The Washington Post has just published a story accusing executives at Chrysler Financial of turning down a $750 million government loan because they “didn’t want to abide by new federal limits on pay,” and instead opted for more expensive private sector financing, “adding to the burdens of the already fragile automaker and its financing company.” Chrysler Financial denies the charge.
Update: Just to clarify a couple of points: Chrysler Financial and Chrysler are different companies, although both are primarily owned by the same private equity firm. Also, Chrysler Financial accepted a $1.5 billion loan earlier this year, making it a bit harder to explain away the most recent refusal as taking a principled stand against bailout money.
The Treasury Department previously had loaned Chrysler Financial $1.5 billion, when less stringent requirements on executive compensation were in place for recipients of federal bailout money. Since that first loan was announced on January 16, the Obama administration and Congress have toughened the rules.
During March, when it seemed that the first loan would run out, the Obama administration began working on a deal to lend the company another $750 million.
Quickly, most of the agreement fell into place. But on April 7, Treasury asked Chrysler Financial to have its top 25 executives sign waivers regarding their compensation, sources said.
Those waivers would have barred the executives from suing the Treasury or Chrysler Financial over new pay restrictions. As part of the economic stimulus package, Congress approved new executive compensation limits, and the Treasury is currently working on clarifying what the firms must do to comply with these rules.
Within a week, the company responded that some of the executives had refused to give their approval. By last week, Treasury had rescinded the loan offer, the sources said.