Federal Officials Pressure ‘Pay Czar’ to Ease Pay Restrictions at AIG

Worry about the government’s investment in AIG has prompted some federal officials to call for easing the restrictions on pay at AIG for 2010, the Wall Street Journal reported.

Last month, the U.S. pay czar, Kenneth Feinberg, announced he cut 2009 compensation, including salaries and stock, for the top 13 AIG employees by 57%. In recent weeks, officials from the New York Fed and the Treasury Department have urged Mr. Feinberg, to avoid making 2010 pay similarly restrictive for some top AIG executives and employees, according to people familiar with the discussions.

Fed and Treasury officials told Mr. Feinberg that tough restrictions could ultimately jeopardize the government's ability to recoup its roughly $90 billion in loans because key employees would leave.

Despite this recent pressure to lower restrictions on pay, some still question whether the government is acting in the taxpayers’ interest.

A report by the special inspector general overseeing the Troubled Asset Relief Program said the New York Fed "refused to use its considerable leverage" to compel AIG's trading partners, including Goldman Sachs Group Inc., to accept lower prices for more than $60 billion in complex securities they insured with AIG.

The U.S. government currently owns 80 percent of AIG. Track all of the ways in which the federal government has provided support for AIG at Stimulus.org.