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SIGTARP: TREASURY FAILED TO CONTROL EXCESSIVE PAY FOR BAILED-OUT FIRMS Once again, Treasury has failed to control excessive executive pay at the expense of taxpayers, according to a report from the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP). From a previous evaluation on executive compensation, SIGTARP found Treasury approved ���excessive��� pay packages and salary increases for executives at three firms that received bailout funds: American International Group (AIG), General Motors (GM), and Ally Financial. After investigating pay in 2012, SIGTARP reported Treasury approved pay packages worth $5 million or more for 23 percent of the top 25 employees at AIG, GM, and Ally. The figure represents 16 out of 69 employees, with nine from AIG, three from GM, and four from Ally. Treasury also approved pay ranging from $3 million to $4.9 million for 21 out of the 69 employees, with 12 employees from AIG, four from GM, and five from Ally. In addition, Treasury also approved all 18 proposed pay raises from the companies in 2012. According to the report, the pay raises ranged from $30,000 to $1 million. GM and Ally each proposed nine pay raises, while AIG proposed one pay raise worth $1 million for the CEO of its subsidiary, Chartis. AIG has repaid the full $182 billion it owed to Treasury, and its bailout led to a positive return. On the other hand, GM and Ally still owe taxpayers a combined $36.2 billion, according to the report. In comparison, the report also pointed out that the 2011 median household income of taxpayers who fund the TARP recipients was about $50,000. SIGTARP, which functions as watchdog agency for the government���s TARP efforts, explained that when Congress passed TARP, limitations were placed on executive compensation for program recipients. Treasury was given the role of implementing the limitations and created the Office of the Special Master (OSM) to set compensation for top executives. However, the report stated OSM failed to follow its own guidelines to reduce excessive pay. For example, total compensation should generally not exceed the 50th percentile for similar employees, but Treasury awarded total pay packages exceeding the 50th percentile by 22 more than $37 million for about 63 percent of the top 25 employees at the three companies, according to the report. In the previous report examining executive pay, SIGTARP found that from 2009 to 2011, seven companies that received TARP funding were approved for pay packages worth $5 million or more for 49 individuals. In the most recent report, SIGTARP made several recommendations: Treasury should reevaluate compensation for the top 25 employees from the prior year; develop policies, procedures, and criteria for approving pay in excess of Treasury guidelines; independently analyze whether good cause exists to award a pay raise or cash salary over $500,000; and return to using long-term restricted stock for employees. In response to SIGTARP���s report, in a letter dated January 25, Treasury responded to the inspector general���s assessment, expressing disagreement with the findings. Patricia Geoghegan, acting special master for TARP executive compensation, stated, ���Although we disagree with your findings and conclusions, OSM has benefited from the audit review.��� Geoghegan went on to say that ���facts show that OSM continues to fulfill its regulatory requirements,��� and she cited Treasury���s own assessments, which put AIG���s average total compensation for the top 25 at the 48th percentile of similar positions at similar companies, GM���s average at the 50th percentile, and Ally���s between the 50th and the 75th. STAT INSIGHT 1.5 Million Homes either bank-owned or in the foreclosure process as of the end of 2012. Source: RealtyTrac THE BIGGER PICTURE IN S&P���S HOME PRICE DATA Despite seeing a month-over-month drop, the 10- and 20-city composite readings of the S&P/Case-Shiller Home Price Indexes registered their strongest year-over-year improvement in two-and-a-half years on a non-seasonally adjusted basis during the month of November. The 10-city index fell 0.2 percent from October to November of last year, while the 20-city index dropped 0.1 percent. On an annual basis, however, the 10-city index was up 4.5 percent, and the 20-city index rose 5.5 percent. It was the strongest yearly gain in the 10-city index since June 2010 and in the 20-city index since May 2010. Prices were up in 19 of the 20 cities surveyed for the year. Despite S&P���s calculation of a seasonal decrease in its home price measurements monthto-month, analysts remained upbeat and positive in their outlooks for the year ahead. ���[A]fter accounting for the normal slowdown in the housing market over the winter months, this actually looks like another 0.6 percent [month-over-month] gain,��� Capital Economics explained in commentary released within hours of S&P issuing its report. Similarly IHS Global Insight���s Stephanie Karol noted that both the 10-city and 20-city composites of the Case-Shiller index, when seasonally adjusted, posted increases for the 10th consecutive month. These increases ���are making a difference,��� she said. Karol pointed out that higher prices are leading to increased household wealth; rising property taxes, which are benefiting local governments; and renewed opportunities for homebuilders. Household wealth rose by more than $1 trillion over the first three quarters of last year, Karol noted, citing data from the Federal Reserve. Over the same period, more than 1.4 million homeowners rose above water on their mortgages, according to the latest market assessment from CoreLogic. Both Capital Economics and IHS anticipate continued price increases throughout 2013. IHS attributes the recent increases to three factors: job growth, diminishing inventory, and low interest rates. ���These three drivers will keep home prices moving up in 2013,��� Karol said. While Phoenix outpaced all other cities in Case-Shiller���s report with a 22.8 percent annual price gain in November, Capital Economics says the types of drastic gains seen in what was considered one of the hardest-hit markets ���are unlikely to be sustainable.��� The firm suggests prices will continue to rise but at milder rates. IHS pointed to New York���s price decline as an ���eyesore��� in the recent Case-Shiller report. Foreclosures are playing an outsized role in New York���s current market woes.

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