Sunday, December 21, 2008

TARP provides Christmas Cheer For Wall Street Execs

Wall Street Christmas tree. Connotes trickle down economics as it pertains to use of TARP money.

From the AP. 12/21/08

Banks that are getting taxpayer bailouts awarded their top executives nearly $1.6 billion in salaries, bonuses, and other benefits last year, an Associated Press analysis reveals.

The rewards came even at banks where poor results last year foretold the economic crisis that sent them to Washington for a government rescue. Some trimmed their executive compensation due to lagging bank performance, but still forked over multimillion-dollar executive pay packages.

Benefits included cash bonuses, stock options, personal use of company jets and chauffeurs, home security, country club memberships and professional money management, the AP review of federal securities documents found.

The total amount given to nearly 600 executives would cover bailout costs for many of the 116 banks that have so far accepted tax dollars to boost their bottom lines.

Rep. Barney Frank, chairman of the House Financial Services committee and a long-standing critic of executive largesse, said the bonuses tallied by the AP review amount to a bribe "to get them to do the jobs for which they are well paid in the first place.

"Most of us sign on to do jobs and we do them best we can," said Frank, a Massachusetts Democrat. "We're told that some of the most highly paid people in executive positions are different. They need extra money to be motivated!"

The AP compiled total compensation based on annual reports that the banks file with the Securities and Exchange Commission. The 116 banks have so far received $188 billion in taxpayer help. Among the findings:

_The average paid to each of the banks' top executives was $2.6 million in salary, bonuses and benefits.

_Lloyd Blankfein, president and chief executive officer of Goldman Sachs, took home nearly $54 million in compensation last year. The company's top five executives received a total of $242 million.

This year, Goldman will forgo cash and stock bonuses for its seven top-paid executives. They will work for their base salaries of $600,000, the company said. Facing increasing concern by its own shareholders on executive payments, the company described its pay plan last spring as essential to retain and motivate executives "whose efforts and judgments are vital to our continued success, by setting their compensation at appropriate and competitive levels." Goldman spokesman Ed Canaday declined to comment beyond that written report. (The only operative word here is 'competitive'.

The New York-based company on Dec. 16 reported its first quarterly loss since it went public in 1999. It received $10 billion in taxpayer money on Oct. 28.

_Even where banks cut back on pay, some executives were left with seven- or eight-figure compensation that most people can only dream about. Richard D. Fairbank, the chairman of Capital One Financial Corp., took a $1 million hit in compensation after his company had a disappointing year, but still got $17 million in stock options. The McLean, Va.-based company received $3.56 billion in bailout money on Nov. 14.

_John A. Thain, chief executive officer of Merrill Lynch, topped all corporate bank bosses with $83 million in earnings last year. Thain, a former chief operating officer for Goldman Sachs, took the reins of the company in December 2007, avoiding the blame for a year in which Merrill lost $7.8 billion. Since he began work late in the year, he earned $57,692 in salary, a $15 million signing bonus and an additional $68 million in stock options. (This is 1.5 months salary for 8000 GM UAW employees, based on around 50.00hr which includes individual benefits, but not legacy hourly benefits of retired employees and their spouses. Add this to the 54 million given to the CEO of Goldman Sachs and we're talking about 13,000 GM employees.)

Like Goldman, Merrill got $10 billion from taxpayers on Oct. 28.
The AP review comes amid sharp questions about the banks' commitment to the goals of the Troubled Assets Relief Program (TARP), a law designed to buy bad mortgages and other troubled assets. Last month, the Bush administration changed the program's goals, instructing the Treasury Department to pump tax dollars directly into banks in a bid to prevent wholesale economic collapse.

The program set restrictions on some executive compensation for participating banks, but did not limit salaries and bonuses unless they had the effect of encouraging excessive risk to the institution. Banks were barred from giving golden parachutes to departing executives and deducting some executive pay for tax purposes.

Banks that got bailout funds also paid out millions for home security systems, private chauffeured cars, and club dues. Some banks even paid for financial advisers. Wells Fargo of San Francisco, which took $25 billion in taxpayer bailout money, gave its top executives up to $20,000 each to pay personal financial planners. (We're not talking health insurance here, we're talking 'personal financial planners'.)

At Bank of New York Mellon Corp., chief executive Robert P. Kelly's stipend for financial planning services came to $66,748, on top of his $975,000 salary and $7.5 million bonus. His car and driver cost $178,879. Kelly also received $846,000 in relocation expenses, including help selling his home in Pittsburgh and purchasing one in Manhattan, the company said. (We're not talking paid vacation here, we're talking personal chauffeurs and limos.)

Goldman Sachs' tab for leased cars and drivers ran as high as $233,000 per executive. The firm told its shareholders this year that financial counseling and chauffeurs are important in giving executives more time to focus on their jobs. (Paid vacations only allow one to focus more time on their families.)

JPMorgan Chase chairman James Dimon ran up a $211,182 private jet travel tab last year when his family lived in Chicago and he was commuting to New York. The company got $25 billion in bailout funds.

Banks cite security to justify personal use of company aircraft for some executives. But Rep. Brad Sherman, D-Calif., questioned that rationale, saying executives visit many locations more vulnerable than the nation's security-conscious commercial air terminals. (There's that risky time though, between getting off the private jet and getting into the private limousine.)

Sherman, a member of the House Financial Services Committee, said pay excesses undermine development of good bank economic policies and promote an escalating pay spiral among competing financial institutions — something particularly hard to take when banks then ask for rescue money.

He wants them to come before Congress, like the automakers did, and spell out their spending plans for bailout funds. (But these financial institutions have no blue collar jobs with which Southern senators can beat them over the heads. Where's the fun in that?)

"The tougher we are on the executives that come to Washington, the fewer will come for a bailout," he said.


Merry Christmas Wall Street upper management. While you're enjoying your end of year bonuses remember the city of Detroit. Remember to Thank God for the UAW, who has been the whipping boy deflecting the heat from you, and also all those Southern Senators who deemed it equitable to compare the Big Three and their labor issues to the transplant Japanese companies in their own back yards.

They forgot to tell us those Japanese companies don't have a retired legacy work force which exceeds their current work force. In fact Japanese companies don't have hardly any retirees to speak of at all. They haven't been in the US long enough. No wonder they don't have to add $25 dollars an hour over the actual cost of a UAW hourly employee.

But this all worked to your advantage and we all kind of forgot about your executive bonuses which come at tax payer expense and really are gifts since they don't come with any accountability.

I bet your counterparts in the Big Three really do wish they weren't partnered with a blue collar union, because then they could have gotten the free hand out you did. Conservative politicians wouldn't have seen the need to teach them a lesson about letting their hourly employees run the asylum, and how the Japanese do it better.

All in all, it's a great Christmas for you guys. I'm sure you'll be toasted fondly in Detroit.


  1. US corporations have gone the way of Scrooge.

    They should be put on notice in Washington that they will have to pack their bags and get out of their mansions, trade the limo in for a scooter if they don't help Americans be able to stay in their homes, be employed, have vacation time and retirement plans and health care and educational incentives and resources for their families.

  2. I love the picture of the tree Colleen. It so aptly describes the greed and self-glorification of corporate bosses who think they're worth so much more than those "below" them.

    This year I didn't want to put up a big tree because I really don't even have the space now for one and it took up so much of my time that increasingly is spent on developing music. The spot where the tree used to go is now my music studio in the living room. We have a gorgeous miniature tree that was probably the top of a much larger tree but it broke off. It's not even three feet high and it sits on a small table with a Christmas tree skirt around it draped to the floor. And yes, my husband once again paraded around with it on again this year.... and so did I. It makes a nice cape, if you like that sort of style. It's not made with ermine fur though. We have one set of lights on the little tree, whereas other trees we've had took four or five sets of lights to power.

    Word: chame - shame on those Scrooges.

  3. Colleen does this little story sound familiar and does it ring a bit true with this massive economical bail out?. . .

    One day a scorpion was walking along the riverbank trying to find a way across the river that separated him from his desired location when he came across a frog sitting alongside the riverbank.

    The scorpion walked up to the frog and asked the frog if he would take him across the river. The frog quickly replied, "No, I would not give you a ride." The scorpion then asked him why. The frog replied, "Because Mr. Scorpion if I gave you a ride on my back you would sting me and I would drown."

    Quickly the scorpion replied, "But Mr. Frog, if I stung you then you would drown and if you drown then I would drown also." The frog thought for a moment and then said, "I guess you're right, then I will give you a ride."

    The scorpion jumps on the frog's back and they start crossing the river. Halfway across the river the frog suddenly feels a sharp pain in his back, as the scorpion stings him. The frog immediately starts to panic as he feels the venom race through his veins and he quickly begins to become paralyzed. Just as he is taking his last breath and is about to go down, the frog looks at the scorpion and asks "Why did you do it? You promised not to sting me! Now we are both going to drown!" The scorpion replies, "I'm sorry sir, but I could not help it--it's my nature.”

  4. The question to ask now is how many of these executives are republicans, how many benefited from the deregulation, and how many are catholic members of opus dei?

  5. oh, forgot, the word was

    sanisled - the ride the banking executives are taking us on

    this word is

    dionestr - integrity values of corporate executives

  6. Yes, who are these people? What are their names?

  7. I haven't heard the scorpion and the frog story for a long time. Sure fits here though.

  8. Butterfly, I howled when I remembered your original story about your husband parading in the Christmas cappa magna. It's a great visual.

    Carl, in order to find out how many of these guys are Catholic or might be Opus Dei one would have to have access to the membership list of Legatus. If you want some interesting speculation on Legatus google Tyco and Legatus. It's great conspiracy reading.