All TARP recipients are subject to executive compensation restrictions as long as their obligations to the Treasury are outstanding. The Emergency Economic Stabilization Act of 2008 (EESA), as amended by the American Recovery and Reinvestment Act of 2009 (ARRA), required that the Secretary of the Treasury issue standards governing executive compensation at financial institutions that received assistance under TARP.
On June 15, 2009, the Secretary released the Treasury's Interim Final Rule for TARP Standards for Compensation and Corporate Governance (IFR). This rule set forth the standards that govern executive compensation at firms participating in TARP. It also established the Office of the Special Master and gave the Special Master specific powers designed to ensure that executive pay at these firms is structured in a way that protects taxpayers' investment.
The rule gives the Special Master four important responsibilities. The Special Master has sole power and authority for:
- Review of Payments: For any TARP recipient receiving "exceptional assistance" (Exceptional Assistance Recipient), the Special Master reviews and approves any payment of compensation to the 5 senior executive officers and 20 next most highly paid employees.
- Review of Structures: For any Exceptional Assistance Recipient, the Special Master reviews and approves the structure of compensation for all executive officers and the 100 most highly compensated employees.
- Interpretation: The Special Master has interpretive authority over the executive compensation provisions of EESA and the Interim Final Rule. Accordingly, the Special Master makes determinations as to the application of those provisions to particular facts, and decisions as to whether their requirements have been met.
- Review of Prior Payments: The Special Master reviewed any bonuses, retention awards, and other compensation paid to the 5 senior executive officers and 20 next most highly-compensated employees of each TARP recipient prior to February 17, 2009, to determine whether the payments were contrary to the public interest. If the payment was determined to be contrary to the public interest, the Special Master had the responsibility for negotiating for reimbursements of such payments.
In September 2010, after fourteen months of service, Kenneth R. Feinberg resigned as Special Master for TARP Executive Compensation and issued the Final Report of Special Master Kenneth R. Feinberg (Final Report of Kenneth Feinberg) . The Final Report summarizes the work of the OSM during his tenure as Special Master. It includes an overview of the compensation determinations issued for the 2009 and 2010 calendar years.
Following Mr. Feinberg’s departure, Patricia Geoghegan, who had worked with Mr. Feinberg since the summer of 2009, was appointed to serve as the Acting Special Master for TARP Executive Compensation. Under Ms. Geoghegan, who is now the Special Master, the Office of the Special Master has issued compensation determinations for 2011 through 2014.