TARP Watchdog Blasts Treasury on Bailouts
A watchdog for the government's bailout program, the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), has hit the US Treasury Department with a hard combo of critique regarding some of the Administration's actions since pumping billions of taxpayer dollars into bailed-out companies like General Motors and Ally Financial (formerly known as GMAC). SIGTARP issued a report lambasting Treasury for allowing excessive pay for executives at GM, Ally Financial and AIG and followed that with statements that scrutinized Treasury's continued refusal to exit its stake in Ally Financial, which is currently 74% owned by the government.
The Detroit News quotes the SIGTARP report as stating, "While taxpayers struggle to overcome the recent financial crisis and look to the U.S. government to put a lid on compensation for executives of firms whose missteps nearly crippled the U.S. financial system, the U.S. Department of the Treasury continues to allow excessive executive pay." The report goes on to mention that executives at bailed-out firms, "...continue to rake in Treasury-approved multimillion-dollar pay packages that often exceed guidelines."
A chart provided in the SIGTARP report shows that of 18 executives that received approval for pay increases, nine worked for GM, eight for Ally Financial and one for AIG. GM execs received five of the top six spots. Total pay for the 18 executives rose $6.16 million to $67.3 million for an average pay of $3.7 million a piece. The pay raise averages over $340,000 each; that increase alone is about seven times what the typical working American earns in an entire year! It would appear that the Obama Administration is only concerned with wealth disparity when the wealthy are not cronies.
The follow-up punch thrown by SIGTARP puts Ally Financial in the limelight for a second dubious distinction. They are the only major, bailed-out company which has had no effort made to end Treasury's intrusion. A Bloomberg article expresses criticism by SIGTARP for Treasury's refusal to exit Ally Financial stating, "'While Treasury has noted that it has several options for possible divestment, including a public or private sale of stock or other sale of Ally assets, Treasury has not decided which of these exit paths to take,' the special inspector general for the Troubled Asset Relief Program said in a report today. 'It is essential that when the government finally exits Ally that it do so forever.'"
It is important to recognize that GM is still highly dependent upon Ally Financial to provide financing and leasing for retail consumers, as well as for providing funding for dealership inventories. In fact, Ally Financial has been providing the leases for the politically-charged Chevy Volt. The majority of Volts "sold" are actually leases, which are funded by taxpayer-owned Ally Financial. The Obama Administration seems to be reluctant to now remove itself from an integral piece that contributes to the GM "success" narrative.
The auto bailouts continue to exhibit conflicts and cronyism, as evidenced by the SIGTARP reports. Despite billions of taxpayer dollars lost ($24 billion is the latest Congressional Budget Office loss estimate) and unfair treatment to non-politically connected groups (e.g. GM bondholders and Delphi non-union retirees), the media has presented the bailouts as a great success; a perspective that helped President Obama win reelection. GM and Ally Financial spend millions of dollars on lobbying politicians while their management has been appointed by some of the same folks who they are giving the money to! GM and the UAW come out to support President Obama for reelection, and then pay raises for executives at GM are approved by the Treasury Department. You can call it cronyism or you can call it corruption but please, do not call the bailouts a success.
Mark Modica is an NLPC Associate Fellow.