Kenneth Feinberg Explains the Art of Compensation

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"It's not rocket science, it's a judgment," Kenneth Feinberg said of his new role as the victims compensation czar for the BP oil spill. The special appointee said he's more likely to award money to families and businesses closer to the oil spill.

In the last decade, Feinberg has served as something like the U.S. government's secretary of fairness. He managed the 9/11 Victims Fund, serves as the "pay czar" for banks receiving TARP funds, and recently tapped to administer the victims compensation fund for the Gulf oil spill.

The controversial 9/11 fund, which awarded more money to the families of rich bankers than firemen, was a defensible bill, he said. But it was also a "unique response to an unprecedented moment" that "will never be replicated," he told Walter Isaacson, the CEO of the Aspen Institute, at the Washington Ideas Forum.

If he, and not Congress, had designed the fund's rules, "I would have said, 'Don't tie compensation to the court system in 9/11. Don't fuel divisiveness. Pay everybody the same.' But that's not what Congress said in that statute."

The United States created a victims fund after 9/11, but not after the Oklahoma City bombing or the first World Trade Center bombing. That's because, said Feinberg, Americans saw 9/11 as special. "We wanted to show our support for the victims of 9/11. From the perspective of American society," he said. "I can see the justification."

Feinberg explained why certain parties do, and don't, receive compensation from the Gulf oil spill fund. A restaurant hundreds of miles from the Gulf? "You can get shrimp elsewhere," he said. An in-land strip joint? "Not associated with the Gulf's affected industries." But a Beloxi shoemaker serving fishermen whose main source of revenue is now streaked with oil? "I'm inclined to pay that client."

More often than not, deserving claimants who don't get money have simply failed to document their losses. "I've paid 50,000 claims worth about a billion dollars", Feinberg said. But he's sitting on about 25,000 claims without proper paperwork. Without a documented loss, he said, there's no way to critically appraise the claim.

Isaacson called his interviewee the "greatest applied moral philosopher we have in America." Feinberg declined Isaacson's request to list his favorite moral philosophers, but he managed to state his own moral philosophy. "Your job is to try to apply the concept of fairness. I do the best I can in applying fairness. Everybody counts everybody else's money. It's very important to achieve relative consistency."

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