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Report: Treasury OKs big pay raises for GM, Ally

By WTOP Staff

MARCY GORDON
AP Business Writer

WASHINGTON (AP) — The U.S. Treasury Department continued to approve “excessive” pay raises for top executives at General Motors and its former consumer finance arm, both of which received taxpayer-funded bailouts during the financial crisis, a new government report says.

The government watchdog that oversees the $475 billion bailout said Treasury approved cash salaries exceeding $500,000 last year for 16 of the 47 top executives at General Motors Corp. and Ally Financial Inc. Treasury allowed total pay packages, including company stock, of at least $1 million for every top executive at the two companies, according to the report released Wednesday by the special inspector general for the Troubled Asset Relief Program.

It said the government approved $3 million in pay raises, from 4 percent to 20 percent, for nine GM executives, most of whom had previously received raises several years in a row. The government sold its last shares of GM in December.

“Treasury loosened its own pay restrictions for senior executives at General Motors and Ally Financial year after year, even as taxpayer losses in these companies mounted,” Christy Romero, the special inspector general, said in a statement. “Treasury could be sending the message that much-needed reforms coming out of the financial crisis are no longer necessary or required in exchange for TARP dollars.”

A report issued in April by Romero estimated that taxpayers lost $11.2 billion on the GM bailout, up from a previous estimate of $10.5 billion. The automaker needed the $49.5 billion in aid to survive its 2009 bankruptcy restructuring. GM went public again in November 2010.

GM has faced intense scrutiny this year over its failure to correct an ignition-switch defect in small cars for more than a decade, even as it learned of fatal crashes. The company recalled 2.6 million cars this year to replace the switches. It has been under investigation by Congress and the Justice Department.

Detroit-based Ally, formerly called GMAC Inc., was the auto loan and mortgage arm of GM until it was taken over by the government in the 2008 bailout. Ally has repaid $18 billion, or about $875 million more than the $17.2 billion in aid it received. The company went public again in April. Treasury sold a chunk of its stock and raised $2.38 billion in the offering.

The government currently owns a 13.8 percent stake. The new report estimates that taxpayers lost $1.8 billion on sales of Ally stock.

President Barack Obama said last year that top executives at the seven companies that received the biggest bailouts would have their annual cash salaries capped at $500,000. Any additional compensation would come from company stock that can’t be cashed in until the companies repay their bailouts.

The report said Treasury failed to comply with that limitation in approving executive pay for GM and Ally executives in 2013. Treasury put only a “minimal” amount of restricted stock into pay packages last year and eliminated it completely from 2014 packages, it said.

Patricia Geoghegan, the Treasury official who approved the raises, disputed the report’s findings. Geoghegan said that for all the seven companies receiving the most aid, Treasury has had to find a balance between limiting compensation and approving pay packages that are competitive with executives in similar jobs.

The government gave $352 billion in aid to those companies and recovered $377.6 billion, according to Treasury.

In a statement, Geoghegan said “the record shows that (her office) has fulfilled its obligation to balance limiting executive compensation with allowing companies to repay taxpayer assistance. Pay packages for the top 25 employees at each of those companies have been restricted so long as the company remained in TARP.”

In a letter to Romero, Geoghegan said that on average, the top 25 pay packages for Ally executives for 2014 are 17 percent cash and 83 percent stock, compared with a median for similar positions at similar companies of 51 percent cash and 49 percent stock.

On average, she said, 81 percent of executive pay at Ally and GM for 2013 was in the form of company stock, not cash. That means “the ultimate value” of most of the pay of top executives depends on the company’s future performance, generally over three years, she wrote. The CEOs of GM and Ally didn’t receive pay raises while they were under Treasury’s supervision, Geoghegan said.

GM said in a statement that it is grateful for the taxpayer aid it received. “While the U.S. Treasury owned GM stock and ever since, we have worked to align executive compensation with the long-term interests of stockholders and we will continue to do so,” the automaker said.

Ally said its executive compensation complies with government requirements for companies that received bailouts. More than 97 percent of Ally shareholders voted in July to approve its executive pay structure, the company said.

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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