Pay czar: You’re worth less than you think

“You’re only paying me $9 million?” the Wall Street executive asked. “Why don’t you like me?”

Kenneth Feinberg, in an interview, recounted the conversation he had with an unnamed corporate bigwig to highlight something that has surprised him during his tenure as the so-called pay czar.

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“I always expected that Wall Street and Main Street weren’t going to be on the same page,” Feinberg said. “The same page? They’re not on the same universe.”

Feinberg, who has looked into the eyes of family members of victims of the Sept. 11 terrorist attacks and the 2007 Virginia Tech shooting, emphasizes that corporate executives who resist his compensation restrictions are not acting in bad faith.

“They really do believe they are entitled to $9 million. That’s the problem,” Feinberg said.

The 64-year-old Feinberg is used to dealing with problems. After the 2001 terrorist attacks, Attorney General John Ashcroft asked him to head the Sept. 11 Victim Compensation Fund. Six years later, he ran the Hokie Spirit Memorial Fund in the wake of the tragedy at Virginia Tech.

In the aftermath of the AIG bonus controversy in 2009, Treasury Secretary Tim Geithner called on Feinberg to set employee compensation restrictions on corporations that received the largest amounts of money from the Troubled Asset Relief Program (TARP).

Feinberg accepted.

“You try saying no to the secretary of the Treasury,” Feinberg said, noting that Neal Wolin, Geithner’s deputy, came up with the idea of bringing him in.

Feinberg says many people in the country could do what he’s doing.

That may be true, but many on Capitol Hill believe he is best fit to run the program.

The Massachusetts native, a former staffer for Sen. Edward Kennedy (D-Mass.), is well-respected on both sides of aisle. Former Sen. Chuck Hagel (R-Neb.) recommended Feinberg for the 9/11 post.

Even so, Feinberg has attracted his share of critics.

Sen. Chuck Grassley (R-Iowa) has questioned Feinberg on the lucrative severance package of the departed general counsel of AIG, Anastasia Kelly.

And Kelly has suggested Feinberg’s negotiating style is one of deception, telling Fortune magazine: “I started referring to us as Charlie Brown in the football game — we’d keep running up to kick the ball, and there was never a ball there.”

Feinberg bristles at that criticism: “I’m intrigued by her use of the word ‘we.’ She has left the company. I don’t see that there’s a mass exodus of others leaving the company.”

Like a good lawyer, Feinberg dissects his criticism and points to his mission — and, specifically, the statute. In a 35-minute interview, Feinberg says “statute” 20 times.

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“I would ask anybody critical of what I’ve been doing: First up, read the statute.”

His voice rising a bit, Feinberg points out that he has no power to scrap valid contracts, such as AIG pay packages inked earlier than his statute’s limitations.

Like others working for the Obama administration, Feinberg isn’t an AIG fan.

“I do have the authority to try to renegotiate these valid contracts and I have done so successfully, except for individuals at AIG. With Citigroup, Bank of America [and others], I convinced those officials of taking the guaranteed money and roll it over into prospective stock,” Feinberg said. “Not AIG. They wanted their money.”

AIG employees last year promised to repay the government $45 million in bonuses. The employees are still $6 million shy on that commitment.

“I have made it very clear that I expect AIG would find a way to round up the remaining $6 million by March 15,” Feinberg said.

And if they don’t?

“I’ll have to consider what my options are,” Feinberg said sternly.

The law gives Feinberg a lot of power, and the avid Baltimore Orioles fan acknowledges that he has enormous leverage over the TARP firms.

“It’s not a fair negotiation… Having said that, I have been fairly successful in convincing the companies that it is in their best interests to seek an accommodation on compensation.”

In some respects, his message to the seven TARP-assisted companies (now down to five after Citigroup and Bank of America repaid their bailout funds) is: I’m from the government and I’m here to help.

He advised the companies that they need to recognize political realities.

“I told them: ‘If I rubber-stamp what you’re requesting, you will be pilloried in Congress. What’s the point? There will be hearings. There will be broad bipartisan attacks on your excessive compensation requests. Let’s work together.’ ”

Feinberg on Thursday is scheduled to testify before the House Financial Services Committee, which is looking at additional ways to limit executive compensation that leads to excessive risk.

Since taking the job, Feinberg has had about a half-dozen talks with Geithner and a few more with Wolin. President Barack Obama has not called him or held any meetings with Feinberg.

“I have not talked to the president, and nobody at the White House has talked to me once,” Feinberg said, indicating that is fine by him.

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Few of his actual meetings have been with specific executives. He has spent the bulk of his time poring over documents and compensation models.

While he has held a few meetings with Wall Street barons, most of his sit-down discussions have been with lawyers or human-resources executives.

Feinberg has a more nuanced perspective of corporate pay than does the average American.

“In our society … compensation is a surrogate for worth, for integrity, for value,” he said. “It’s not just about private schools and fast cars and mansions.”

Like his work on the 9/11 and Virginia Tech funds, Feinberg is working on the compensation for TARP companies on a pro bono basis.

Working to assess fair pay for 9/11 families was a “harrowing” experience for Feinberg, one that made him more fatalistic, but at the same time renewed his faith.

There were countless heartbreaking stories that shaped that experience, such as the 25-year-old mother of two with terminal cancer who lost her husband in the attack. She asked Feinberg to pay her settlement quickly so she could set up funds for her children before she died. The request was granted.

Feinberg, who wrote a book on his work on the 9/11 fund, is no longer in touch with the victims’ families. But on each anniversary of the attack, he receives flowers, “like clockwork,” from one of the families.

He is considering writing another book on his TARP-related work, but he knows it’s unlikely he will get any flowers from Wall Street.

Video of Feinberg’s interview can be viewed at thehill.com