Pay Czar Lets a Big One Slip with GMAC

The new CEO of thrice-bailed-out lender GMAC pulled down $1.2 million in pay and stock options for the 45 days he worked in 2009. Bloomberg observed that on an annual basis GMAC’s Michael Carpenter was paid roughly the equivalent of Goldman Sachs’ (GS) Lloyd Blankfein, who runs the most profitable securities firm in US history and adeptly managed through the recession.

GMAC Inc., the auto and home lender that hasn’t posted a profit since 2008, gave Chief Executive Officer Michael Carpenter a pay package rivaling that of Goldman Sachs Group Inc. CEO Lloyd Blankfein, who runs the most profitable securities firm in U.S. history.

GMAC paid Carpenter about $1.2 million in salary and restricted stock for the month-and-a-half he was employed by the Detroit-based company last year, equivalent to full-year pay of $9.5 million, according to a regulatory filing yesterday. Goldman Sachs paid Blankfein $9.6 million for 2009. — 3/2/2010

A spokeswoman for GMAC defended the compensation saying that Carpenter’s pay is justified by his experience with large, complex financial services companies, such as Citigroup (C). However, that explanation does not hold water for other executives at the firm who received multimillion dollar pay packages last year, including $7.7 million for Chief Risk Officer Sam Ramsey who has held his position since late 2007. It is tough to argue that he has been anything but a failure at mitigating risk, and his pay is even more mind-numbing than is Carpenter’s.

Say what you want about Goldman Sachs and executive compensation, but it is much easier to understand Blankfein’s pay versus Carpenter’s. Goldman Sachs Group has been hugely profitable recently and shareholders have seen 85% gain in the last twelve months. They were among the earliest to repay TARP loans with interest, and thus the Obama Administration’s Pay Czar Kenneth Feinberg has much less say in executive compensation.

In contrast, GMAC has relied on three separate government bailouts totaling more than $17 billion due to the credit crunch and its exposure to mortgage and car loans. They have reported a loss in each quarter since the fourth quarter of 2008, and the largest of those (loss of $3.9 billion) came in the most recent quarter. To be fair, Mr. Carpenter was tapped to lead the turnaround and joined GMAC well into their struggles in mid-November 2009. If he is able to engineer a turnaround at GMAC and repay the taxpayers, he will certainly justify his pay. However, at this point, he must understand that he is under the microscope and to take such a high salary so early in his tenure is not a savvy public relations move.

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