www.commondreams.org/headline/2008/10/30
Reuters US Lawmakers, Cuomo Seek To Curb Bailout Bonuses by Kevin Drawbaugh WASHINGTON - The prospect of taxpayer money lining the wallets of executives at banks being bailed out by the government prompted congressional leaders and New York's top law enforcement official on Wednesday to demand answers from the banks themselves and the Treasury Department. An American flag hangs over the exterior of the New York Stock Exchange in New York, October 9, 2008. With credit markets in crisis and stocks roller-coastering daily, Treasury Secretary Henry Paulson is managing a program that was initially set up to buy troubled mortgage-backed bonds, but now is focused chiefly on buying stock in banks, and possibly helping other businesses such as insurers. Barney Frank, chairman of the House of Representatives Financial Services Committee, on Wednesday scheduled a hearing for November 18 to look into what's happening with Paulson's fast-moving program, co-managed by the Federal Reserve, and known as the Troubled Asset Relief Program (TARP). Senate Majority Leader Harry Reid and House Speaker Nancy Pelosi, the top Democrats in Congress, on Wednesday expressed concern about senior executive pay at financial institutions benefiting from taxpayer assistance. The law enacting the controversial program set limits on executive pay at participating banks, but Reid and Pelosi said in a letter to Paulson that those limits may need tightening. "News reports have suggested that six major financial institutions participating in the program have plans to pay their executives billions of dollars," said Pelosi and Reid, who represent California and Nevada, respectively. The Treasury Department confirmed on Wednesday that it has spent $125 billion to purchase preferred shares of stock in nine large banks under the program. BONUSES IN '07 AT $50 BLN Those nine banks paid out an estimated $50 billion of bonuses in 2007, based on the total compensation expense for the companies, and assuming that for investment banks about 60 percent of total compensation was allocated for bonuses, and for commercial banks about 20 percent went to bonuses. Critics of the bailout program told Reuters earlier this month that its compensation restrictions may not rein in CEO pay at banks getting government cash infusions because the rules are vague and subject to interpretation. While the pay limits do restrict things like so-called "golden parachute" severance awards, they set no precise limits on corporate leaders' pay, the critics said. we hope you will seriously consider strengthening the restrictions on executive compensation," Pelosi and Reid told Paulson in the letter. A Treasury Department spokeswoman said every bank that accepts money under the stock purchase portion of the TARP must agree to the pay restrictions passed by Congress and every bank that is receiving funds has done so. Another Democrat, New York Attorney General Andrew Cuomo, demanded information about executive bonus pools from the nine banks involved in the Treasury bailout -- including Bank of America, Citigroup and Goldman Sachs. Cuomo asked the banks to explain how they intend to protect taxpayer funds received through the program. He said bonus payments made by "undercapitalized firms" may be illegal. Letters from Cuomo also went to Bank of New York Mellon, JPMorgan Chase, Merrill Lynch, Morgan Stanley, State Street and Wells Fargo. "We will have grave concerns if your expected bonus pool has increased in any way as a result of your receipt or expected receipt of taxpayer funds from" the federal bank bailout program, Cuomo said in the letters. House Republican Leader John Boehner, of Ohio, also shot off a letter to Treasury, questioning its "apparent decision to permit banks to use bailout money to pay bonuses to executives and acquire other banks," said a statement from his office. Bank of America, Goldman, Morgan Stanley, Merrill, JPMorgan, Bank of New York Mellon and Wells Fargo officials declined to comment. A State Street representative was not immediately available. A Citigroup spokesman said the bank will cooperate with inquiries into wages, health insurance and benefits and "adhere to applicable legal and regulatory requirements." Additional reporting by David Lawder and Kim Dixon in Washington;
Save settings artrod October 31st, 2008 8:45 am Silly me, I always thought bonuses should be tied to performance, no performance no bonus. Ok I gess conning the government into dumping money into failed financial institutions may constitute good performance if your goal is to bilk the public in every way posible. "Never underestimate the power of very stupid people in large groups."
report this comment old goat October 30th, 2008 1:59 pm The suit alleges the banks and companies arranged for institutional investors to buy up huge chunks of tech stocks after IPOs to artificially inflate the stock price investors would have to pay down the line. Those early buyers allegedly kicked back some of their profits to the companies and the banks who served as underwriters -- a group that includes Morgan Stanley, Goldman Sachs, Merrill Lynch and just about every other well-known bank.
the oligarchs need billions in public money to run their actual business, but can shield their own cash for the purpose of self-payment? I It's good for the general public to learn this economic reality. Taxpayers can now approach lenders and inform them the only money remaining to the public is in its "beer, chips and cigs pool" and that the "house and credit card payment pool" is completely tapped.
report this comment Thomas More October 30th, 2008 12:52 pm The very best thing for America would be if these greedy bottiom feeders passed out their large bonus packages.
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