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The Obama administration will soon order the nation’s biggest bailed-out companies to drastically cut the pay packages of 175 top executives, a senior administration official confirmed to CNN Wednesday.

Kenneth Feinberg, who was named the White House’s pay czar in June, will demand that each of the seven largest bailout recipients lower the total compensation for their top 25 highest paid employees by 50%, on average, the official told CNN.

For the past two months, Feinberg has been reviewing pay plans at Citigroup (C, Fortune 500), AIG (AIG, Fortune 500), Bank of America (BAC, Fortune 500), General Motors, Chrysler, GMAC and Chrysler Financial in an effort to put these firms in a position to pay back bailout money as soon as possible.

Under the plan, which is expected to be officially released by the Treasury Department next week, annual salaries for executives at those seven firms are expected to fall 90%, on average, the official said.

Another source in the Treasury Department told CNN that Feinberg is "trying to strike the balance" between protecting taxpayers and allowing companies to have the ability to "grow their way out of TARP."

Some compensation experts have worried that the firms that have received the most bailout funds could wind up losing top talent to companies that have already paid back the government and are not subject to Feinberg’s pay restrictions, such as JPMorgan Chase and Goldman Sachs.

According to other reports, the plan will come down particularly harsh on embattled insurer AIG. Within AIG’s controversial Financial Products division, the unit that led to the company’s near collapse, no employee is expected to receive more than $200,000 in total compensation, several reports indicated.

The Wall Street Journal also reported Feinberg is expected to demand a series of governance changes at the seven firms — including splitting the role of chief executive officer and chairman.

The Treasury Department had no comment. AIG, Bank of America, Chrysler Financial and GM also declined to comment. Chrysler, Citigroup and GMAC were not immediately available for comment.

But the moves by Feinberg should not come as a major surprise. Last week, outgoing Bank of America CEO Ken Lewis said he would not accept a salary or bonus for 2009, and the bank said the decision came after Feinberg "suggested" it to Lewis.

Lewis’ decision followed an uproar over indications that he is poised to walk away with a minimum of $53 million in pension benefits after he retires.

Lewis’ cash salary has been $1.5 million annually since he took over as CEO in 2001. But he actually made $63 million in pay and perks over the past three years, according to filings — including almost $10 million last year.

Other high-profile CEOs have also taken it upon themselves to act before the government did. Citigroup chief Vikram Pandit, for example, declared earlier this year that he would accept pay of just $1 a year and no bonus until his firm returned to profitability. Just a year ago, Pandit took home $10.8 million in salary, stock and options.

CNN’s Jessica Yellin, Gloria Borger, Miguel Susana, CNNMoney.com’s Jennifer Liberto and Fortune’s Colin Barr contributed to this report.  

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A year after the government applied a tourniquet to the banking industry, the bleeding has slowed — but it hasn’t stopped.

The six biggest U.S. banks will tell investors in coming weeks how they did in the third quarter. Analysts expect four of the six to post profits, and the best-run banks — Goldman Sachs (GS, Fortune 500) and JPMorgan Chase (JPM, Fortune 500) — are likely to more than double last year’s bottom line.

But Wall Street expects profits at both Wells Fargo (WFC, Fortune 500) and Morgan Stanley (MS, Fortune 500) to fall from a year ago. And the biggest beneficiaries of Washington’s too-big-to-fail mindset, Citi (C, Fortune 500) and Bank of America (BAC, Fortune 500), may lose money.

Bank analysts say a severe economic downturn preceded by a long credit boom means stubbornly high losses on home loans, credit cards and commercial properties will be working their way through the system for a while — which translates to uneven profit reports at big banks and, in some cases, failures at smaller ones.

"We’re through the worst of the storm, but we’re not out of the other side of it," said William Schwartz, senior vice president for the U.S. financial institutions group at ratings agency DBRS.

The big banks have been sheltered over the past year by lavish government assistance, ranging from Treasury loans to expanded deposit insurance to federally backed loan guarantees. Some of those props are due to start falling. The Federal Deposit Insurance Corp.’s loan guarantee program, for instance, is due to expire Oct. 31.

In the meantime, bank stocks have rallied off their winter lows — driven in large part by gains that were concentrated in nonbanking businesses such as fixed-income trading and investment banking.

The major bank stocks all posted massive gains in the third quarter, led by a 57% jump at Citi, whose shares continue to fetch less than $5 each, and 30%-plus rises at BofA, Goldman Sachs and JPMorgan Chase.

"The big firms have more revenue streams, so they’re probably a little better off right now than the regionals," said Schwartz.

JPMorgan Chase, which has emerged as a rare beneficiary of the financial crisis via its low-cost, government-assisted acquisitions of Bear Stearns and Washington Mutual, is due to post third-quarter numbers Wednesday morning. Analysts polled by Thomson Financial expect its earnings to rise to 49 cents a share from 11 cents a year ago, as solid performances in fee-based businesses such as mortgage and investment banking offset rising costs in its big credit card book.

Thursday morning will bring reports from another big winner over the past year, Goldman Sachs, and from Citigroup, which continues to struggle under the weight of big loan losses. Analysts expect Goldman to make $4.24 a share for the third quarter, up from $1.81 a year ago. Citi, meanwhile, is expected to lose 21 cents a share, compared with a 60-cent loss last year.

"Citi’s earnings remain under significant pressure near term along with the industry," analysts at JPMorgan wrote in a note to clients last week.

Closing out the week will be Bank of America, which is due to post third-quarter numbers Friday morning. Analysts expect the bank to lose 6 cents a share for the quarter, reversing the year-ago profit of 15 cents.

The numbers will come less than a month after the bank’s longtime CEO, Ken Lewis, quit under pressure from shareholders, as well as legislators who question his handling of BofA’s takeover of Merrill Lynch.

Two other banks dealing with management changes — the investment firm Morgan Stanley, whose CEO John Mack announced plans last month to retire, and West Coast lender Wells Fargo, whose Chairman Dick Kovacevich will step aside Jan. 1 — are expected to post results next week. Both firms are expected to make less money than they did in last year’s third quarter.  

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Soft drink maker Pepsico Inc said on Saturday that Michael White, vice chairman and PepsiCo International chief executive, would retire later this year after nearly 20 years with the company.

White will also leave his seat on the PepsiCo board of directors when he retires, which is the company’s practice.

The component businesses of PepsiCo International will be managed by Zein Abdalla, who becomes CEO of PepsiCo Europe, and Saad Abdul-Latif, who becomes CEO of PepsiCo Asia, Middle East, Africa. Both will report to PepsiCo CEO Indra Nooyi.

“Close to a year ago, Mike shared with me his interest in eventually moving on to ‘the next chapter’ of his life,” Nooyi said in a statement fast payday loan.

“It would be difficult to overstate Mike’s contribution to PepsiCo over two decades,” Nooyi said.

White joined the company in 1990 and has held several senior positions, including CFO of Frito-Lay North America. (Reporting by Kyle Peterson; Editing by Peter Cooney)

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Federal Reserve Bank of San Francisco President Janet Yellen said prospects for a “tepid” recovery require that policy makers boost employment and guard more against inflation becoming too low rather than too high.

“We face an economy with substantial slack, prospects for only moderate growth, and low and declining inflation,” Yellen said today in a speech in San Francisco. Until the time comes to raise interest rates, “we need to defend our price stability goal on the low side and promote full employment,” she said.

Yellen, without calling for more monetary stimulus from the Fed, said “tight credit” may restrain growth for “some time to come.” The central bank in March authorized $1.45 trillion in purchases of mortgage-backed securities and other housing debt this year, and last month decided to taper off its $300 billion program buying U.S. Treasuries through October while debating a similar move with MBS.

“I expect the recovery to be tepid,” Yellen, who votes at interest-rate meetings this year, said in remarks to the CFA Society of San Francisco, a group of financial analysts.

“The gradual expansion gathering steam will remain vulnerable to shocks,” and the jobless rate will stay “elevated for a few more years,” she said, speaking one year after the Fed and the Treasury Department allowed Lehman Brothers Holdings Inc. to go bankrupt, intensifying the financial crisis.

Speaking to reporters, Yellen said she favors a tapering of the MBS purchases similar to the decision on Treasuries, “whatever level the MBS program is at or reaches when it comes to an end.” She declined to comment on whether the program will either be expanded or stopped short.

Main Rate Cut

The Fed cut its main interest rate in December almost to zero and switched to asset purchases as the primary tool of monetary policy. Central bankers have since reiterated that they will keep rates low for an “extended period,” and Yellen said in June that rates may stay near zero for several years.

Yellen said today the Fed’s moves “appear to be helping,” while the extent of their impact is “highly uncertain.” The Fed is mandated by Congress to promote stable prices and maximum employment.

There’s a “fear,” which is “real, growing and disruptive,” that the Fed will be unable to withdraw its $1 trillion expansion of credit and will print money to support the federal deficit, she said.

‘Loud and Clear’

“That’s why it’s so important for me to say the following loud and clear: We at the Fed are and will remain fiercely independent from politics,” Yellen said. “We have the means, we certainly have the will, to tighten policy when the time is right.”

That’s likely to happen before inflation rises to 2 percent because of the lag time following a monetary-policy decision, Yellen told reporters after the speech.

The central bank must be more mindful of asset-price bubbles now, she said. Low Fed rates “probably” helped inflate the housing bubble, Yellen said in response to an audience question.

The U.S. faces the possibility that inflation, excluding food and energy costs, will drift further below the Fed’s long- term objective of around 2 percent, Yellen said.

Treasury 10-year notes fell for the first time in four days amid speculation the rally that pushed yields to their lowest levels in two months can’t be sustained. The yield on the benchmark 10-year note climbed eight basis points, or 0.08 percentage point, to 3.42 percent at 5:50 p.m. in New York, according to BGCantor Market Data.

Improving Economy

In its Beige Book report last week, the Fed said that 11 of its 12 regional banks reported signs of a stable or improving economy in July and August, adding anecdotal evidence that the worst U.S. recession in seven decades is over. Five districts, including San Francisco, home to the biggest regional economy, “mentioned signs of improvement,” the report said.

“A wide array of data” supports the view that the recession has ended and the economy will expand in the second half, Yellen said. The growth this year will come from a “diminished pace of inventory liquidation by manufacturers, wholesalers and retailers,” she said.

Gross domestic product shrank at a 1 percent annual rate from April to June, following a 6.4 percent pace of contraction in the first three months of the year.

‘Low Gear’

The labor market “may keep the recovery in low gear for a while,” said Yellen, 63, a former Fed governor and top economic adviser under President Bill Clinton. Unemployment, a slowdown in wage growth and workers’ insecurity will “undoubtedly” restrain consumer spending and may result in “sluggish spending growth,” she said.

Yellen said potential losses on commercial real estate loans at small and mid-size banks represent a possible “financial contagion” that’s one of the biggest threats to economic recovery. “The likelihood of continuing losses by financial institutions will add new fuel to the credit crunch,” Yellen said.

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U.K. house prices rose for a second month in August as low borrowing costs lured homebuyers, a report by Halifax showed.

Home values climbed 0.8 percent to an average of 160,973 pounds ($266,000) after rising 1.2 percent in the previous month, the division of Lloyds Banking Group Plc said in a statement today. The median forecast of 14 economists in a Bloomberg News survey was for a 1 percent increase. Prices were down 7.6 percent from a year earlier.

The report adds to evidence that the property slump is easing. Mortgage approvals rose to a 15-month high in July. The Bank of England will probably continue a plan to buy 175 billion pounds of bonds with newly created money to cement the economy’s recovery from the worst recession in a generation.

“Demand for housing has increased since the start of the year due to better affordability and low interest rates,” Martin Ellis, housing economist at Halifax, said in the statement. “This, together with low levels of property available for sale, has boosted house prices over the last few months.”

The central bank will maintain the size of its bond purchase program, according to all 35 economists in a Bloomberg News survey. Policy makers will also keep the benchmark interest rate at a record low of 0.5 percent, all 60 economists in a separate survey said. The bank announces the decision at noon in London today.

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Policy makers in Southeast Asia’s biggest economies may begin to remove monetary stimulus in their financial systems as early as the second quarter of 2010 as growth resumes, according to UBG AG.

Singapore may shift its currency stance to one that allows for a modest and gradual appreciation of its exchange rate, while Thailand, Indonesia and the Philippines may start raising interest rates in the quarter ending June, UBS economist Edward Teather wrote in a report published yesterday. Malaysia will raise rates by 50 basis points next year, Credit Suisse predicts.

Central banks across Asia have started to signal they may soon need to raise borrowing costs as stimulus spending worth more than $950 billion revitalizes economies and threatens to stoke consumer prices. Credit Suisse yesterday raised its growth forecast for some Asian nations including Singapore and Thailand.

“Discretionary monetary policy easing in Southeast Asia appears to be at an end,” Teather wrote. “Our forecast removal of policy stimulus is driven by an expected improvement in GDP growth, credit growth and inflation. Because of the shocks each economy has received in the last 18 months, any removal of stimulus will be both cautious and tentative and likely to be halted if growth moderates.”

Indonesia’s central bank yesterday refrained from cutting its benchmark rate for the first time in 10 months, judging faster inflation is now a bigger risk than slowing growth.

‘Earlier’ Tightening

“We conclude that Bank Indonesia has good reason to keep policy rates on hold until at least year end,” Teather said. “In 2010, we expect the reacceleration in inflation already underway will be very clear, and with it, inflation expectations. Monetary loosening in terms of lower interbank rates should continue, even with policy rates unchanged.”

Bank Indonesia will probably raise rates 1.5 percentage points to 8 percent by the end of 2010, UBS and Credit Suisse said. Morgan Stanley, in a report today, said the risk of an “earlier policy tightening” is higher in Indonesia compared with other Asian economies.

Bank of Thailand Deputy Governor Atchana Waiquamdee said Aug personal business card. 31 it’s unlikely the central bank will cut rates further as the economy starts to recover from its first recession since the Asian financial crisis. Policy makers kept the rate unchanged at 1.25 percent last month for a third straight meeting after 2.5 percentage points of cuts between December to April.

The Thai central bank may raise rates by 50 basis points in the second quarter before leaving borrowing costs unchanged for the rest of the year, Teather predicts. Credit Suisse expects the rate to be at 2.25 percent by the end of 2010.

De Facto Devaluation

The Monetary Authority of Singapore in April said it would adjust the trading range for the island’s dollar, a move economists said was a de facto devaluation of the currency. Singapore should return to a policy of allowing the currency to strengthen once the economy recovers from its deepest recession since independence in 1965, the International Monetary Fund said this week.

UBS foresees a “real possibility of a tightening move” by the central bank at its April review amid rising inflation expectations and credit growth, after earlier predicting no such move next year. Goldman Sachs Group Inc. yesterday said Singapore will allow more room for a stronger currency in 2010.

The Philippines will raise its benchmark rate to 4.5 percent in the second quarter of 2010 from 4 percent now, Teather said. Credit Suisse is predicting it will be at 5 percent by the end of next year.

Bangko Sentral ng Pilipinas reduced rates six times from December to July before keeping borrowing costs unchanged last month. The monetary policy stance “remains appropriate at this time,” Governor Amando Tetangco said today.

Bank Negara Malaysia will be the only one of the region’s five biggest economies to leave its monetary policy unchanged next year, UBS’ Teather predicts. Morgan Stanley and Credit Suisse economists are more bullish, with the latter expecting rates to be raised to 2.5 percent by end-2010 from 2 percent now.

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China’s economic growth may exceed 10 percent in the first quarter of next year on a “moderately loose” monetary policy, a government research agency forecast.

The policy will stay in place in the short term to ensure a “stable recovery,” Ba Shusong, deputy director of the Development Research Center, an affiliate of the nation’s State Council, said in an interview with Shanghai Securities News.

China will be the first to recover from the global recession and has already passed its worst, Ba said, citing last quarter’s faster growth. The government will meet its target for an 8 percent expansion this year, Ba said, according to a transcript of the interview posted on the center’s Web site.

The world’s third-biggest economy grew 7.9 percent in the second quarter from a year earlier, rebounding from a 6.1 percent expansion in the first, which was the weakest in almost a decade. The recovery is being fueled by 4 trillion yuan ($585 billion) in stimulus spending, record growth in credit and improving demand for exports.

China’s economy may expand 8.5 percent in the third quarter from a year earlier, the China Securities Journal reported Aug. 21, citing State Information Center forecasts. Industrial output may climb 11.5 percent in the third quarter from a year earlier, Zhu Hongren, spokesman for the Ministry of Industry and Information Technology, said today.

“The next policy focus should shift economic growth from government-motivated demand” to the private sector, Ba said. Consumer and producer prices may resume rising in the fourth quarter, he said.

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After a six-week trip through bankruptcy, the "new" General Motors was born Friday owned by the government and free of tens of billions in debt and shed of unaffordable brands, dealerships and plants.

The sale of the valuable assets of the old company to the new GM was completed Friday morning.

"This is an exciting day for General Motors, one that will allow every employee, including me, to get back to the business of designing, building and selling great cars and trucks and serving the needs of our customers," GM Chief Executive Fritz Henderson said.

"We deeply appreciate the support we’ve received. We’ll work hard to repay the trust, and the money, that so many have invested in GM," Henderson added.

But he said he couldn’t promise that GM would repay the $50 billion the government has already given or promised to GM.

"Our performance over time will determine if the taxpayers are made whole," he said.

The company hopes to beat a 2015 deadline for repaying about $6.7 billion in government loans, Henderson said.

But Treasury’s ability to recover most of the rest of the $50 billion will depend on the future market value of the government’s large equity stake. The company’s stock is not expected to trade publicly until 2010 at the earliest.

Henderson told CNNMoney Friday that he is confident the company will not need government assistance beyond the $50 billion already committed to its turnaround.

"This is a precious second chance," he said. "There are no third chances."

The new company retains the Chevrolet, Cadillac, GMC and Buick brands, along with most of its overseas operations.

GM also keeps about 3,600 of its 6,000 U.S. dealerships and most of its plants. But 14 U.S. plants will be closed, and the company will eliminate about 20,000 of its 88,000 U.S. employees by the end of the year as it continues to cut costs.

While the new company goes forward outside of bankruptcy, much of its debt and many of the assets it shed in the process remain in bankruptcy. It will take about two to three years for an entity known as Motors Liquidation Co. (GMGMQ) to liquidate under court supervision.

The company is in the process of selling its Saturn, Saab and Hummer brands. It will make its last Pontiac in September. Virtually all of the dealerships it is shedding will continue to sell GM cars and do warranty repair work into 2010, but all are expected to be discontinued by September of next year.

The new GM has a tough road ahead. The company has suffered from decades of market share losses and now accounts for less than 20% of U.S. auto sales. It retains the lead over its rivals such as Toyota Motor (TM) and Ford Motor (F, Fortune 500), although last year it lost its long-time title of world’s largest automaker to Toyota.

Despite losing that global sales title, GM’s overseas operations are generally stronger than its U instant cash advance.S. operations. Its joint ventures are a leader in sales in China, a growing market that now rivals the U.S. market in sales volume. Only about one in four of its vehicles sold in the first quarter of 2009 were in the United States.

GM has lost $88 billion since 2005 as its debt rose to an unaffordable $54 billion. Its current crisis came as a downturn in the U.S. economy and credit crunch at the end of last year caused industrywide sales to plunge.

The Treasury has pumped about $30 billion into GM to keep it alive since late last year, and will give it an additional $20 billion before the end of 2009. In return, taxpayers will own 60.8% of the company going forward. A trust fund controlled by the United Auto Workers union, which will be used to pay retiree health costs, will hold 17.5% of shares, while the Canadian and Ontario governments will own 11.7%.

The remaining 10% is expected to eventually go to GM’s former bondholders as partial compensation for their lost investment in the company. Previous GM shareholders will have no ownership stake in the new company. GM was removed as a component of the Dow Jones industrial average last month following its bankruptcy filing.

On Friday, Henderson started pulling back the curtain on a series of new initiatives.

He announced a proposed new partnership with eBay that will allow buyers in California to bid on vehicles, the way they do for other vehicles. He said the venture would "revolutionize how people buy vehicles online."

GM will also be making announcements later this summer on new battery technology to make electric and plug-in hybrid vehicles possible, Henderson said.

The company announced some key management changes Friday. Vice Chairman Bob Lutz, who had said earlier that he would retire from day-to-day responsibilities, will instead stay with the company to run products and customer relationships.

Customers need to be GM’s top priority, Henderson said. "If we don’t get this right, nothing else is going to work. It’s that simple," he said.

Henderson also announced he was reducing levels of management and several committees that had been responsible for decision making.

"Most people would say our culture to this point has been an impediment and I agree with that," he said.

Have you gone to a state or local government office only to find locked doors due to worker furloughs? Are you a public employee forced to take unpaid time off? How have furloughs affected you? We want to hear your experiences. E-mail your story to realstories@cnnmoney.com and you could be part of an upcoming article. For the CNNMoney.com Comment Policy, click here. 

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A quarter of U.S. employers have eliminated matching contributions to employee 401(k) retirement plans since September to save money amid the economy’s downturn, according to research released on Monday.

A quarter of U.S. employers also have instituted limited enrollment rather than open the savings plans to all employees, according to the study conducted for Charles Schwab Corp. by CFO Research Services.

Although the study showed 23 percent of companies have eliminated 401(k) matching contributions, most see the move as temporary, said Steve Anderson, who heads Retirement Plan Services at Charles Schwab, a financial services provider.

“Most view that as a temporary step. They don’t see that as a long-term approach,” he said.

Workers with 401(k) plans have seen their savings hit hard in the recession. A 401(k) account allows workers to defer taxes on some income and typically put the money in a mix of stock and bond mutual funds and other investments.

Companies often match all or part of employee contributions cheap business cards.

Asked to identify the most important feature of their company’s 401(k) plans, 87 percent of those polled said it was the company’s match, the Schwab study said.

Second most important was providing employees access to 401(k) investment advice, the study said.

Of the 107 human resource and 112 senior finance executives polled, 63 percent said employee concerns over personal finances are creating a more difficult work environment.

The online survey was conducted in March and April among executives at companies with revenues ranging from $100 million to more than $10 billion in a cross-section of industries.

More than half of the respondents worked for companies with more than 1,000 employees eligible for participation in their 401(k) plans. A statistical margin of error was not immediately available.

(Reporting by Ellen Wulfhorst; Editing by Jackie Frank)

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AIG Chief Executive Edward Liddy announced Thursday that he plans to step down from the company once the insurer’s board of directors finds a replacement.

"Much work remains to be done at AIG, but much has already been accomplished," Liddy said in a statement. He noted that the company’s recovery "is likely to take several years [and] AIG should have a leadership team committed to a similar time horizon and prepared to carry the plan to completion."

Liddy had previously indicated that he would stay at the company for a limited amount to time, but he did not give an exact time frame. "[He] said he would know when the time was right," said AIG spokesman Mark Herr. "He stabilized the company, reduced its risk issues, and institued a plan to pay back the taxpayers. He decided now the time is right for someone else to oversee the next phase for the company."

Liddy, who serves as both chairman and CEO, was appointed by the Federal Reserve to head the company in September, after the troubled insurer received billions of dollars in federal aid.

Liddy also recommended that the CEO and chairman roles be split — a move the current board has indicated it will do.

AIG will elect six new board members at its annual meeting on June 30. The slate of six includes former executives from American Express, Boeing, KPMG, Delphi, Sears and Northwest Airlines. On Thursday, the company also announced it will vote on a 20-1 reverse stock split at the meeting fast cash advance loan.

Liddy had come under intense scrutiny from lawmakers and the public in March after it was revealed that AIG (AIG, Fortune 500), recipient of $182 billion of taxpayer funds, had paid out $165 million to executives in the company’s financial products division, the unit that dragged the company to its knees.

Liddy had argued that all of the bonuses were needed to retain top talent, to prevent an "uncontrolled collapse" of the financial products unit and to maximize return on taxpayers’ near-80% stake in the company.

But after much prodding by Congress and the Obama administration, Liddy asked employees who took home more than $100,000 in bonuses to return at least half. So far, AIG said about a third of the bonuses were returned.

AIG’s board and trustees have said all along that they support Liddy and his plan to spin off some of the insurer’s most valuable assets to pay back the government. Earlier this week, the company said it would speed up plans to list its Asian subsidiary through an IPO that could raise more than $4 billion

Liddy "answered the call of his country and the needs of AIG without reservation amid one of the darkest periods of the current financial crisis," said Stephen Bollenbach, AIG’s lead director, in a statement. "We wish him well in his return to retirement. He deserves it." 

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