New York State Attorney General Andrew Cuomo put out a report called “No Rhyme or Reason,” which demonstrates that the "Too Big To Fail" banks that got all that lovely tax payer money last Fall—when Hank Paulsen pulled his little bait and switch maneuver on Congress (you know, asking for trillions to help out homeowners by buying up toxic mortgages, while instead handing over the money to the banks with virtually no strings attached?)—have paid out MORE in bonuses to their top executive, than they actually made. (By the way, the report’s title really does sum up what happened.)
Got that?
Citigroup and Merrill Lynch each lost more than $27 billion (a total of at least $54 billion if my math is correct), and were bailed to the tune of $55 billion in taxpayer money. Yet, they chose to pay out bonuses of $5.3 billion and $3.6 billion respectively. That is $8.9 billion in your tax dollars that passed directly through these banks and into the hands of the Masters of the Universe who control those banks.
Goldman Sachs, Morgan Stanley, and J.P. Morgan Chase paid out bonuses that totaled much more than the bank actually earned. (Go read the WaPo article for the dollar amounts.)
I do not want to hear the “we had to pay the bonuses to keep key people” crap. If none of the banks had paid bonuses, since no bonuses were justified for poor performance, than no key people would have had incentive to leave in a fit of pique.
But much more important, not paying out the bonuses would have driven home the lesson to the MOTU class that actions have consequences, and taking crazy risk that makes ordinary homeowners suffer and throws thousands of people out of work also will cause Wall Street to suffer. By insulating the risk takers from the consequences of their own actions, the Government has guaranteed that the MOTU will take those same kinds of irresponsible, crazy risks again. And continue to whine every time someone uses the word “regulation.”
I’m sorry, can somebody explain to me how calling these payments a “bonus,” which implies that it is a reward for good performance, is not a fraud?
Related posts:
- The Next Big Taxpayer Bailout? IMF Could Get Hundreds of Billions for European Banks
- What Will @jahimes Say About Goldman Sachs Record Bonus Payout?
- FDL Book Salon Welcomes Barry Ritholtz – Bailout Nation: How Greed and Easy Money Corrupted Wall Street and Shook the World Economy
- Blue Dog Melissa Bean Bites Bank Customers
- Bank of America Cannot Use Attorney Client Privilege as an Excuse to Avoid Edolphus Towns
Spotlight
Support this site!
Subscribe to the newsletter
Advertise on Firedoglake
Send
us your tips
Make us your homepage
About Firedoglake
Advanced search
I think all the money given to the banks in the TARP needs to be paid BACK at the usury rates that they charge US and of course add on latex fees at comparable rate.
What was done was a looting of the treasury.
latex fees? Is that a typo, or have you just coined a new term?
They MOTU looted public companies with public funds. It became a shell operation where these companies were effectively fronts to embezzle tax payer funds to people that destroyed our economy. Except in this shell/embezzlement operation, there are no worries whatsoever of the government prosecuting it since they are in it as well as the ones that seized public wealth and handed it to their pals in wall street.
It is disgusting.
Z
“Can’t keep good people without good pay,” they’ll say.
As if these are good people, who’ve run it into the ground. Interesting that Arianna called Citi “insolvent” on Countdown and Richard Wolffe had to post a next-day “correction” from the company: WE ARE NOT! Not sure that qualifies as a “correction” or simply a response.
These people need to be in prison, not atop our leading financial institutions.
Citigroup and BoA as corporate entities may have lost a bundle but the people who traded in their crap, including their executives, made a bundle. That’s what the bonuses were for. If BoA were to go under Lewis would be demanding a platinum parachute.
That’s for holding up the sagging economy.
Nah, those are silicone taxes.
It is fraud.
I want our money back.
I want jail terms.
I want accountability.
Not that there was little doubt, but it further illuminates who these companies serve: rich executives, shareholders and the politicians that they own.
Z
I want a mountain bred Appaloosa pony, along with everything needed to support it.
maybe it has something to do with, as Matt Tabibi said here on FDL the other day:
http://firedoglake.com/2009/07…..e/#Respond
seems like a Shock Doctrine play- precipitating a crisis and then looting the public coffers.
I wonder if Naomi Klein is still welcome on FDL when it is a Democratic Administration doing the huge wealth transfers?
And from the Master of the Universe to Congress. Funny how that happens.
Wait all day to get that last sentence dig in, didja?
Well, I’m stumped, then.
RICO, anyone?
Maybe the task force that rounded up all those Jersey corrupters ought to turn its eye to this.
works for me!
well, many here are still determined to vote Democratic, no matter what. I just point out a bit of what one enables by doing so.
As Matt Tabibi says elsewhere:
mmmkay?
Consequences? Consequences are for rubes and little people.
Ugh, this change that I can believe in what I find in my seat cushions. Now there’s a reward for being honest and doing the right thing.
It’s criminal.
Sprkvat, the bait and switch of which I spoke happened under the Bush Administration. Fall 2008
She had better be!! In reality the Lake goes after anyone regardless of party who are going against the best interest of the citizens of this country!!
these forking MOTU need to find themselves in prison stripes.
fraud is exactly right cynthia.
Congress can not allow any more “no strings attched” money. Period.
The money has to be part of a reform plan
Is this the Invisible Handjob we’re heard so much about?
I am sure Naomi Klein is a welcome here as ever.
This post is unfair, incorrect and very inaccurate.
Bonuses are typically paid on an Individual Operating Unit’s performance. If one unit make a gigantic loss, and that affects corporate profits, why should employees of other units, who made or exceeded their individual numbers be punished?
You believe the commercial lenders in say, Citibank’s Australia’s lending unit should be punished (not paid their bonuses) if their colleagues in the New York CDO unit loose $1 Trillion? Why?
Please understand the complexity of a large corporation’s commission based compensation plans before posting.
I’m not defending Paulson’s actions or the CEO bonuses. I am defending the employees’ right to be paid if the employees have performed under their employment agreement, including very senior executives, if their unit is meeting its earnings and profit plan.
I do not believe collective punishment fair, under any circumstances.
It seems like theft to me. Pure and simple theft.
your candidate supported those bailouts – the house initially rejected them thanks to a Republican mutiny, then there was some arm-twisting behind the scenes, and they passed.
Mr. Obama, in a statement, said: “When taxpayers are asked to take such an extraordinary step because of the irresponsibility of a relative few, it is not a cause for celebration. But this step is necessary.”
OBAMA ON THE BAILOUT
http://www.nytimes.com/2008/09…..=1&hp
The backing of the presidential candidates will be crucial to Congressional leaders seeking to generate votes for the bailout plan among lawmakers, especially those up for re-election in November. The general public has bristled at the notion of risking $700 billion in taxpayer funds to address mistakes on Wall Street, and many constituents have urged their elected officials to vote against the plan.
cynthia – do you think there is a snowball’s chance in hell of this being criminally investigated?
The TARP passed in the House 263-178 with only 63 of 235 Democrats voting against it. It passed in the Senate 74-25. One of those voting for it was a relatively new Senator from Illinois Barack Obama.
http://clerk.house.gov/evs/2008/roll681.xml
http://www.senate.gov/legislat…..vote=00213
That’s tough to refute.
A most excellent suggestion. And if the charges can be made to stick, I recommend maximum-security federal pens for the convicted felons. And none of this “protective custody” crap, either. General population only, please.
Please understand the idiocy of the ‘individual unit’ rationale for distributing profits within a company. If a company as a whole makes NO profit, and in fact posts a loss, real capitalism than requires that all employees of that company receive no bonus. This is not a punishment at all, but common sense. When a company is bailed out by taxpayers to protect from economy-wide collapse, and those monies are still due the government, paying bonuses is an unfair taxpayer subsidy. Even for firms that have repaid their bailout loans, with interest and warrant buy-backs, there remains the conflict of AIG pass-through payments funded by taxpayers and still outstanding. So that is why Australia should suffer if NY loses money, presuming they are all working for one legal entity.
Because NONE of the companies I mentioned made a profit. They didn’t have the money to pay the bonuses. They TOOK Taxpayer Money that was meant to provide relief to homeowners in crazy mortgages and spent it on bonuses instead.
What a bank does with it OWN money, is between the Bank and its shareholders. What a bank does with somebody else’s money that was loaned to the bank for a specific purpose–is something else.
I understand completely
So that’s what Adam Smith meant? Who knew?
They definitely took ownership, regardless of who actually came up with the plan.
That is a “The operation was a success. Complications: Patient died.” argument. We are not talking about normal variations in profitability of healthy companies. We are talking companies that would not have survived without government help and willful and persistent overlooking of their insolvency. The question you should be asking is would that exec in Citi’s branch in Oz get paid a bonus if Citi had gone under?
And Congress passed the bill upon the testimony of Paulson who told Congress–including Senator Obama–that the money was going to be used to buy up the toxic mortgages, so banks would not foreclose on beleaguered homeowners.
Then AFTER Congress voted, Paulson –and EXECUTIVE BRANCH employee of Bush’s– used the money in a way that bore no relationship to what he told Congress before the vote.
Of Course Obama supported it, I supported the idea of the Government buying up the toxic mortgages too.
But that never happened. BushCo did a bait an switch
Hell, I’m still waiting for Cheney’s non-privileged Libby transcripts to be released. I think an investigation of this would get on line after the Cheney transcript, if at all.
Simply b/c Dems supported an alternative to worldwide financial collapse doesn’t mean they also foresaw and/or support(ed) bonus payouts. The special master pay review and action by the House could very well put the brakes on bonus payments. AIG employees did not receive scheduled payouts this summer. The press is only hearing now that bonuses were paid for 2008, or was this kept secret somehow or were the biz press too busy covering tea parties for tots to publicize this?
What Paulson said to Congress before the vote is very different from what Paulson did with the $ after the vote.
Congress did not put limiting language in the TARP bill itself, b/c Paulson said there was no time to work on language. So, they relied upon his personal integrity and honor.
I’m sure many of them would love a “do over”
The accounting looks fishy to me. $3B profit after paying $9B in bonuses? Wouldn’t this imply $12B profit before paying out the bonuses? Why is compensation skewed so much towards the MOTU bonuses, and not towards the shareholders or retained as capitalization?
That is an excellent question.
The government’s buying up of banks’ crap assets was a dreadful idea. First, $700 billion would hardly have made a dent in bank losses. OTOH the government could have purchased just about the whole industry for that much at the time. Second, the reverse auction Paulson envisioned was a non-functioning monstrosity from the start. Banks hated it because, and this has been the problem all along, if their crap assets were valued at anything like they were worth, it would expose the underlying insolvency of the banks. Paulson knew this almost as soon as the bill passed. So the only way for him to do something with the $700 billion he had was to use an obscure add-on in the original bill to make loans. Paulson proceeded to do this on terms that were extremely attractive to banks.
Why doesn’t Congress rely on the president’s personal integrity and honor in his call for genuine health care reform measures, post haste?
This is the “something was better than nothing” argument. There were of course many better alternatives which Democrats did not pursue. Instead they caved as they have caved for years.
Go to the link to the orginal article. The way I read it, was $3B prift BEFORE paying $9B in bonuses. Creating a $6B loss which was then made up with money from the gov’t.
Just like the companies posting losses still paide bonuses
There’s also Citigroup’s possible $100,000,000 (yes that’s 8 zeros) bonus (not just salary) to Andrew Hall who ran/runs their energy trading unit Phibro which just happened to be heavily involved in causing the speculative bubble in petroleum markets
Remember $4+ a gallon for gas? Thank Citigroup’s Andrew Hall
http://www.sott.net/articles/s…..lion-bonus
Now that’s a bonus! Citigroup used to be City Bank ante Gramm-Leach-Bliley.
Well that’s your opinion but the bailout and payment of bonuses seem to me to be entirely separate issues. You can take issue with any kind of bailout but arguing that after the fact is pointless. Ongoing bonus payments are out of the pocket of taxpayers and worth discussing in the present tense, yes?
Du’oh! Busted link
Click here
I don’t know that I agree that buying toxic assets was a horrible idea.
1)It was acknowledged from the start that the original TARp amount was only the first installment, so that $ amount does not represent the entire universe of funding to buy the toxic assets.
2) If the government bought the BAD mortgages, remember the securities had traunches, there were good solid loans in them that were being sullied by the lower grade traunches–they might have been able to soften the housing bubble collapses.
3) By not quarantining the lower traunches, the housing bubble collapse was exacerbated and middle traunch mortgagees began to default as homeowners suddenly found themselves “upside down” in their mortgaes and unabel to refinance when their debt to equity ratio triggered interest rate escalation clauses.
4) so, the toxic mortgage problem infected upwards to the point where even conventional mortage holders who used to have at least 20% equity in their homes, now find themselves upside down in their mortgages.
I have been house hunting for over a year now. And have watched prices in my area tumble more than 25% (I don’t need to sell a house, so taking my time has vastly improved what is available in my price range)
But I know many people in my area who had conventional, full document loans with 20% equity whoa re now screwed b/c of the failure to stabilize the housing market by buying up the reallr really crappy loans, back when we had a chance.
The government, as mortgage holder would have had all sorts of choices about how to deal with those houses and the people in them and could have avoided the sudden flood on the market of housing stock.
I agree with you there, Hugh. Congress let itself get stampeded like a panicked bunch of gazelles
My guess is Mr. Hall will be making use of that castle to hide from people with pitchforks.
And in the 1930’s Ferdinand Pecora had the same issues with excessive compensation at that bank and it’s affiliate securities company.
Nothing really ever changed
Your confusing two different things, I think. TARP was Paulson’s plan meant to prevent any more Lehman Brothers failures. It had naught to do with mortgage-backed securities impacts on mortgage holders.
Btw, in some parts of upstate NY, houses seems always reltively cheap, e.g., in the central and western part of the Mohawk Valley. I think it’s partly due to the lack of employment opportunities in such areas.
Cynthia Kouril @34 and Hugh @37.
Commission plans and bonuses are not structured in the manner you express. Only if everyone shares corporate profit your point makes sense. Typically people are compensated on individual or operating unit performance, because that is where their efforts have effect.
Why is that not both fair and prudent?
If the companies had gone bankrupt you points would be correct. They were not allowed to go bankrupt and there were few conditions on the bail out funds. As a consequence, the commission and bonus plan extant had to be paid.
If I’d worked for Citibank or AIG and met my goals, hell would freeze over before I’d surrender or return my bonus or commission.
This does not mean I like or agree with what happened. My preference would have been to let the financial system fail, as I perceive nothing worth redeeming. That was not our leaders choice.
Also, I don’t see any punishment for those who caused the epic failure. Cynically, petty thieves get punished. Most people who steal billions get rewarded.
Behind every fortune lies a crime.
Paulson originally said he wanted the money to buy toxic assets and get them off the books of the banks, so the banks would not have to show the loss. if the banks did not have to show the losses, the theory went, the banks would not fail
It’s clear Paulson lied to protect his fortune.
The underlying conflicts of interest, on Wall St and Congress are at fault. For example: Backus and Health Industry contributions. No reasonable person would believe there was no Quid Pro Quo.
Am I calling our congress people greedy unprincipled thieves? Yes.
I’m not sure I agree that they HAD to be paid, but cannot say with certainty without specific employment contracts in front of me.
The reason I doubt that they HAD to be paid, is that although the bonus calculation may be based on a unit’s performance, the existence of any bonus pool at all would seem to be contingent on profitability. And there were no or insufficient profits to support such bonuses.
On days when I am really frustrated, I often feel like maybe we should have let the whole thing fail too. But then I think about my local service station, where for a month, there was no gasoline to buy, because his bank stopped doing short term revolving commercial credit. The guy who owned the gas station did nothing wrong, but his bank destroyed his small business by contracting its commercial credit policy.
No banks, no commerce, everybody out of a job.
That’s very poetic. And expresses much of what I feel
Thanks, Cynthia.
No, I can’t explain it.
Although I think in other circles, such behavior would be called MONEY LAUNDERING. I could be wrong, though.
Who could have predicted? Oh. Wait. Never mind.
FunnyWheelieDiva
This is what I feel:
http://agonist.org/synoia/2008…..ry_lawsuit
want some help?
There is some case law that the Federal Reserve is not part of the Federal Government.
Neat idea, the class action suit.
FYI at the end other post you say Defendant’s when you mean plaintiff’s.
Conceptually, I like the idea of a class action suit, I’m not sure if I’m totally on board with your current theory of the case though.
Do you really think the people who “lost” money for these too big companies didn’t get their bonus’s along with the guy from Australia ?
I doubt they were punished financially at all.
OT – I saw your comment from last night about the British against the Boers and the Malaya Emergency.
After Rhodes established his mines in the Transvaal, later Rhodesia, the British saw a opportunity to remove the Boers. I wouldn’t call this an insurgency. While the British had some success in relocating Boer commandos into what became known later in Malaya as “New Villages,” the British defeated the Boers in conventional set piece battles, most notably at Spion Kop. The British won the war and lost the peace. See The Boer War by Thomas Pakenham, 1979.
In Malaya the killing of British High Commissioner Gurney by the MNLA caused the Chinese population to withdraw it’s support from the guerrillas, primarily because they thought if the MNLA would kill that person no one was safe from them . The “New Villages” were a success because they actually provided safety and a better standard of living for the guerrillas and their families. I’ll give the British credit for the success of the New Villages but the movement sputtered and died after the assassination of BHC Gurney, not because of military action.
Work in progress. Needs more effort.
I’d be willing to discuss the legal theory.
I was defending the employees and business unit managers. I was not defending the corporate executive bonus.
I’m sure some bonuses were paid to senior executive when the better response would have been ‘You are fired for cause’ and not paid one penny.
Thomas Pakenham is clearly British, or he would have called it “The South African War”. The Boer war was won by the Boers (Afrikaners), in 1948.
As I was told by my then girlfriend’s grandfather and Father (who did not like the British). My focus was not on the Boer war at the time.
I went to university with a Guards’ officer, I forget his name, who lost a foot in the Malaya Emergency. And a number of officers who were in Aden and Cyprus during their troubles, and then went to Ireland, and some of them came back.
Then aren’t there consequences for lying to congress? Paulson knew damn well the TARP funds weren’t going to be used as intended and he also had to know that the little side deals that the bailed out banks had with AIG would ensure that they suffered no losses.
Are you referring to Lewis or other case law?
I forget the case. It was when the Fed was sued over an employment related issue, and the ruling was in part that the Fed was not part of the Federal Government, so some Federal Government protections did not apply.
They do squeeze us don’t they!
Apparently they AREN’T serving their shareholders properly. They’re paying out a lot of dough to employees instead of distributing it to shareholders.
Clearly shareholder rights need to be supported/protected in this matter.
hmmm, are you saying ’stripes’ is the new ‘checkered past’?
or, maybe, ‘felon’ is the new ‘bankster’?
Personally, I’m not in favor of throwing the book at these guys. After all, it cost them millions to get the deregulation and then it cost them trillions when their world crashed in. I think they’ve gotten a lot of what they deserve.
I’d rather just fix the system, so it will begin working properly FOR EVERYONE.
When there’s a gun to your head you aren’t going to worry about whether your pants are falling down. Dems were told they had to act NOW and they did.
All other regrets are pretty much irrelevant and finger-pointing is out.
It sounds like they need a formula to ensure nobody gets cheated. Maybe X% of profit goes to shareholders and Y% goes to bonuses and so on.
City National Bank at one time, but Citi Bank more recently.
Incidentally, “citi” in Latin means “fast”, not tightly knight residential and business area. Beware of citious people!
Banks decided not to sell. Go figure.
Hi Synoia,
I understand your point of view. But the fact is that all of these executives are in the same company. I understand the principle of separate profit and loss centers as well as the next person. But everyone in these large companies benefits from their identification with the overall company umbrella. Therefore I think that every unit should be responsible for both the profits and losses that are sustained by the Company in any unit where they occur. If we held the companies and their divisions to such a standard, we would not have the too big to fail to problem because profitable units in Australia would not want to be associated with units in New York that were taking high risks and that could possibly bring them down. These companies and their employees want the advantages of unity without the responsibility that brings. We ought to deprive them of such a have your cake and eat it too arrangement in the future. The divisions of these companies should be made to stand or fall together, so long as they choose to organize under the same umbrella. The company as a while ought to be profitable before anyone gets a bonus, especially if teh Company may need to be bailed out by taxpayers.