Bailed-out bankers love their perks
Bankers are different from you and me.
While the average person would experience some sense of shame at having brought the economy to the brink of collapse with reckless lending, big shot bankers have no such shame. Even as they were accepting government (read, taxpayer) bailouts, they increased their lavish perks, according to The Washington Post.
Even as the nation’s biggest financial firms were struggling and the federal government was spending hundreds of billions of dollars to save many of them, the companies as a group were boosting the perks and benefits they pay their chief executives.
Some chief executives, such as Kenneth D. Lewis of Bank of America and Jeffrey M. Peek of CIT Group, the major small-business lender now on the brink of bankruptcy, each received about $100,000 more than a year earlier for personal use of corporate jets. Others saw an increase in the value of chauffeured services, parking or personal security.Ralph W. Babb Jr., chief executive of Dallas-based lender Comerica, was compensated for a new country club membership, with an initiation fee and dues of more than $200,000. GMAC Financial Services chief executive Alvaro de Molina benefited from a $2.5 million payment from his company to help cover his personal tax bill.
This is the sort of thing that has made the average voter furious about the bailout. When workers are struggling with massive debt, unemployment, foreclosures, etc., Ralph Babb gets a new country club membership?
The Obama administration has some leverage over banks that took bailouts, and, by golly, they ought to use it to demand repayment of these lavish perks. But the administration needs to do more. The president needs to insist on tight regulation of Wall Street so the kind of meltdown that occurred last year won’t happen again.
Obviously, we can’t depend on bankers and their Wall Street compatriots to learn that lesson on their own.
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34 comments Add your comment
Rascal
October 20th, 2009
7:53 am
Wow, a seeing eye dog could help you get through an empty gymnasium. Your refusal to accept that government started the whole problem, Republicans and Democrats alike, pushing through their “everyone ought to own a home” agenda, gives you top billing in the category “Most Likely to Fail to Understand Anything in Her Adult Life”. Then the big good government swoops in with more money to save the fools that did exactly what they were forced to do and you support them all the way. I guess you’ll support the second round of bailouts coming soon from your vote buying democrats. Now you have the audacity to complain about the very predictable side effects of the government action, AGAIN!! You take the cake.
AJC RIP 2010
Peadawg
October 20th, 2009
7:58 am
“This is the sort of thing that has made the average voter furious about the bailout.”
Yet in yesterday’s column, you want MORE “mini-stimuluses’ as you put. What a hypocrite!
Kraig Hilden
October 20th, 2009
8:11 am
She writes this nonsense in the hopes of getting people upset. She is trying to get her comment count up.
LeeH1
October 20th, 2009
8:23 am
Pay them off in toxic loan assets! They created the problems, so instead of paying them in stock and cash, let them have a piece of the bad investments they helped to create. If they can then make these investments good again, then more power to them! If not, let them reap their own rewards.
cas
October 20th, 2009
8:25 am
By golly you really are clueless. The banking community are rookies compared to this administrations lavish spending for personal gratification. That being said despite the fact it most certainly was government forcing private business to make bad loans for housing people could not afford that got us here, a smart executive would determine now is not the time for lavish corporate spending. If for nothing more than the message he sends to his employees and customers. No government meddling and no government bailouts would encourage most to make better long term decisions.
Tall
October 20th, 2009
8:28 am
These banks, insurers and auto makers should never have been bailed out in the first place. The treasury should have ensured enough liquidity to keep order in the banking system, but that is it. There should be a real sense of pain for the mistakes that have been made, but there is not. The lesson learned is that the Feds(funded by taxpayers and foreign creditors) will cover for your mistakes. Nothing was learned from the Savings and Loan debacle, nothing was learned from the Long Term Capital Management meltdown, and nothing will be learned from this. Suffer our nation.
TnGelding
October 20th, 2009
8:33 am
But they have to retain that “talent.” You do them and the country a disservice by referring to the investment as a bailout, tho. It will be repaid with interest. Until derivatives are completely eliminated it could happen again.
TnGelding
October 20th, 2009
8:38 am
The greed and feeling of self-importance on Wall Street staggers the mind. It looks like the government is going to have to step in and mandate pay and compensation limits since the boards won’t and the shareholders are powerlees to.
jt
October 20th, 2009
8:43 am
“we can’t depend on bankers and their Wall Street compatriots to learn that lesson on their own.”
Yea!!!!!
Let’s get Charlie Rangel, Barney Frank, Chris Dodd, and Tim Geithner to show’em who’s boss.
Call it like it is.
October 20th, 2009
8:44 am
Well Cindy, that is your main problem you look towards the government to take care of all of your needs, including issues with the banks. If the government had kept it nose out of their business in the first place, we wouldnt be in this situtation. Who forced the banks to give out loans to people who shouldnt be buying a home in the first place?? The government.
We know the banks have issues, but the government needs to let the system work.
How about you hit upon our 1.42 TRILLION dollar deficit, that Obama is racking up. Of course if all of Bush’s fault right? The Obamatons are already staing it will take around 10 years to fix what Bush did? It would be funny if it wasnt so sad.
Jimmy62
October 20th, 2009
8:56 am
I don’t understand how Cynthia automatically assumes that government knows best. They don’t. That’s why they should interfere as little as possible.
We did not have law first, then property. Property came first, then law came to protect property. Then people came around and said, “Well no one but me really understands the best way to run their property, so I’m going to change the law.” And then law changed from protecting property to giving the people who make laws the ability to take property. We should go back to what law is supposed to be… A set of rules to protect private property from the more powerful. Not come up with more ways to give our politicians more power over our lives. I know 100% that I can run my life better than Obama can, and I can spend my money better on my own than Obama can in the form of taxation.
But yeah, the hypocrisy Cynthia displays by calling for another stimulus one day, and decrying the predictable results of the previous stimulus the next. Want fodder for more columns whining about bankers? Do another stimulus, and that money will be taken from those who earned it and end up in the pockets of rich bankers and friends of politicians.
The GOP was corrupt, but it’s moronic to say that the Dems aren’t, too. They are just people, like you and me, which is why we shouldn’t trust them with all this money and power.
TnGelding
October 20th, 2009
9:12 am
Call it like it is.
October 20th, 2009
8:44 am
It would be funny if it wasn’t so true. Ten years might not be long enough, when you throw in Iraq and Afghanistan.
TnGelding
October 20th, 2009
9:16 am
Jimmy62
October 20th, 2009
8:56 am
TARP and stimulus were two different things.
Why can’t we back a third party and run them both out of town? Because they control the election process.
peon banker
October 20th, 2009
9:19 am
Ok, so I get it! The governement should not have bailed out the banks! Well, they did so now what are we going to do? Watch while the CEO’s of these banks get fatter off my dime? The bank I work for has cut my paltry pay, cut my sick time, and cut their 401k matching. Meanwhile, the CEO is driving a brand new Mercedes paid for with my tax dollars and now receives 8 weeks of paid vacation and will receive a bonus year end! So you may not like that these banks were bailed out but they are loving every minute of it!
TnGelding
October 20th, 2009
9:23 am
peon banker
October 20th, 2009
9:19 am
Your tax dollars are way short of even paying for our government. The TARP funds were printed or borrowed.
Shareholders have to revolt to put an end to the madness.
TnGelding
October 20th, 2009
9:34 am
From Michael Moore dot com:
October 19th, 2009 8:27 PM
‘Take America Back from the Banks’
Reining in the financial industry’s power and greed will be a long, hard-fought war. But it is one that must be fought.
By Dean Baker
The elites hate to acknowledge it, but when large numbers of ordinary people are moved to action, it changes the narrow political world where the elites call the shots. Inside accounts reveal the extent to which Lyndon Johnson and Richard Nixon’s conduct of the Vietnam war was constrained by the huge anti-war movement. It was the civil rights movement, not compelling arguments, that convinced members of the US Congress to end legal racial discrimination. More recently, the town hall meetings dominated by people opposed to healthcare reform have been a serious roadblock for those pushing reform.
Those disgusted by the bank bailouts, and the bankers who brought us this recession, will have a chance to make their views known when the American Bankers Association has its annual meeting in Chicago this month. A large coalition of labour, community and consumer organisations are organising a protest at this “Showdown in Chicago”.
A big turnout at this event can make a real difference. Just to review the scorecard, most of the country is still suffering the fallout from the bankers’ irrational exuberance of the housing bubble era. The Congressional Budget Office (CBO) and other forecasters expect the suffering to endure for years to come.
The US unemployment rate is about to cross 10%, with an additional 9 million workers only able to find part-time work. CBO projects that unemployment will not return to normal levels until 2014. Almost 200,000 people are losing their homes every month through foreclosure. Tens of millions of people who had expected a comfortable retirement just saw most of their wealth disappear with the collapse of the housing bubble. State and local governments are being forced to lay off school teachers and fire fighters under the pressure of enormous budget deficits.
But not everyone is suffering. Thanks to the bailout programmes put in place last fall, most of the country’s major banks are back on their feet. In fact, in the most recent quarter, bank profits hit a new record high as a share of all corporate profits.
And the banks are sharing their wealth. Many of their top executives and high performers will be getting bonuses this year worth millions of dollars. In some cases the bonuses will be in the tens of millions.
In the meantime, in elite Washington circles people are busy making plans for a national sales tax so that the government can limit the fiscal damage caused by the bankers’ recession. A sales tax is of course very regressive, since low- and moderate-income people typically spend the vast majority of their income, while our banker friends will more likely to be able to save some of their income or spend it in other countries where they will not be paying this new sales tax.
To summarise: the bankers wrecked the economy with their greed, ran off with taxpayer dollars in a massive bailout and now plan to raise taxes for the rest of us. If that picture doesn’t sound quite right, then go to Chicago.
This is a case where the divisions are not left-right, but of the elite against everyone else. When Congress was debating the Tarp bank bailout last fall, members of Congress were hearing calls from people across the political spectrum who were outraged that their tax dollars were going to the banks that had wrecked the economy. A higher percentage of Republicans than Democrats ended up voting against this bankers’ piñata.
The policies that will rein in the banks: reform of the Federal Reserve Board to make it democratically accountable, a tax on financial speculation to pay for the bankers’ mess and restrictions on the bank abuses of consumers that caused the carnage have support from people on both the left and right.
A bill that would require the Fed to disclose what it did with more than $2tn in loans to banks and other financial institutions was originally co-sponsored by Ron Paul and Alan Grayson, one of the most conservative and one of the most progressive members of Congress. Due to public pressure, it now has more than 270 co-sponsors.
This is exactly the sort of alliance that gets the elite worried. Reining in the power of the financial industry will be a long, hard-fought war, but it is one that must be fought. President and Nobel peace prize winner Barack Obama may not have been able to bring the Olympics to Chicago, but everyone who wants to retake our country from the banks can bring their backside there on October 25th.
Dean Baker is co-director of the Center for Economic and Policy Research, and author of ‘Plunder and Blunder: The Rise and Fall of the Bubble Economy.’
2 cents worth
October 20th, 2009
10:09 am
I see little difference between the bankers . . and let’s say . . . the million dollar atheletes and the owners of the professional teams. They take the fans’ money . . . raising the cost of tickets, etc. to support their lavish living and it matters not if they are good, ok or a big flop or if the players commit crimes.
ThePlainTruth
October 20th, 2009
10:20 am
Cynthia,
This is scary—I agree with you again. The fault lies as you mildly imply with the Obama administration. Why did they allow these perks? If they are going to give my money to a company then by golly I expect them to do some oversight. But I just don’t think the gov’t is capable. Look at all the Medicare fraud. Why in the hell won’t they do something about that? You need to be tough on them and not just ride the party line.
CPA
October 20th, 2009
10:51 am
OK, enough! Someone needs to explain to everyone EXACTLY HOW the government FORCED lenders to make bad loans. The government DID NO SUCH THING.
No one, but absolutely NO ONE, sat at the closing table with a gun to the lenders’ heads, threatening them to make loans to people who could not repay. THE LENDERS DID IT THEMSELVES. They knowingly, willingly, greedily, and with full knowledge of the consequences, made bad loan after bad loan, one after the other, hand over fist, in order to make a quick buck in the form of origination fees. Then, all too conveniently, these bad loans were packaged up, bundled together and sold off to the highest bidder.
Gone was the time-honored practice of carefully scrutinizing a borrower’s ability to pay. Why go through the hassle, if next month the loan is just going to be sold off anyway?
Once the banks and the lenders decided to abandon their responsibility of performing adequate due diligence, the system broke down, the downward spiral begun, and we collectively landed on our a$$es, mired up to the neck in recession.
All the banks had to do was say, “I’m sorry sir/mam, but you don’t appear to have the resources to take responsibility for this loan.”
That’s all they had to say.
M Percy
October 20th, 2009
11:11 am
The difference between bankers and pro athletes: pro athletes (and Hollywood actors, for that matter) are union members. It’s ok for A Rod (Alex Rodriguez, NYY $33,000,000) to make 82.5 times what his less stellar teammates make ($400K is the league minimum). Or for Kevin Garnett (Boston) to make $24,751,934, which is 54 times the league minimum. Or for Tom Hanks to make $25M for a few weeks worth of work when there’s a surplus of starving actors.
M Percy
October 20th, 2009
11:24 am
CPA, the Government compounded the problem in at least two ways. First, Fannie and Freddie bought up those loans, to the tune of about $5T or 45% of all mortgages before the bubble burst. Secondly, laws like CRA placed pressure on banks to make the loans to basically non-creditworthy people (from fear of administrative actions and/or lawsuits, or just the annoyance factor of ACORN and similar groups).
So, because of government the banks are, while not forced to lend, at least pressured to lend. And because of government, they can lend without risk to themselves (by selling the bad loans to GSAs like Fannie & Freddie). And they make money in fees for doing so.
Is it any wonder then that bad loans got made? It’s simply human nature, and not necessarily an abject level of greed.
I’d really like for you to lend that wino passed out in the gutter over there $100. Will you do it? Probably not. If I tell you that if you lend him the $100, you can charge a $10 fee, which you can add into his IOU, and that I will then buy the $110 IOU from you, will you lend him the money then. Probably so. Are you an evil greedy person? Probably not.
TnGelding
October 20th, 2009
11:33 am
CPA
October 20th, 2009
10:51 am
You’re right of course.
From the FDIC Web site:
(b) It is the purpose of this title to require each appropriate Federal financial supervisory agency to use its authority when examining financial institutions, to encourage such institutions to help meet the credit needs of the local communities in which they are chartered consistent with the safe and sound operation of such institutions.
Kevin
October 20th, 2009
11:51 am
Cynthia, enjoy riding the wave of populist sentiment while you can. I’m sure you’re loving every minute of it.
But don’t worry. The times they are a-changin . . . .
2 cents worth
October 20th, 2009
12:11 pm
CPA. . I wouldn’t want you to handle my tax returns! Yes, the banks were forced to make loans . . because the push was on to give everybody “the American dream” . . can’t tell you how many times I heard that term come out of both democrats and republicans the 15-20 years prior to the real estate bubble exploding!!! Banks were forced by the feds to give these loans as well as Fannie Mae and Freddie Mac. I know for a fact people in my office who could not afford to buy houses especially in the price range they ended up buying were able to do so because of the “push” to give everybody the “American Dream” and everybody was getting the subprime mortgages!!! Living for today and never caring what tomorrow would bring.
Roger
October 20th, 2009
12:20 pm
This has nothing to do with bankers but i thought it might make an interesting column. But, i doubt Cynthia will write about this.
Michele Obama has 26 taxpayer funded assistants. That’s more than any 1st Lady in history. Do you think the?
taxpayer should pay $1,750,000.000 a year for her assistants? She already has her mother living in the White House to help with the children, why does she need 26 assistants? The First Lady is not a political office; why does she need so many assistants?
Chris
October 20th, 2009
12:35 pm
I have nothing but praise and admiration for this woman. She somehow has come up with the nerve to say what most of us have been thinking for so long. If I hear one more senior complain about being on a fixed income I’ll throw up. All we hear is how bad they have it, and how much the rest of the world owes them. Their generation is only one that has the chance to retire and from now on, future generations will only know what the word “retirement” means by looking in the dictionary or looking it up on the net. Most of us have been dumping money into 401k’s and IRA’s not to mention Social Security knowing full well we’ll most likely never see the money let alone retirement. We live near a horse race track / casino type place and guess what, 99% of the people going into this place are retired people throwing their money away. Gambling is now the number one hobby of the retired and they’re bitching about not getting a raise. If they really cared about the people they love that will have to work until they die they should shut up and realizes how good they have it. Never happen…
Quityourbitchen
Kamchak
October 20th, 2009
12:50 pm
CPA, the Government compounded the problem in at least two ways. First, Fannie and Freddie bought up those loans, to the tune of about $5T or 45% of all mortgages before the bubble burst. Secondly, laws like CRA placed pressure on banks to make the loans to basically non-creditworthy people (from fear of administrative actions and/or lawsuits, or just the annoyance factor of ACORN and similar groups).
So much to unpack from this, so I’ll start with:
Between 2004 and 2006, when subprime lending was exploding, Fannie and Freddie went from holding a high of 48 percent of the subprime loans that were sold into the secondary market to holding about 24 percent, according to data from Inside Mortgage Finance, a specialty publication.
But to back up a bit, blaming the banks for this is just wrong.
Federal housing data reveal that the charges aren’t true, and that the private sector, not the government or government-backed companies, was behind the soaring subprime lending at the core of the crisis.
Subprime lending offered high-cost loans to the weakest borrowers during the housing boom that lasted from 2001 to 2007. Subprime lending was at its height from 2004 to 2006.
Federal Reserve Board data show that:
* More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.
* Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.
* Only one of the top 25 subprime lenders in 2006 was directly subject to the housing law that’s being lambasted by conservative critic.
M Percy
October 20th, 2009
1:22 pm
Federal Reserve Board data show that:
* More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.
* Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.
——————–
These appear to be the same thing. But I never questioned who originated the loans. I stated that Fannie & Freddie, as proxy Gvt agencies by their very existence and charters, compounded the bank’s errors by provided a way for the banks to originate the loans and then sell them to Fannie and Freddie. Thus the banks profit and taxpayers foot the bill for all the risk.
Fannie & Freddie were willing, nay, eager, buyers who bought up $5T in loans many of which were bad and probably never should have issued. Had F&F not been there to buy these loans and eat the risk, I think far fewer bad loans would have originated, CRA pressures or not.
Kamchak
October 20th, 2009
3:07 pm
Fannie & Freddie were willing, nay, eager, buyers who bought up $5T in loans many of which were bad and probably never should have issued. Had F&F not been there to buy these loans and eat the risk, I think far fewer bad loans would have originated, CRA pressures or not.
You didn’t read the article that I linked.
In 2005 and 2006, the private sector securitized almost two thirds of all U.S. mortgages, supplanting Fannie and Freddie, according to a number of specialty publications that track this data.
F & F went from a high of 48% down to 24% in this period. The private sector stepped into this void. I see that I should have posted the full paragraph:
Between 2004 and 2006, when subprime lending was exploding, Fannie and Freddie went from holding a high of 48 percent of the subprime loans that were sold into the secondary market to holding about 24 percent, according to data from Inside Mortgage Finance, a specialty publication. One reason is that Fannie and Freddie were subject to tougher standards than many of the unregulated players in the private sector who weakened lending standards, most of whom have gone bankrupt or are now in deep trouble.(bold emphasis added)
Carlton
October 20th, 2009
3:16 pm
Rascal Said:
>Wow, a seeing eye dog could help you get through an empty gymnasium.
As a person who uses a seeing eye dog every day for the past eight years, I find that remark offensive.
I don’t fail to understand things just because I can’t see, but people like you certainly fail to understand that a lack of sight does not equal a lack of perception or understanding.
I do fail to understand why, in this time of political correctness, it remains ok to compare blindness to stupidity or lack of understanding.
Maybe YOU might be unaware or unable to understand things if you went blind, but the people who really are blind remain more preceptive than you will ever know.
As a side note, my guide dog can help me through a gymnasium so crowded that you sighted folks can’t move.
Kamchak
October 20th, 2009
3:39 pm
And as far as the CRA is concerned—
Fannie and Freddie, however, didn’t pressure lenders to sell them more loans; they struggled to keep pace with their private sector competitors. In fact, their regulator, the Office of Federal Housing Enterprise Oversight, imposed new restrictions in 2006 that led to Fannie and Freddie losing even more market share in the booming subprime market.
What’s more, only commercial banks and thrifts must follow CRA rules. The investment banks don’t, nor did the now-bankrupt non-bank lenders such as New Century Financial Corp. and Ameriquest that underwrote most of the subprime loans.
These private non-bank lenders enjoyed a regulatory gap, allowing them to be regulated by 50 different state banking supervisors instead of the federal government. And mortgage brokers, who also weren’t subject to federal regulation or the CRA, originated most of the subprime loans.
Randall W. Capps
October 20th, 2009
5:45 pm
She takes on banker bailout bonuses and has the nerve to complain about old people getting a possible $250.00 check from the government?
How many banker bailout bonuses would it take to pay for the whole of the proposed Social Security package? What ten, twenty? Guess who paid for those bonuses? C.Tucker probably paid tax on her 10k P.Prize bonanza. The only plus I see to having paid out nearly a trillion to the bankers is that some of her 10k prize money was used when it was taxed. Ha!
current events, |
October 20th, 2009
8:49 pm
[...] recent rise in Wall Street bonuses. We all want to know one thing above else, right? How do those CEOs live with themselves? I suspect those CEOs know and remember and were possibly part of the reason the bailouts [...]
catlady
October 21st, 2009
7:05 am
IMHO, the problem is lack of stiff correction for unbridled greed. Not just the condemnation of it, but actual jail time for persons whose greed for their own benefit caused others to suffer. It is a form of robbery and should be punished.
Stealing an American birthright for your progeny is also theft (is much of anything worth more than American citizenship, really?) and should be punished by deportation or jail time then deportation.
In the old days, being censured by your peer group was enough to keep much greed in check (and illegitimate babies from being born, etc.). Now, no one feels they “can be judged.”