxpayers will have their compensation at half a million dollars unless it is a new CEO or a new 

employee at the company. 

So the standard, we had this discussion about the law and how 

Treasury interprets the laws and how the guidelines work and all, 

but the fact is the statement is the statement, and it was sold to 

the American people on the simple premise we are capping it at 

$500,000. We don’t care if he didn’t say, oh, but if there is a new 

guy who comes in or a new lady who comes in this position, this 

position, or this position, forget that, we will make up our standard 

then and we will let them make more than half a million dollars, 

58 

and we won’t look at it and we will go from six out of seven companies. He didn’t say that, did he? 

Ms. GEOGHEGAN. No, sir, he didn’t. 

Mr. JORDAN. So the same standard applies, right, regardless of 

who is running the company? 

Ms. GEOGHEGAN. Well, that standard was not incorporated into 

the statute. 

Mr. JORDAN. The standard has not changed; the Treasury rules 

are the same, regardless if it is a new person. So the person who 

was there in 2009 or for someone else, the same standard applies, 

correct? 

Ms. Romero, does the same standard apply? 

Ms. ROMERO. Absolutely. It is Treasury’s standard. 

Mr. JORDAN. Exactly. So this idea that, well, we have different 

people running the company, so now it is different, that, I think, 

just proves what Ms. Romero has been saying for several years, 

that there is not guidelines that you guys have in place that you 

can objectively determine what the standard really is. 

Ms. GEOGHEGAN. May I address that? 

Mr. JORDAN. The simple question is, Ms. Romero, do you think 

they have listened to anything at all, any of the suggestions you 

have given over the last several years? Has the special master 

taken any of your advice, any of your counsel and implemented it 

in how they decide executive compensation? 

Ms. ROMERO. Nothing meaningful. 

Mr. JORDAN. And, Ms. Geoghegan, first of all, I assume maybe 

you would disagree, but why haven’t you done that? Do you not 

like them? Do you think, what the heck, we don’t have to; I am the 

boss here? They seem like pretty smart folks over there; they have 

given you suggestions. It seems it would be clear to me that there 

has been a trend in the direction of giving more and more executives compensation above half a million dollars. Why haven’t you 

taken any of their recommendations to heart and implemented 

them? 

Ms. GEOGHEGAN. Chairman Jordan, I would like to clarify that 

point. We understand the importance of diligent oversight and we 

have benefitted from SIGTARP’s review of our work. However, we 

do have very robust policies and procedures. I hope today we have 

made the case that we continue to follow those policies and procedures and guidelines. We have actually implemented, if I may say 

so? 

Mr. JORDAN. Sure. 

Ms. GEOGHEGAN. We have implemented several of SIGTARP’s 

recommendations and we are in the process of considering others. 

But we have fully implemented a number of them. 

Mr. JORDAN. The lady beside you is shaking her head pretty 

strongly no. 

Ms. Romero, would you disagree with that? 

Ms. ROMERO. Eight recommendations; one has been implemented, and that was to keep better documentation of their use of 

market data. That is it. 

Mr. JORDAN. The market data that they get from the companies 

that they are overseeing, correct? 

59 

Ms. ROMERO. And how they look at it. I will give you an example. 

We said substantiate why someone should be paid a cash salary 

over $500,000. What they did was maintain an eight-page spreadsheet which gives the reasons for that, which largely parrot what 

the companies say. Well, we didn’t say better document it; we said 

substantiate, meaning there has got to be a real independent analysis. 

Mr. JORDAN. I am glad you raised that point, because I wanted 

to get into this. Here is the document we received, which is justification for exceeding half a million dollars recommended by executive compensation committee. So this is the document we got from 

one of the companies. It has everything blacked out except the employee ID number. So employee 4859 gets, they are recommending 

a cash package of $1.7 million; employee 2986 they are recommending $850,000; employee 5021 they are recommending 

$875,000. 

This is what we got. I hope you are getting more than that. 

Frankly, I hope they are getting more than that when they are 

making their decision. But it can’t be this bad, I assume, for you 

guys; there has to be some justification. 

Now, one of the things we did get is we got, and this was in 

2012, employee performance goals. Some of the stuff that wasn’t redacted, we got statements like move the organization to be marketand consumer-driven company. I guess that is versus a government-driven company. Optimize and manage complexity. These 

goals, I have no idea what they mean. 

Ms. ROMERO. The goals really don’t matter because they are only 

tied to long-term restricted stock, and it has been removed for half 

of the employees. 

Mr. JORDAN. Okay. 

Ms. ROMERO. So the pay for individual performance, the longterm restricted stock has been removed for every single Ally employee and some of the GM employees and some of the AIG employees. So most of them actually don’t have any goals. 

Mr. JORDAN. So no goals at all, let alone vaguely written ones 

like this? 

Ms. ROMERO. Not individual goals, no. 

Mr. JORDAN. I was telling the staff the other day, when I first 

looked at it, my background coaching, working with student athletes, and one of the things we do at every season, we say write 

down your goal for this season; and we said we don’t want this baloney I want to be the best I can. Or, do you want to be a national 

champ, do you want to be an all American, do you want to make 

the varsity? What is your goal? Pretty specific. 

This is—I have no idea what this is. But back to the first question, it can’t be this bad for you, right? 

Ms. ROMERO. No, we get information. 

Mr. JORDAN. How much of what you get is redacted and blacked 

out? 

Ms. ROMERO. No, we do not get anything redacted. 

Mr. JORDAN. So you get to see the full thing. Okay. 

Ms. ROMERO. We get to see the full thing. 

Mr. JORDAN. But is it still kind of this generic language that I 

just cited here, some of this sort of warm and fuzzy language? 

60 

Ms. ROMERO. We see the language and then we do interviews 

and we try to see sort of why did somebody get a raise, for example; and we see the explanations from the companies and we see 

the explanations from the Office Special, and what we found is the 

Office of Special Master’s reasoning largely parroted the reasoning 

of the companies. 

Mr. JORDAN. So you are getting the same statement from the 

special master that you are getting from the companies, and the 

special master makes the decision on information they get from the 

companies, the very companies the taxpayers are bailing out. 

Ms. ROMERO. Yes. 

Mr. JORDAN. Such a deal. Such a deal. 

Ms. Geoghegan, do you want to comment on any of that? 

Let’s go back to the first question. Why one of eight, and it was 

just more documents? Why haven’t you looked at some of the other 

recommendations that repeatedly have been given to you by 

SIGTARP? And do you make that decision, or does Mr. Massad or 

does Mr. Geithner, or now Mr. Lew? Who makes that decision, is 

that ultimately your decision? 

Ms. GEOGHEGAN. It is my decision, yes. 

Mr. JORDAN. And do you have to clear it when them, let them 

know what you are doing? I mean, once you make the decision, do 

you inform them? Do they get some notice of that? 

Ms. GEOGHEGAN. I certainly do inform them before we go out 

with a determination letter. 

Mr. JORDAN. Okay, so eight recommendations you have been 

given by SIGTARP, you have implemented one, just this thing on 

documents. And when you do that or fail to do the other seven, you 

let Mr. Massad know that, I assume he lets Mr. Lew now know 

that or Mr. Geithner previously. Ever any feedback from those 

guys? 

Ms. GEOGHEGAN. Chairman Jordan, in the Treasury there is actually a checklist as to where these recommendations stand, so we 

do keep track of whether we are or are not following up on any of 

SIGTARP’s recommendations. And let me say we are always open 

to improving our policies and procedures, and we are currently considering some of these new recommendations that have come from 

SIGTARP. 

Mr. JORDAN. Well, that is great to hear, that you are going to 

consider them in the future. I mean, it has been five years, repeated requests to do things different, and we have the same old 

thing. 

The last thing I will say, and then we will go to Mr. Horsford, 

if my math is right, so in 2009 you had seven companies, so that 

is potentially, top 25 executives, so that is potentially 175 individuals who could potentially receive cash compensation above half a 

million. And six were okayed to receive that. Now, it may have 

been a lower number than 175, but potentially could have been 

175, and only six were allowed. 

And again, this is what I think people are seeing here, today you 

are down to two companies and it is 23. So potentially 50 and you 

are giving 23. So almost half now, where before, someone can do 

the percentage. Six out of 175 is a pretty low percentage. And now 

it is 23 out of potentially 50. That is the trend the taxpayer is seeVerDate Aug 31 2005 15:16 Mar 14, 2013 Jkt 000000 PO 00000 Frm 00064 Fmt 6633 Sfmt 6633 C:\DOCS\79741.TXT APRIL
61 

ing. That is the trend Ms. Romero, that is the trend we are seeing 

as part of the Oversight Committee. That is what concerns us. 

The gentleman from Nevada is recognized. 

Mr. HORSFORD. Thank you, Mr. Chairman. 

Thank you to our witnesses for being here today. 

Ms. Geoghegan, let me ask you. The Office of the Special Master 

is governed by the interim final rule on TARP executive compensation, is that correct? 

Ms. GEOGHEGAN. Yes, Congressman, it is. 

Mr. HORSFORD. Thank you. And that rule is very explicit in the 

principles your office is required to consider when approving or 

modifying executive compensation packages, correct? 

Ms. GEOGHEGAN. Yes, sir. 

Mr. HORSFORD. So could you explain, then, the requirements of 

the rule and the principles that you are explicitly directed to balance? 

Ms. GEOGHEGAN. There are six principles, and two of the most 

important are that compensation should be consistent with and not 

excessive, taking into account amounts paid for similar positions at 

similar companies. Another is that compensation should be structured in a way that keeps the companies competitive so that they 

can attract and retain employees who will contribute to the success 

of the company and so that the company will be able to repay the 

taxpayer. 

There are focuses on discouraging structures that would lead to 

excessive risk-taking. There is a principle focusing on stock-based 

compensation so that the compensation will ultimately reflect the 

performance of the company. There is a principle relating to having 

some combination of short-term and long-term and other elements 

of compensation. And, finally, there is a principle making sure that 

the compensation reflects the contribution of the individual to the 

success of the company. 

Mr. HORSFORD. So let me follow up on one principle in the rule, 

and that is the compensation structure. Let me read what it is. It 

says ‘‘should reflect the need for the TARP recipient to remain a 

competitive enterprise; to retain and recruit talented employees 

who will contribute to the TARP recipient’s future success and ultimately to be able to repay TARP obligations.’’ 

Can you explain some of the challenges or conflicts that this 

principle may create in making compensation determinations? 

Ms. GEOGHEGAN. Thank you, Congressman. That goes to the 

main task of our office under the law, which is achieving the balance we need to achieve between limiting compensation on the one 

hand and the other, making sure that pay is at levels that permit 

the companies to be competitive and to repay the taxpayer. So we 

aim to make sure that those pay levels are market-based, not excessive when considering what similar companies pay for similar 

positions. But on the other hand we look at the structure to be sure 

that it doesn’t encourage excessive risk-taking. We minimize cash; 

we maximize stock. We have fundamentally restructured the whole 

compensation package that we generally approve for these employees. 

Mr. HORSFORD. So then, Ms. Geoghegan, can you then, from your 

mandate to balance these set of principles when limiting compensaVerDate Aug 31 2005 15:16 Mar 14, 2013 Jkt 000000 PO 00000 Frm 00065 Fmt 6633 Sfmt 6633 C:\DOCS\79741.TXT APRIL
62 

tion, can you discuss how you arrived at these determinations for 

GM and AIG, specifically, in context of these principles, please? 

Ms. GEOGHEGAN. Thank you. I would be happy to. For all of our 

pay packages that we approved last year, we looked at those six 

principles that we described, in addition to the five guidelines that 

Mr. Feinberg originally established. Each of the pay packages, if 

you look at our set of pay packages in 2012, 94 percent of those 

pay packages are majority stock; the total amount of cash pay in 

those pay packages is 63 percent lower than the median of cash 

pay compared to what similar companies pay; we have made sure 

that the market levels meet our benchmark. 

In the case of AIG it was 48th percentile, GM 50th percentile, 

and Ally Financial midway between 50th percentile and 75th percentile. We have long-term—while there is not a guideline requiring long-term restricted stock, there is a guideline focusing on having a lot of stock-based pay, which we do have. That may be in the 

form of stock salary and not necessarily long-term restricted stock. 

Where we do have long-term restricted stock, it is awarded only 

upon the achievement of pre-established performance goals. And, 

finally, we significantly limit perks. 

And that describes our pay packages that we approved in 2012. 

Mr. HORSFORD. Thank you, Mr. Chairman. 

Mr. JORDAN. The gentleman from Pennsylvania is recognized. 

Mr. CARTWRIGHT. Thank you, Mr. Chairman. 

Well, Ms. Geoghegan, I want to follow up with you. One thing 

that we have talked about is the elimination of bonuses as executive compensation, the elimination of golden parachutes as executive compensation. Those have been done, is that correct? 

Ms. GEOGHEGAN. Congressman Cartwright, that is correct. On 

the other hand, I do want to point out that some amount of incentive compensation is permitted under the law and under the interim final rule, and for that portion, if we can, we like to have 

some amount of long-term restricted stock. 

Mr. CARTWRIGHT. Right. And that is where I was headed, Ms. 

Geoghegan. You have talked at several points in today’s testimony 

about minimizing the cash compensation and putting an emphasis 

on stock compensation. Would you again make clear for us why we 

are doing that? 

Ms. GEOGHEGAN. We want to be sure that the maximum part of 

the compensation will reflect the performance of the company over 

time. By having stock that becomes transferrable or payable only 

over a period of three years, we feel that this is a structure that 

makes sure that the executives are not focusing on short-term results and that they are not encouraged to take excessive risks. 

Mr. CARTWRIGHT. So, in essence, their reward is the success of 

the company that they are running. 

Ms. GEOGHEGAN. Exactly. 

Mr. CARTWRIGHT. Okay. And that is what we want, because 

these are companies that we need to succeed not only because they 

are employing the middle class people that work there, but also because we need to get back our bailout money. 

Ms. GEOGHEGAN. Exactly. And if I can just point out, in 2012, 

when we made our AIG determinations, for example, I believe it is 

the case that Treasury owned more than 70 percent of the stock 

63 

of AIG, at the time that we made the 2012 determinations, and we 

made those determinations based on market data. In December of 

2012 AIG exited TARP and the Federal Reserve and Treasury received back the entire $182 billion of assistance that AIG had received from the Federal Reserve and from the Treasury, with a 

total positive return of $22.7 billion. So it is that kind of result that 

we are working for when we set our pay packages in our determination letter process. 

Mr. CARTWRIGHT. Well, thank you for that. Now, of course, we 

have Ms. Romero here, who has testified that SIGTARP has made 

an awful lot of suggestions that didn’t get accepted by your office. 

Are you aware of a legal requirement that you have to take all of 

SIGTARP’s suggestions for how to structure executive compensation, and what to approve and what not to approve? 

Ms. GEOGHEGAN. Congressman Cartwright, I am not aware of 

any legal requirement. Nevertheless, we have definitely benefitted 

form SIGTARP’s review of our work. We have made some changes 

in our policies and procedures simply as a result of the audit process when we are interviewed by SIGTARP or when we give them 

information. 

If I may give an example, it was not a recommendation of 

SIGTARP last year; nevertheless, in our 2012 determination letters, as a result of SIGTARP’s focus on our market data, we incorporated for the first time into all of our determination letters an 

overview of the market data and our process for evaluating the 

market data. That, I think, is a definite improvement in our determination letters; they are all available on our Web site. And we did 

that as a result of our interaction with SIGTARP; it was not a specific recommendation of theirs. But, as I say, we are always open 

to improving our policies and procedures. 

Mr. CARTWRIGHT. And we have also heard in today’s testimony, 

I think from Ms. Romero, that your office has been open and forthcoming and transparent with information with SIGTARP. Is that 

true? 

Ms. GEOGHEGAN. I certainly hope that that is what they believe. 

I believe we are totally cooperative with all the interviews they 

have requested and all of their written questions. I think we give 

them all the information they ask for in a prompt and cooperative 

manner. 

May I just point out, also, Congressman Cartwright, that we are 

very supportive of openness and transparency, and we do have an 

excellent Web site, and we have a lot of information on our Web 

site, including all our determination letters and fact sheets. 

Mr. CARTWRIGHT. Well, I want to thank you again for coming 

here today, both of you. 

Mr. JORDAN. I am going to, if I could real quickly, Mr. Cartwright, just one other line of questioning. In your questioning with 

Ms. Geoghegan she talked about AIG, and I think one of you said 

the reward is actually the success of the company in the end, so 

I want to pick up on that and go to a subsidiary of Ally, ResCap. 

ResCap, I think we talked about this earlier, Ms. Geoghegan, 

they currently are filing for bankruptcy, is that correct? 

Ms. GEOGHEGAN. That is correct. 

64 

Mr. JORDAN. And at least the information we were provided, I assume you have the same information, 2013 exceptional assistance 

justification for top 25 employees with cash salaries greater than 

half a million dollars, and on this paper is Mr. Moreno, employee 

ID number is listed, CEO of ResCap. He is going to be paid over 

half a million dollars in cash. His total compensation package, 

which was, again, given to us not redacted, is $8 million. 

So when you talk about, this is a company, again, 74 percent 

owned, the parent company, Ally, 74 percent owned by the taxpayers. The justification given on this piece of information that you 

all have says, under the line justification for exceeding half a million dollars in cash salary, salary at the request of the ResCap 

board of directors. And you guys approved this. 

Here is a company in bankruptcy, 74 percent owned by the 

American taxpayers, and just because the board of directors at the 

company says, you know what, even though we are in bankruptcy, 

we think our CEO needs to make half a million dollars and needs 

a total pay compensation package of $8 million, and you guys said 

yes to that? How do you justify that? 

Ms. GEOGHEGAN. Chairman Jordan, in response to that, I would 

like to make two points. The first one is that a successful resolution of the ResCap legacy mortgage liability situation is an important step before Treasury can continue to receive value for its investment in Ally Financial. 

Mr. JORDAN. Are you going to approve it? 

Ms. GEOGHEGAN. If I may, Chairman Jordan? 

Mr. JORDAN. Go ahead. 

Ms. GEOGHEGAN. Secondly, whatever we approve for any ResCap 

employees, all of those amounts are also subject to bankruptcy 

court approval, and the unsecured creditors. 

Mr. JORDAN. We are not talking about that; we are talking about 

what you are going to approve. Are you going to approve that? You 

approved his salary in the past. They weren’t in great condition before and you approved it. Are you going to approve it now? 

Ms. GEOGHEGAN. I actually can’t address that, I don’t know what 

they are proposing. We have looked preliminarily at their proposals. We are very far from approving anything that they have 

proposed. 

Mr. JORDAN. Okay. 

Ms. GEOGHEGAN. We have to do all of our processing work first. 

Mr. JORDAN. Ms. Romero, do you think a company 74 percent 

owned by the taxpayers, subsidiary ResCap with its CEO compensation package of $8 million being proposed, cash assistance 

over half a million dollars, do you think that should be approved 

when we are trying to look at the best interest of the taxpayers and 

this program and getting people out of this program? 

Ms. ROMERO. No. And let me talk about Ally for just a second, 

because we issued a report this past month on Ally. 

Mr. JORDAN. Sure. 

Ms. ROMERO. Ally is GMAC, it is a subprime mortgage lender. 

Ally was taken down literally by its mortgage unit of Rescap, which 

was a subprime mortgage lender for all of these years. Ally has 

continued to fail the Federal Reserve stress test year after year 

65 

after year. The ResCap issue, the mortgage liabilities has been a 

problem since the start. 

Mr. JORDAN. Probably the biggest problem for the company. 

Ms. ROMERO. The biggest problem. It has never been addressed. 

Ally’s CEO called it a millstone around the company’s neck. It has 

now become a millstone around taxpayers’ neck. And they finally 

filed bankruptcy in April 2012 for this company, but at this point 

there is no concrete plan how Treasury is going to get out of its 

74 percent investment. 

And when I say there is no concrete plan, I mean I go to Treasury and I say how are you going to get this company back on its 

feet without taxpayers’ assistance, and they say we could sell assets, the company could re-buy the shares, or we could sell the 

shares on the market. And I said, well, that is just how you dispose 

of any stock. There is no concrete answer, which one of those 

things are you going to do? And the answer is we don’t know. 

So there is no concrete plan at all to get Ally out of TARP. 

Mr. JORDAN. And all of this was understood where this was 

heading; it has been common knowledge in the market and, frankly, something that the special master should know, and yet they 

approved a pretty good compensation package for the CEO of 

ResCap just last year. Is that correct? 

Ms. ROMERO. The pay was approved in April 2012. 

Mr. JORDAN. Before they filed. 

Ms. ROMERO. Just weeks before ResCap filed bankruptcy, and it 

included, and I just want to point this out, a $200,000 pay raise 

for an employee at ResCap; three ResCap employees got packages 

exceeding the 50th percentile. And this is not the amount of the 

pay package, this is how much it exceeded it by, $1.7 million, $1.2 

million, $850,000. 

Mr. JORDAN. So, to cut to the chase, the special master allowed 

pay increases to take place with a company 74 percent owned by 

the taxpayers on the verge of bankruptcy. The night before bankruptcy they allowed pay raises to take place with the top executives 

at that company. 

Ms. ROMERO. And exceeding the 50th percentile. 

Mr. JORDAN. And exceeding the 50th percentile. So even exceeding the average in the industry. Amazing. 

I have nothing further. I want to thank both our witnesses. We 

will follow up, Ms. Romero and Ms. Geoghegan, we think there has 

to be a better way to deal with this, so we want to thank you both. 

I know I promised two hours and, look at that, only three minutes 

past the deadline. So it is not too awful bad. Thank you. You have 

both been very good. We appreciate that. 

The committee is adjourned. 

[Whereupon, at 12:02 p.m., the subcommittee was adjourned.] 

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