Pay czar Kenneth Feinberg emphasized on Friday his ability to claw back pay at any company receiving a taxpayer bailout, but said such an extreme action will be rare and far between.

Feinberg said he has not really explored how he will use the clawback power and will only exercise it when he finds an egregious fact pattern.

There may be situations where, you want a good example, is the CEO for Bank of America, where we thought it important to claw back, Feinberg told reporters after speaking at George Washington University Law School.

Bank of America Chief Executive Ken Lewis, who has announced he will leave the company by the end of the year, will receive no more pay for 2009 and will have more than $1 million of his prior pay clawed back, according to a deal Feinberg struck.

The pay czar emphasized that he can use his power to claw back pay at all companies that received bailouts under the government's Troubled Asset Relief Program, not just the seven companies for which he has explicit authority to rework compensation plans.

The seven companies are American International Group Inc , Bank of America Corp , Citigroup Inc , General Motors Co , Chrysler, GMAC and Chrysler Financial.

On Thursday, Feinberg slashed compensation for the top 25 earners at the seven companies for the final two months of the year, when bonuses are typically paid. He cut cash payouts by 90 percent and overall compensation by 50 percent.

Illustrating his general hesitancy to use clawbacks, Feinberg did not ask those employees to return any pay they received from January through October this year.

I am reluctant to become a bill collector or a Treasury official reaching out and trying to get back compensation long since distributed, long since cashed, long since spent, he said.

He added that, in deciding how dramatically to rework pay plans, he listened to a lot of arguments about which employees were critical to a company.

Bank of America Corp said on Thursday that Feinberg's rulings would put it at a disadvantage as it competes with firms not under the pay czar's thumb. The bank said its employees were already being poached by rivals.

Feinberg said on Friday he has not yet received any appeals against his rulings.

WELCOMES FED PAY GUIDELINES

Feinberg's rulings were complemented by the unveiling of new Federal Reserve proposals that would have the government police pay practices more closely at all levels of employee ranks at banks.

The guidelines apply to any employee able to take risks that could significantly and adversely affect the safety of a firm, and marks an attempt to curb the type of pay that rewarded juiced-up returns and contributed to the financial crisis. The Fed will also conduct an intensive review of pay at the 28 largest and most complex banking organizations.

I like very much the basic idea of the Fed weighing in, Feinberg said.

He said it was healthy for all the banking regulators to take a closer look at pay but also called it a big challenge for those agencies.

The government's one-two punch announcement about pay initiatives this week came after a groundswell of public anger that Wall Street firms -- fresh off a near-meltdown of the financial system -- are still paying huge bonuses, while the U.S. unemployment rate is at a 26-year high.

Recent news that Goldman Sachs Group Inc had set aside $16.8 billion for compensation, so soon after repaying $10 billion in taxpayer money, fueled concerns Wall Street was already returning to the lavish pay practices that were commonplace before the financial crisis struck.

Feinberg said he cannot help but empathize with that public anger. He said he was given the impossible task of calming that frustration while not coming down so hard at the bailed-out firms that their employees flee, making it impossible for them to repay taxpayer money.

That's a 3 a.m. problem, trying to figure this out, Feinberg added.

(Reporting by Karey Wutkowski; editing by John Wallace and Andre Grenon)

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