Goldman Sachs: Income inequality will 'achieve greater prosperity and opportunity for all'
In a sign the Obama administration may finally be reacting to Main Street anger over Wall Street bonuses, the Treasury Department's "pay czar" is planning new limits on compensation for the senior-most executives at seven companies that received large amounts of bailout cash.
The 25 highest-earning executives at the seven firms -- Citigroup, Bank of America, A.I.G., as well as GM and Chrysler and their respective financing arms -- will see their compensation for this year slashed by an average of 90 percent, the New York Times reported in an exclusive on Wednesday.
Overall, compensation for all executives at the seven companies will drop 50 percent compared to last year. At A.I.G., whose bailout alone cost taxpayers $180 billion, executives in the company's financial products division will see their compensation limited to $200,000.
Notably, some of the most high-profile recipients of government aid, such as investment bank Goldman Sachs, are not on the list.
The Times said Kenneth Feinberg, the administration's "pay czar," whom the newspaper refers to as "the special master at Treasury handling compensation issues," will announce the new restrictions in the next few days.
"The pay restrictions illustrate the humbling downfall of the once-proud giants, now wards of the state whose leaders’ compensation is being set by a Washington paymaster," wrote the Times. "They also show how Washington in the last year has become increasingly powerful in setting corporate policies as more companies turned to the government for money to survive."
GOLDMAN SACHS ADVISER: INCOME INEQUALITY PROVIDES 'OPPORTUNITY FOR ALL'
But there is little indication that the Obama administration's new hard line on executive bonuses is changing the mentality on Wall Street. News of the pay restrictions came the same day as controversy erupted over comments by a Goldman Sachs adviser that growing income inequality between senior executives and employees is "necessary" to rebuild the economy.
“We have to tolerate the inequality as a way to achieve greater prosperity and opportunity for all,” Bloomberg news service quoted Brian Griffiths as saying. Griffiths is an adviser to Goldman Sachs International and once served as a special adviser to British Prime Minister Margaret Thatcher.
Goldman Sachs set aside $16.7 billion this year for compensation and benefits, an increase of 46 percent over 2008.
As Pat Garofalo noted at ThinkProgress, executive compensation is on the rise in the United States even as employee salaries in almost all economic sectors decline. Pay cuts in sectors other than finance are "occurring more frequently than at any time since the Great Depression," Garofalo wrote.
As RAW STORY reported in August, income inequality in the United States is at its highest level since records began.
But the phenomenon of runaway bonuses appears to be limited for the most part to the financial industry. A recent report from Grant Thornton indicates that executives in most industries are cutting back on bonuses, with 55 percent of executives reporting that their companies are in the midst of reducing compensation packages.
Only nine percent said their companies were increasing compensation.