Wall Street ‘Delusional’ on Pay: Feinberg

Wall Street ‘Delusional’ on Pay: Feinberg

Wall Street executives are "delusional" if they think their pay will continue to rise significantly, Kenneth Feinberg, the former Obama administration special master on executive pay, told CNBC on Friday.

"In this economy, with this political uncertainty, my advice would be to executives and boards – be careful," Feinberg said.

"It's a volatile political atmosphere, and executive compensation is fair game in times of financial uncertainty."

But while politics may be looming over corporate boards making pay decisions for their executives, Feinberg, the founder of Feinberg Rozen, said that the current discussion on Wall Street salaries is being driven more by free market factors. (Read More: A Bigger Paycheck on Wall Street.)

"I think that most of this discussion about executive pay is driven by conventional, traditional market forces – competition, volatility of markets, financial uncertainty," he told CNBC's "Squawk on the Street," adding "I don't think much of it has to do with Treasury regulations, or the ongoing role of the pay czar or agency activity."

"It's more the free market and the impact of the free market on pay," he said. But he added that Wall Street is "delusional" to expect big pay increases.

Feinberg also said Vikram Pandit's exit from Citigroup appeared to stem from the traditional relationship between CEOs and corporate boards.