Skinning the Fat Cats

The Obama administration has named its enforcer of fat-cat pay. He is Washington attorney Kenneth R. Feinberg, and, as CNNMoney.com puts it, he'll be charged with "curbing runaway corporate pay practices." Just don't call Feinberg a "czar." "One thing that troubles me is this notion of me described as a compensation czar," Mr. Feinberg told the New York Times. "It makes it sound as if my goal is to impose certain restrictions on the private marketplace, whereas I am much more interested in working with these companies."

Feinberg has plenty of experience sorting out complicated compensation matters, most recently as a Bush administration-appointed arbiter of payouts for families of the victims of the Sept. 11 attacks, the business press point out. At the outset, Feinberg's case load will involve overseeing the compensation of employees at the seven companies: AIG (AIG), Citigroup (C), Bank of America (BAC), General Motors (GM), Chrysler, and the financing arms of the two automakers, the NYT reports in a separate article. "He will have broad discretion to set the salaries and bonuses for their five most senior executives and their 20 most highly paid employees," the newspaper writes. The Wall Street Journal points out that bailed-out firms were spared even stricter compensation limits from Washington. "The Obama administration scrapped the $500,000 salary cap it proposed for executives at firms receiving large amounts of federal assistance but appointed a pay czar to review, reject and even set pay levels—with no appeal," the newspaper writes.

Was Bank of America bullied into the Merrill Lynch deal? According to the Financial Times, BofA wanted to negotiate a knock-down price for Merrill just before Christmas, citing a "material adverse change" clause that could have nullified the troubled mega-merger, only to meet stiff resistance from the Federal Reserve. BofA CEO Kenneth Lewis "dropped his threat after being told by former U.S. Treasury Secretary Hank Paulson that regulators, including [Fed Chairman Ben] Bernanke, would remove him and his board if BofA tried to invoke the 'MAC' clause," the newspaper writes. Details of the tense game of brinkmanship between the White House and Wall Street have been unearthed by congressional investigators who successfully subpoenaed e-mails and other internal documents from the Fed, the WSJ reports. "They provide a rare insight into the thinking of top Fed officials, who have been criticized by Congress and others for their lack of public disclosure in the crisis," the newspaper writes. The juiciest detail comes from a Dec. 21 e-mail from Federal Reserve Bank of Richmond President Jeffrey Lacker to Fed employees. In it, Lacker wrote that the Fed chief " 'intends to make it even more clear' that if Bank of America kills the Merrill deal, and later needs government assistance, 'management is gone,' " the newspaper writes. Lewis is scheduled to testify later today in a congressional hearing.

Ciao, Chrysler! The Detroit automaker yesterday formally sealed its alliance with Fiat, the WSJ writes. Executives promised the new company would have leaner management and an overhauled manufacturing operation "as the car maker tries to regain consumer confidence with new models and higher quality." Fiat CEO Sergio Marchionne reassured Chrysler staffers that this was the same strategy that he had employed to revive the Italian car giant, but he also warned that Chrysler must succeed this time around. "Second chances are rare in the auto industry and 'there won't be a third chance,' " the WSJ quotes him as saying. Outside observers take an even more cautionary view. "The new company will be working in a recession-weary environment, and with no significant new product arriving for months," notes Business Week, quoting one leading auto analyst as saying: "I would call this deal a move to salvage Chrysler, not save it, and we will have to see what comes of the salvage."

China is on a raw materials stockpiling binge that has helped raise commodities prices around the world but is unsustainable in the long term, the NYT writes. "At least 90 large freighters full of iron ore are idling off Chinese ports, where they face waits of up to two weeks to unload because port storage operations are overflowing," it writes. Along with the iron ore, China is also hoarding aluminum, copper, nickel, tin, zinc, canola, soybeans, and, yes, crude oil. Some of the stockpiling comes in anticipation of price rises later in the year, while in the case of aluminum and canola, the Chinese government has bought huge quantities "to insulate domestic producers of these goods from falling global prices over the winter." The end result is a false dawn from the commodities sector as it looks to recover from the global economic crash. Sure enough, Chinese exporters are still feeling the pinch. According to the BBC, "Chinese exports have dropped by a record amount in May as demand for its goods from the US and Europe slumped."

And finally, if you think your stock portfolio is looking weak, some of the most powerful politicians in the country may have you beat. The WSJ reports that AIG's share price meltdown lost House Speaker Nancy Pelosi and her husband a sum of between $100,000 and $1 million. The list goes on. Rep. Dave Camp, the top Republican on the House tax-writing committee, took a bet on Citigroup in September and lost 30 percent on his investment. A review of Congress' financial disclosure statements "shows many House lawmakers lost money last year and several held large investments in financial-services firms and auto makers that turned to the federal government for financial help." In case you were wondering, yes, "such holdings are permissible under congressional ethics rules."