The U.S. pay czar has begun reviewing the appropriateness of the richest pay packages proposed by firms that received billions of dollars in government aid.

Kenneth Feinberg has deemed the proposals for the 25 highest-paid employees at the seven companies substantially complete, starting a 60-day clock on Monday, a Treasury Department spokeswoman said.

His determination that they are complete kicks off the controversial process of the government scrutinizing pay contracts of private-sector companies and then greenlighting or putting the brakes on them.

The government sent out letters on Monday about the step to the seven firms who have received exceptional assistance from the Troubled Asset Relief Program (TARP): Citigroup Inc , American International Group Inc , Bank of America Corp , Chrysler Financial , Chrysler Group LLC, General Motors Co and GMAC Inc.

The government has laid out general principles that will guide Feinberg's decisions, such as ensuring the contracts do not encourage excessive risk taking, that they have an appropriate balance of short-term and long-term pay, and that pay is tied to performance.

The pay plans should also be generous enough that the firms can retain top people and become profitable enough to repay taxpayer investments, Treasury has said.

Feinberg, who previously oversaw payouts to victims of the September 11 attacks, has a great deal of latitude in making his determinations and can even claw back pay that employees have received if he finds that it was paid out unfairly.

He has been verifying the submissions since they were due in to Treasury on August 14.

Feinberg said earlier this month that he has been regularly consulting with the seven companies, and described the meetings as very amicable.

There have been some tough disagreements, but everyone is trying to get to an end place in compensation that makes sense in a post-TARP world, Feinberg said.

He said Citigroup, in particular, has concerns about pay restrictions causing its top employees to leave.

Andrew Hall, a Citigroup energy trader on pace to make about $100 million this year, has recently become a target for accusations of excessive pay at bailed-out companies.

Feinberg told Reuters that Citigroup included Hall's contract when it submitted its pay plans earlier this month.

After Feinberg makes his initial determination about whether to approve or disapprove pay contracts, the companies have 30 days to ask him to reconsider, after which Feinberg has 30 days to make a final determination.

His final determinations are binding, Treasury has said.

Separately from that process, Feinberg has already made some rulings on pay. AIG said earlier this month that Feinberg had approved in principle a $10.5 million pay package for newly appointed Chief Executive Robert Benmosche.

It is not yet clear how much the government will reveal about the pay contracts of other top-paid employees, largely because federal privacy laws restrict public disclosures about individuals' pay.

Feinberg has said he has wrestled with the disclosure issue. There is a tension between not wanting to put on the front page of every newspaper in the country the specific compensation packages of these individuals ... versus the public's right to know, he said.

After judging the pay packages for the companies' top 25 employees, Feinberg will have to approve broader compensation structures for the 75 next-highest-paid employees.

(Reporting by Karey Wutkowski in Washington and Steve Eder in New York; Editing by Gary Hill)

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