The Obama administration's pay czar said on Thursday he is concerned that pay cuts he ordered at bailed out companies could hamper their ability to retain talent and would consider offers to hire new executives at competitive industry rates.

Kenneth Feinberg, the U.S. Treasury's special master for executive pay at the seven firms that have received taxpayer bailouts, defended his pay restrictions as striking an appropriate balance between reining in excessive pay and allowing companies to thrive and repay the government.

I'm always concerned that the companies thrive and they keep the personnel they need to stay in business. That's a major concern, Feinberg said at a forum sponsored by Bloomberg. I took that into account in 2009 and I'll look at that again in 2010.

Feinberg last month ordered an average 50 percent cut in pay and bonuses for the top 25 earners at the seven bailed-out firms: General Motors , Chrysler Group, GMAC Financial Services, Chrysler Financial, American International Group , Bank of America and Citigroup .

Feinberg said the automotive firms did not appeal his rulings, but said he would be open to requests to hire in new executives at competitive pay.

If General Motors or any other company wants to bring someone in laterally -- laterally -- and competitive pay packages require that lateral hires get certain competitive pay, what have you, we're perfectly willing to examine that, he said.

Feinberg added that AIG's new chief executive, Robert Benmosche, had expressed concerns over the compensation restrictions, but said he was not aware of any situation that led to recent media reports that Benmosche was considering stepping down.

Benmosche on Wednesday sent a letter to employees saying he that was totally committed to staying at the company, which is 80 percent owned by U.S. taxpayers. Benmosche said he and the company's board were frustrated with pay restrictions that he said present a barrier that stands in the way of restoring AIG's value.

Feinberg said he has met with Benmosche one or two times over the past few months.

Robert expressed his concern that compensation keep his people on board and that the company thrive, Feinberg said.

PAYBACK EQUALS SUCCESS

Feinberg said he would measure his success in determining appropriate pay levels for the bailout-out firms by their repayment of taxpayer money. He said he would like to see other Wall Street firms adopt compensation plans based on long-term profits, but made it clear his jurisdiction does not extend beyond the seven bailed-out firms.

I think it would be wonderful if my determinations had some consequential impact beyond these seven companies, but there is nothing more important than the fact that these companies repay, Feinberg said. The secretary of the Treasury has made it very clear that we must keep these companies in business, thriving, so that the taxpayer can get repaid.

For AIG, which some analysts say may not be able to repay all of the $180 billion in taxpayer funds it has received, Feinberg said partial repayments or a move toward installment payments would be considered signs of success.

Feinberg is now working on compensation plans for the next 75 highest earners at the seven firms and then will start the whole process over for 2010 compensation.

(Editing by Leslie Adler)