Compensation czar has tough task ahead

How fitting it is that the person who oversaw the compensation to families of 9/11 victims will decide whether top executives of massive companies involved in the economic crisis are paid too much.

The new White-House-appointed compensation czar is Kenneth Feinberg, a Washington rainmaker with the power to fix the compensation (and retirement packages) of bigwigs whose firms got bailouts and haven't started paying the money back. (Why is it always a czar? Why not money mullah or big-bucks buster?)

Feinberg, the personification of a bespectacled, balding 1930s-movie banker, is a thoughtful lawyer who handled a tough job well. Only 11 days after 9/11, Congress set up the September 11th Victim Compensation Fund to try to stave off massive lawsuits that could have crippled the airlines. It worked; only 94 lawsuits were filed by people who didn't want to participate.

Before the compensation fund expired in 2003, it paid out $7 billion to 5,560 people. The average payment for a death was $2 million. A few got upwards of $400,000 for physical injuries.

For months, Feinberg sifted through the sad stories of those who had lost loved ones through no fault of their own. Now, he must sift through the sad stories of those whose questionable judgment may have caused the loss of life savings for millions but who have nonetheless been paid millions in salaries and bonuses.

The White House was advised by many business leaders and Republican lawmakers not to get into the details of setting executive compensation. After all, they said, what does it know about running giant corporations?

In ordinary times, that's probably a valid argument. But in this case, public outrage is understandably too high to gloss over the issue of executives whose wrong herd mentality caused 401(k) plans to fall off the cliff and housing prices to go in the tank.

We might have swallowed our ire if AIG (the American International Group) had not decided to pay $165 million in bonuses to people who had been involved in the squandering of the life savings of so many. (AIG got $180 billion in taxpayer funds.)

It remains to be seen how much of a hands-on approach the Treasury Department wants Feinberg to exercise. There are some officials who say that he won't, in fact, actually cap the pay of executives at seven firms that got huge bailouts (and have not started paying them back), as well as many smaller firms that got small bailouts. He won't even set salaries — just keep an eye on bonuses and overall compensation plans to make certain they're not outrageous.