[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]



 
    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


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                      http://www.house.gov/reform


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              COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                 DARRELL E. ISSA, California, Chairman
JOHN L. MICA, Florida                ELIJAH E. CUMMINGS, Maryland, 
MICHAEL R. TURNER, Ohio                  Ranking Minority Member
JOHN J. DUNCAN, JR., Tennessee       CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina   ELEANOR HOLMES NORTON, District of 
JIM JORDAN, Ohio                         Columbia
JASON CHAFFETZ, Utah                 JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan                WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma             STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan               JIM COOPER, Tennessee
PAUL A. GOSAR, Arizona               GERALD E. CONNOLLY, Virginia
PATRICK MEEHAN, Pennsylvania         JACKIE SPEIER, California
SCOTT DesJARLAIS, Tennessee          MATTHEW A. CARTWRIGHT, 
TREY GOWDY, South Carolina               Pennsylvania
BLAKE FARENTHOLD, Texas              MARK POCAN, Wisconsin
DOC HASTINGS, Washington             TAMMY DUCKWORTH, Illinois
CYNTHIA M. LUMMIS, Wyoming           DANNY K. DAVIS, Illinois
ROB WOODALL, Georgia                 PETER WELCH, Vermont
THOMAS MASSIE, Kentucky              TONY CARDENAS, California
DOUG COLLINS, Georgia                STEVEN A. HORSFORD, Nevada
MARK MEADOWS, North Carolina         MICHELLE LUJAN GRISHAM, New Mexico
KERRY L. BENTIVOLIO, Michigan        VACANCY
RON DeSANTIS, Florida

                   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               MATTHEW A. CARTWRIGHT, 
PATRICK T. McHENRY, North Carolina       Pennsylvania, Ranking Minority 
PAUL GOSAR, Arizona                      Member
PATRICK MEEHAN, Pennsylvania         TAMMY DUCKWORTH, Illinois
SCOTT DesJARLAIS, Tennessee          GERALD E. CONNOLLY, Virginia
DOC HASTINGS, Washington             MARK POCAN, Wisconsin
CYNTHIA LUMMIS, Wyoming              DANNY K. DAVIS, Illinois
DOUG COLLINS, Georgia                STEVEN A. HORSFORD, Nevada
MARK MEADOWS, North Carolina
KERRY BENTIVOLIO, Michigan
RON DeSantis Florida

                            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


   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.
    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 
responsibility 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 the Country because their 
compensation wasn't tied to the long-term 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.
    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.

                       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 salaries 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.
    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 
million, $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.
    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.
    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 
compensation 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.
    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 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 
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.
    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 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.
    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 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.
    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 rules-based 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.
    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?
    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----
    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 understand 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.
    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 Master 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 
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 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 anymore, 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 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 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, 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?
    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 market-and 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 
long-term 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?
    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 seeing. 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 
compensation, 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 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.
    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 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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