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December 14, 2009

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Pay curbs at 4 firms tightened

THE United States pay czar has expanded a crackdown on pay packages at four companies rescued with taxpayer money, limiting most cash salaries at US$500,000 for a second tier of top earners.

The Treasury Department's Kenneth Feinberg issued the new limits on Friday amid outcries from some companies on a government lifeline that they cannot retain or attract key employees, sending the firms racing for a bailout exit.

He set the compensation structures for the 26th through 100th highest-paid employees at four firms: Citigroup Inc, American International Group, General Motors Co, and GMAC.

Chrysler and Chrysler Financial were exempted during this round of rulings because total pay for their second-tier executives is already under US$500,000.

Feinberg, a Washington lawyer appointed by President Barack Obama in June after public anger exploded over high pay at bailout firms, said he granted less than a dozen special exemptions from the cash salary cap.

"In a very few cases, we did recognize there was an individual who, based on company input, was deemed to be truly essential," he said.

Those exempted from the new pay caps included several at insurer AIG. The exempted executives were not identified and generally were allowed cash pay up to US$950,000, although one was granted US$1.5 million, according to Feinberg.

The pay czar's control has caused significant friction with AIG, where top executives, including new chief executive Robert Benmosche, have reportedly considered quitting because of the pay constraints. AIG has received pledges of up to US$180 billion in taxpayer aid.

The pay curbs also have prompted Citi to race to repay its US$45 billion in bailout funds. The bank remains locked in talks with the government over repayment terms.


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