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Christy Romero, the special inspector general overseeing the bailout, said that the Treasury Department allows such high compensation for executives at bailed-out auto companies as to create an incentive for other companies to seek bailouts.

“Absolutely,” Romero replied when Rep. Kerry Bentivolio, R-Mich., asked her if the Treasury Department had created a “moral hazard” by approving so many pay increases. “It shouldn’t be comfortable or luxurious to be in TARP.”

Romero noted that shows that the Treasury Department had approved numerous raises ranging between $30,000 and $1 million. Romero also reminded Congress that ”executive compensation did play a material role in the financial crisis” that made the bailouts necessary because executives lacked the long-term incentives to make responsible long-term decisions about the company.

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