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Bailed-out banks ordered to reveal executive compensation
October 29th, 2008, 1:06 pm · 12 Comments · posted by Teri Sforza, Register staff writer
Nine troubled banks - still in business thanks to a $125 billion lifeline from taxpayers - are planning to spend $108 billion for employee compensation for the first nine months of 2008 - about the same as they spent in 2007.
And much of that may be in the form of year-end bonuses, “significantly enhanced” due to said infusion of taxpayer funds, a congressional committee said yesterday.
(We can only guess that said compensation is not performance-based.)
Congress’s Committee on Oversight and Government Reform is trying to cut this horse off at the pass. Committee Chairman Henry Waxman sent letters to nine major banks Tuesday, demanding details on their compensation and bonus plans for 2008.
Letters went to Bank of America, Bank of New York Mellon, Citigroup, Goldman Sachs, JP Morgan Chase, Merrill Lynch, Morgan Stanley, State Street Corporation, and Wells Fargo. They’ll have to cough up essentially all compensation information, for all employees, for three consecutive years, by Nov. 10.
Waxman’s committee has been cracking down on American International Group - recipient of more than $120 billion in government loans -as well. His letter to the bank execs is below (or visit the committe’s website, which is always good for raising the blood pressure).
(UPDATE: The New York Attorney General today warned the nine banks that bonuses may be illegal under state law. See the Reuters story here.)
Earlier this month, the Treasury Department announced plans to invest $125 billion of taxpayer funds in nine major banks, including yours, as an emergency measure to rebuild depleted capital. According to
recent public filings, these nine banks have spent or reserved $108 billion for employee compensation and bonuses in the first nine months of 2008, nearly the same amount as last year.
Some experts have suggested that a significant percentage of this compensation could come in year-end bonuses and that the size of the bonuses will be significantly enhanced as a result of the infusion of taxpayer funds. According to one analyst, “Had it not been for the government’s help in refinancing their debt they may not have had the cash to pay bonuses.” Press accounts report that the size of the bonuses could exceed $6 billion at some firms receiving federal assistance.
While I understand the need to pay the salaries of employees, I question the appropriateness of depleting the capital that taxpayers just injected into the banks through the payment of billions of dollars in bonuses, especially after one of the financial industry’s worst years on record. As one newspaper recently reported, “critics of investment banks have questioned why firms continue to siphon off billions of dollars of bank earnings into bonus pools rather than using the funds to shore up the capital position of the crisis-stricken institutions.”
To assist the Committee’s investigation into this issue, I request that you provide the following information and documents for your company as well as any affiliates or subsidiaries:
1. For each year from 2006 to 2008, the total compensation and average compensation per employee, paid or projected to be paid to all personnel, broken down by salaries, bonuses (cash and equity), and benefits; and a description of the reasons for the year-to-year changes in these amounts.
2. For each year from 2006 to 2008, the number of employees who were paid, or are projected to be paid, more than $500,000 in total compensation; the total compensation paid or projected to be paid to these employees, broken down by salaries, bonuses (cash and equity), and benefits; and a description of the reasons for the year-to-year changes in these amounts.
3. For each year from 2006 to 2008, the total compensation paid or projected to be paid to the ten highest paid employees, broken down by salaries, bonuses (cash and equity), and benefits; and a description of the reasons for the year-to-year changes in these amounts.
4. Documents sufficient to show all policies governing the granting of the bonuses to the groups of employees referenced in items (1) to (3).
Please produce the requested information to the Committee no later than November 10, 2008. To the extent that 2008 year-end bonuses have not been finalized by that time, you should notify the Committee as soon as those bonuses are determined and supplement your response with updated information and responsive documents.
The Committee on Oversight and Government Reform is the principal oversight committee in the House of Representatives and has broad oversight jurisdiction as set forth in House Rule X. An attachment to this letter provides additional information about how to respond to the Committee’s request.
If you have any questions about this request, please ask your representatives to contact Theodore Chuang or Alison Cassady of the Committee staff at (202) 225-5420. Thank you for your cooperation.
Sincerely,
Henry A. Waxman
Chairman
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I’ll bet we could recoup a large percentage of the 700 billion if we took the retirements packages away from these people.
I;d like to see full names and positions of all employees in those banks, for those who earned over 5 million in cash in salary for this year. That is generous- and that does not include stock options- but all the over 5 million dollar guys and gals- their names on a website with the titles and pay in salary.
I’ll state that 5 million- although a lot- is an OK salary for a public bank president- but these guys can pull ten or 50 times that- that’s what I want made public. Better yet- force them to put a ceiling on all paid salary at 5 million for everyone at all- across the banking industry.
The money was given to help balance the BASIC NEEDS of the bank systems and pay for bonuses due !!!!!
Many companies have GONE UNDER since 2006 and people have lost out. Retirement funds have DWINDLED !!!
Give them their base salary and NOTHING ELSE…
FEED the HOMELESS and help the LAID-OFF first.
Is there no limit to the greed and chutzpuh on the part of these criminals? Public monies infused into their banks are meant to prevent their failure and the consequences to the economy, not to reward their egegious actions with end of year bonuses. Do the many employees recently fired have bonuses to look forward to? I believe that the bank executives should be rewarded with orange prison jumpsuits and huge penalties if indeed they are found guilty of speculating and mismanaging their depositor’s hard earned funds.
I’m so happy to hear that these banks are going to be held accountable for their past and present earnings. I know for a fact that the CEO of every bank on this list is shaking in their chair as they read the information regarding pay. Haha. We should start a pool to see which company blows the most money on its worthless management. Maybe a chart showing company earnings vs. CEO earnings would be nice too!
Thanks Mr. Waxman!
about damn time
These rotten scum sould be shot for treason along with the rotten scum politicans (both Democrat and Republican) who were playing pocket pool while this was going on
I pay almost 50% in taxes
Where is my bailout?
Does this include the Banks that were requested behind closed doors to accept bailout funds even through their balance sheets were solid?
“While the program is voluntary, Treasury essentially forced nine major U.S. banks to agree to take $125 billion from the federal government. Treasury will buy $25 billion in preferred stock from Bank of America — including soon-to-be acquired Merrill Lynch — as well as from J.P. Morgan and Citigroup; $25 billion from Wells Fargo & Co.; $10 billion from Goldman Sachs Group Inc. and Morgan Stanley; $3 billion from Bank of New York Mellon; and about $2 billion from State Street. The remainder will be available to small and medium-size institutions that apply for an investment.”
- Wall Street Journal
http://online.wsj.com/article/SB122398468353632299.html
I feel bad for those Banks that manage their assets professionally and now are subject to disclosure. However, are they not already disclosing this to the ones who own the Companies - the Shareholders?
And some of this could be misleading as well. While the parent co may be either in trouble, or as many of the banks are, not really in trouble but forced to particpate, some of their subsidiaries may be financially sound and not have engaged in the reckless lending that caused problems for the parent.
AIG got a lot of bad press for the big events that were being held to reward independent insurance agents. If they are independent agents, they are not employees and are ones bringing in income to the co.
And now they are pushing them to loan out the money. I wonder is history going to repeat itself with part of what got lenders and the whole economy into this mess when govt pushed them to lend to a broader group of people which sounded good. But the pressure was on so standards were lowered which is a big part of where the sub-prime mess came from. Oh and it was the Dems who pushed that program and who resisted attempts by Bush, McCain and others to introduce some more regulation of Freddie and Fannie. But they were squelched by the Dems including Frank, Dodd and Obama. And yet Obama constantly blames the lack of regulation on Bush!
Before they swiped your $700 billion they told you that they were going to use it to buy up the toxic assets from the financial institutions, hold ‘em and eventually turn a profit for the taxpayer. ha-ha. Once they strongarmed your money they merely dished it out willy nilly to the banks of their choice with virtually zero conditions. The banks used it for acquistions, ceo bonuses and to shore up their books! ha-ha. The idea was to unfreeze the liquidity. ha-ha. banks still refuse to loan to one another because no one can be trusted. ha-ha. Meanwhile, foreclosures continue to multiply unabated which will further erode the economy and destroy corporate profits for years to come. Basically, we have entered into an L shaped recession. Don’t know what that is? Google Japan economics 1990. You are flying at 10k feet with no pilot in the cockpit.
More of the same! Once the government owns the banks, the Chinese will demand repayment and all we’ll have to give them .. are the banks. Time to bail.. out of this country.
I just l got my insurance bill for my auto policy, AIG just bought 21st century insurance before they got a bailout. I feel like I am getting rippped off twice paying these people more money so they can go out and party at my expense. I do not want to give any money to these *ssholes. But you know , the own the court system and the DMV too. All the law enforcement and state employees pension is tied up to financial derivatives from mortgage based investment. What can be done?