US 'plans bail-out firm pay cut'

President Obama has made his displeasure at the bonuses clear

Firms in the US which received billions of dollars of government aid in the financial crisis are to be told to cut the pay of top executives.

The seven companies that received the most aid from the US Treasury will have to reduce the basic salaries of their 25 best-paid employees by up to 90%.

The totals paid to each firm's 125 top earners would be halved under the plan.

Details of the plans were confirmed ahead of schedule by Elizabeth Warren, who heads the oversight panel.

The US government is expected to announce the salary cuts for top executives within the next few days.

'Party's over'

Speaking in an interview on CBS's The Early Show, Ms Warren, from the government's Troubled Asset Relief Programme, which has organised the bail out of US banks, said reports of pending reductions in executive salaries are "real".

She said those people being targeted had to take responsibility.

"Guys, you have to understand that you can't party on like its 2007. If you're going to take taxpayer dollars, then the game has to change", she said.

There has been widespread outrage over the high level of bonuses paid by firms that had to appeal for government help.

The seven companies affected would be Bank of America, American International Group (AIG), Citigroup, General Motors, GMAC, Chrysler and Chrysler Financial.

Some companies, such as the Goldman Sachs Group and JP Morgan Chase, have already repaid bailout money.

'Offensive'

The US is expected to ofically announce the salary cuts for top executives within the next few days.

Kenneth Feinberg, the Treasury official appointed to handle compensation issues as part of the $700bn Troubled Asset Relief Programme (Tarp), will be in charge of the negotiations on salaries with each of the companies.

Officials close to Mr Feinberg say the plan, targeting the 25 top earners at each of the seven companies affected, will on average cut total compensation by about 50%.

MARDELL'S AMERICA With a growing sense of anger at the distance between Wall Street and Main Street, and a sense of unfairness that the bosses who'd helped fuel the crisis were getting rewarded for it, the administration obviously felt it had to act Mark Mardell BBC North America editor Read Mark's thoughts in full

The plan will also change the form of the pay to align the personal interests of the executives with the longer-term financial health of their companies.

The base salary of the executives will be cut on average by 90%, while the remainder will be replaced by stock that cannot be sold for years.

Executives will also need permission to claim perks worth more than $25,000 per year - including country club memberships and company cars. Until now, companies were only required to provide guidelines for the use of such luxuries.

But it is still unclear exactly how much the executives will be allowed to earn, or how a figure will be determined by Mr Feinberg.

Bonus 'outrage'

President Barack Obama has been outspoken about the payment of bonuses - when the rest of the country is still suffering from the fall out of the global financial crisis.

Earlier this year, the president said he was "outraged" by plans by bailed-out insurer AIG to pay $165m bonuses pledged to executives.

And this week his senior aide, David Axlerod, called the payouts "offensive", telling the ABC that firms "ought to think through what they are doing and they ought to understand that a year ago lot of these institutions were teetering on the brink and the United States government and taxpayers came to their defence".

Excessive pay and bonuses have been cited as one of the causes of the world economic downturn, with bankers accused of taking greater risks driven by potential rewards.

The recent G20 summit wanted bonuses linked to long-term performance.

However, the Pittsburgh meeting produced no plan for general caps on the amount banks could pay out - something that some European governments wanted.