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Banking Bandits Get Their Reward
By now everybody must know that the top banking executives responsible for our economic meltdown have no shame. Otherwise they would not have dared give themselves such hefty bonuses as a deeply perverse reward for actions that caused millions of Americans to lose their jobs and homes. The $33 billion that the executives of the nine banks bailed out with taxpayer funds paid themselves in 2008 is all one needs to know about the depth of their amorality.
But it also speaks volumes about the inefficiency of a system of rewards that has nothing to do with performance. “No Rhyme or Reason: the ‘Heads I Win, Tails You Lose’ Bank Bonus Culture” is the title of the report by New York’s Attorney Gen. Andrew M. Cuomo unmasking this scandal. It concludes: “ ... compensation for bank employees has become unmoored from the banks’ financial performance.”
That would not be of public concern if bank executives and their stockholders would bear the full price of such folly. But not one of those top nine banks that distributed bonuses of at least $1 million to each of 5,000 top executives faced the consequences on their own. Instead, taxpayers were called upon to pony up what will eventually be trillions of dollars to save the banks and the nation from this disaster. As the Cuomo report notes:
“Two firms, Citigroup and Merrill Lynch suffered massive loses of more than $27 billion at each firm. Nevertheless, Citigroup paid out $5.33 billion, in bonuses, and Merrill paid $3.6 billion in bonuses. Together, they lost $54 billion, paid out nearly $9 billion in bonuses and then received TARP bailouts totaling $55 billion. For three other firms—Goldman Sachs, Morgan Stanley, and J.P. Morgan Chase—2008 bonus payments were substantially greater than the banks’ net income.”
In each instance, those bonuses on average more than doubled earnings and were in turn more than doubled by the government bailout in TARP funds. Those funds, and the nonrefundable tens of billions passed on through the AIG bailout and other government programs, come from the very taxpayers already reeling from a banking collapse brought on by reckless lending practices.
Yet the $306 billion in toxic assets that Citigroup—a leader in the irresponsible practices that created such “assets”—managed to pile up are also now guaranteed by taxpayer funds. And being on the public dole didn’t prevent Citigroup CEO Vikram Pandit from “earning” $38 million last year.
The Merrill Lynch bonuses were paid as the company was about to collapse. It was saved at the last minute by being purchased for $50 billion by Bank of America in a deal engineered by the federal government and facilitated by $45 billion in bailout funds to BofA. On Monday, Bank of America agreed to pay $33 million in penalties to the Securities and Exchange Commission to settle an SEC complaint that BofA had deceived shareholders about those billions in bonuses.
One of those handsomely rewarded was Thomas Montag, now with BofA, who received a $39.4 million bonus for his work at Merrill Lynch, a reward for his performance as Merrill’s trading and sales chief, a position in which he presided over the billions in mortgage acquisitions that fueled the company’s downfall.
The banks, considered “too big to fail,” were quickly showered with enormous amounts of money, contributing to a U.S. deficit expected to grow to $1.86 trillion this year. But homeowners are not too big to fail, and they were left to the tender mercies of the very bankers who swindled them with flaky mortgages.
On Tuesday, the Treasury Department criticized the major banks for their abysmally weak effort to aid distressed homeowners who are more than 60 days delinquent on their mortgages. Only 9 percent of those who qualify for assistance under President Obama’s foreclosure prevention plan have been entered into trial programs to determine whether their mortgages will be modified. BofA, one of the major holders of distressed mortgages, has entered only a scant 4 percent of its eligible mortgage holders in the program.
Citigroup has managed to begin the process with 15 percent of those eligible, while Wells Fargo has begun with only 6 percent of its eligible borrowers. Compare that snail speed in helping folks keep their homes with the alacrity with which the federal government responded in bailing out the banks when they got into trouble.
The choice from the beginning of this debacle has been: Do we bail out the banks that caused the problem in the hopes that they will help ordinary folks or do we start with government relief for distressed mortgage holders? The decision to aid the bankers first was based on the assumption that for the first time in their lives they would do the honorable thing and surrender space in the lifeboats to those most vulnerable.
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39 Comments so far
Show AllAnyone who thinks the banks have the least interest in helping ordinary folks has never worked for one. I did, a quarter century ago, and came away with the firm belief (that I have posted here several times) that they are all criminal conspiracies, that the only reason they aren't doing time is that they have the politicians bought and paid for and the lawbooks cooked to render their depredations non criminal and non-civilly actionable.
I find sour amusement in the fact that Elizabeth Warren, the chair of the Congressional Oversight Panel, the person who is supposed to be the official money monitor for the bank bailout, keeps going on Bill Moyers and other such places, telling all who will listen that she has no idea what the banks are doing with the money that they extorted from the government ("If you don't give us money, we'll implode and that will hurt you all") is being used for.
What the media labels a 30 year period of financial industry deregulation (starting with allowing securitization of mortgages in 1978), is actually a 30 year period of financial industry decriminalization.
The net result of this decriminalization was recently summarized by Illinois Senator Dick Durbin when he told the world that the financial industry owns all three branches of the US Government.
When the Wall Street pirates tell the president, a senator, or congressional representative to jump, the automatic response is "how high ?"
Instead of bonuses these executives should have been fired then sued to recoup their absurd pay and bonuses they received while they were driving the economy off the cliff. The executives that dreamed up the so called NINJA loans (No Income, No Job, No Assets) should be defending themselves in criminal court…with a public defender.
A second batch that should be panhandling for pocket change with a sign stating “Will Whore for Food” are the lawmakers that decided the financial derivatives industry did not require regulation. Do you think these asshats throw out the rule book when they are on the golf course? Simple common sense tells us that when there are no rules for the game the game will be freakin lawless. Which part of “Badges. We don’t need no stinkin badges” did they think the public didn’t understand?
Finally, these outlandish bonuses would be somewhat less obscene if they were taxed at something like 90%, the federal treasury is piling up debt that will crush us in the coming years, the time for much higher taxes in income above $250,000 has long passed, the absurd 15% tax rate on capital gains needs to be changed to 85%, and FICA taxes need to be applied to every penny of income instead of the first $105.000.00 and on and on and on.
Sioux Rose
Madhoosier: Right on! And well-stated!
Absolutely pathetic!!! No words can adequately describe the stupidity of the American people for continuing to allow this to happen!!
Vast sums of money are spent by corporations figuring out how to manipulate people. The news media has mostly been taken over by these same corporations. Where is the news media expressing outrage over this? For the most part, corporations order their news media to ignore it.
I totally agree with you, and , while there was no real rioting in the streets, emails, letters and calls went out to all senators and representatives with an overwhelming majority of the people being against the bailout.
An election is coming up un 2010 so better get them lists of pro bailout voting politicians and let's kick them out.
BTW, both McCain and Obama voted for the bailout. It was my opinion at the time that the one who voted against it would have the presidency guaranteed. None of them had the balls to do it.
"There SHOULD HAVE BEEN rioting in the streets, when the idea of the bailout was first floated, just as an alert & politically conscious population should have rioted when the Supreme Court stole the 2000 election. // The fact that the population passively swallowed the bailout itself, & now the outrage of the bonuses;..."
I don't know if I would go so far as to say that the population passively swallowed the bank bailouts. If you will remember, the switchboards of both congressmen and senators were jammed along with floods of e-mails (with about 90% of the people against) protesting the bailouts. Meanwhile obama was working overtime trying to convince his fellow senators to passs this boondogle. Bu$h in the meanwhile was in the House threatening martial law if the bailout ddidn't pass.
It would appear that the time for being 'nice' about this whole shenanagen has passed and the banksters must be dealt with in a different fasion. Primal fear seems to work. Perhaps, since they have in fact put the economy of the country in peril, they could be charged with treason, where upon conviction, be sentenced to death by public hanging. After a few of these folks dance at the end of a rope followed by swinging to and fro in the breeze, while still in their soiled thousand dollar suits, maybe the point will come across to the remaining crooks that their theiving ways may in fact be detrimental to their health.
I agree! There was outrage. Everyone I know wrote letters and e-mails, and also called their elected officials. Again, though, we're back to the mainstream news and the fact that the pundits don't keep us informed.
In addition, I attended three rallies/protests on Wall Street.
To me, it seemeded like a repeat of the buildup to the invasion of Iraq -- millions of people protesting, and no one listening. We were invisible and muted.
Sioux Rose
RICH: Given your "Superman-like" capacity to see through BS, would you agree that some of the reasons why the public did not riot in the streets include:
1. The "news" they receive from the mainstream media dulls the edge of their blade by diverting their attention to the wrong targets and inaccurate cause factors.
2. More than 30 million Americans are routinely ingesting anti-depressants drugs. Without access to righteous anger, many are chemically placed into a virtual soporific state.
3. A lot of people are stressed to the max trying to keep up with today's costs of living which have risen while wages often have not (or not kept up).
I also happen to think the sporting arenas work to channel massive aggression into fixations on teams and their scores, plays, wins and losses; and with so much collective testosterone projected at these spectacles, political passion is lost along with civil engagement in society's intended-democratic processes.
I do not mean to make excuses for an apathetic public, but to explain why it appears to be thus.
Sioux Rose
RICH M: As always, flawless reasoning on your part. It's been some time since I read both of those novels. Not only is the public made to lack a target for its anger, it is also unable to connect the dots that have taken the hubristic step of richly rewarding those same FAILURES, i.e. bankers. I'd say the collective fury would move the meters charting Seismic activity were THAT truth let out of the box in its entirety!
By the way, as per "soma," if related to the new "Happiness Studies" at universities, would it surprise you to find that in the next decade persons like ourselves, incensed with the evils and misuse of authority in our midst, would be forced to take medications to render us more pleasant and/or pliable?
In one of the scripts I sent to Hollywood (a contest) that was quickly rejected, Theodore Hurtz (a play on the word hurts), CEO of "Happy Chemical Corps" is making a fortune on depression. Doesn't hurt his profit margins that these ARE depressing times! And in one scene his 4th wife, who's been sculpted by technology to fit all the "desirable metrics," enters the room carrying a tray. On it are a variety of pills, each a product of Hurtz's laboratories. She asks him submissively, looking down at the pill collection, if he'd prefer for her to be "giddy," "seductive," or "sweet" for the evening. The impliciation of course being that the pill will effect that particular dominant attitude. How far are we from that "soma" version of attitude-adjustment in a society that has 30% of TV commercials touting some drug cure or another (for diseases largely invented on Madison Avenue). No shame that it smacks of utter hypocrisy given the duplistic campaign directed at kids in the form of "Just Say No!" (to drugs).
I would like to add the film "Brazil" to the list of prophetic literature. Also, to some extent, "The Handmaiden's Tale".
"treatment" for our "deviance" already exists in the form of anti-depressants and extreme social pressure to project a positive attitude, especially at work. Advice for the unemployed, for instance, always proposes that the personal attitude is the key - never that there are fewer and fewer effin jobs for more and more unemployed!
Joe
Sioux Rose
RICH M & JCLIENTELE: Thank you for your responses. I posed my post as a rhetorical question, however I am well-aware of the inroads being made in the way of engineering "happiness" to a public that has all the required evidence to feel anything but! I recall a film based on the life of movie actress Frances Farmer, and how she was forced to take medication. How many were given forced lobotomies in this country? Wilhelm Reich, whose theories were (and remain) highly controversial comes to mind. Rod Serling examined this theme in at least two of his prescient "Twilight Zone" tele-plays. Once universities make "happiness training" part of their curriculum, contemplative sorts who are moved by the depravity all around them ought to take notice. I'm keeping my passport current.
I know I'm intruding on a relatively private dialogue here, but these points and fictional references snapshot me to a few of the writings of Ericco Malatesta from the turn of the 20th century. From his essay, "A Little Theory," in discussing the authoritarian end justifying its means:
"The end of the Jesuits is, for the mystics, the glory of God; for the others, the power of the Society. Thus they must try to daze the masses, to terrorize them, to make them submit.
The aim of the Jacobins and of all the authoritarian parties, who believe themselves in possession of the absolute truth, is to impose their ideas on the mass of the lay people. They must for that attempt to seize power, to subjugate the masses and to fix humanity on the procustean bed of their conceptions."
Discussing how reform is not "change" (to pen a popular buzzword of today). It is a different name tag plastered on the same demon. Reformists only replace the powers that be in a system that is already failing the people not just here, but world-wide: Starvation, sickness, human rights, poverty, etc. Real "change" comes from social revolutions not political ones. The apathy you are loathe to defend, Sioux Rose, is the sickness we get by choosing to live behind the bars. A longer excerpt from the same essay (edited portions in elipses to shorten):
"As for us, it is another thing: our aim is much different, thus our means must be very different.
We do not fight to put ourselves in the place of the exploiters and oppressors of today, and do not struggle for the triumph of an abstraction...
...We want good fortune for individuals, for everyone, without exception. We desire that each human being be able to develop themselves and live as happily as possible. And we believe that liberty and good fortune cannot be given to men by men or by a party, but that everyone must by themselves discover the conditions of their own freedom and conquer them. We believe that only the most complete application of the principle of solidarity can destroy struggle, oppression and exploitation and that solidarity can only be the result of free agreement, the spontaneous and intentional harmonization of interests...
...We desire the triumph of liberty and love."
That's cut to bits, but it hits the highlights. Real change can happen, some would argue its inevitable, but it starts with the individual and the impact he or she makes within the community. It put a smile on face as i read it so thank you both for reminding me of it. I hope it adds a little something to your day, as well.
Sioux Rose
MOMERATH: Thank you for joining the conversation. Your screen name is new to me, so welcome. Suppose I said that both aspects, the role of the individual and that of society are intended to work in concert, as opposed to any either/or agenda. For example, if an awakened soul seeks to set new precedents, if the powers in his or her society find those new behaviors a threat, they can "disappear" this individual. I am reminded of women like myself who were naturally intuitive and drawn to various works of healing only to be seen as "uppity" examples in their times, damned under the castigation of "witchcraft" and TORTURED in flames.
Only the strongest of the strong can pave the path that others will follow. In most cases (Jesus and Martin Luther King come to mind) they are martyred. Others (Lech Walesa, Nelson Mandela, to name a few) are imprisoned. Possibly if matters get tough enough more of us will opt for these outcomes; meanwhile, there are undercurrents of change happening like an earthquake that still remains under the range at which the authoritarians can pick up its signals.
I believe human beings can rise to many occasions and can evidence far more justice than is the apparent case in America today. It seems to me that when a great many people (quite a few the same ones who experienced the Renaissance of the 60's-70's) began to work on themselves in therapy and/or spiritual practices, that this focalized attention upon "the self" allowed "the dark side" to make MAJOR inroads into the ownership of media, think tanks, political players groomed to act as yes-men (and women) to their corporate sponsors, and military "programs" which would bleed the nation of funds more wisely appropriated for other functions.
We are where we are and must work from here. I do believe there's promise borne from a massive shift in consciousness, and that's why I possiby spend too many of my mortal hours directed at writing books, articles, plays, etc.
The House said NO to the bailout. The reason was that we were screaming bloody murder about the bailout. The whole thing then was gamed by the Senate. At that point, I suppose rioting in the streets was called for, but it didn't happen because....... people weren't hungry....but soon they will be hungry.
I want to ask all of you this question:
Is there a lawyer anywhere out there who is willing to represent all of us in a class action lawsuit against these banks? Seriously, there has to be someone who is willing to do it.
I am not a lawyer so I can't answer the question. However, I know a little about the law as I took some law courses in college.
1) Law has nothing to do with justice.
2) Law has everything to do with precedent.
3) Supreme courts which are heavily corporate friendly "reinterpret" precedent in order to benefit corporations.
The current Supreme Court is corporate friendly.
When that changes, then a class action suite might be successful.
If all of you want to see something astonishing about what really is happening, check out this video clip of Congressman Grayson questioning the IG for the Fed. Here is the link:
http://dailybail.com/there-are-no-words-to-describe-the-following-part-ii.html
These banks are highly competitive with one another, and their system of compensation is part of that competitiveness. Any bank that fails to reward executives appropriately will be left leaderless as they go to the other banks and they fail to attract talent. So, once the banks were allowed to live under present leadership, this scenario was inevitable.
The problem is with the entire finance sector. As last Fall showed, although competitive with one another, they live in a regulatory environment that rewards predatory behavior, and rewards gambling. As Krugman has noted, banking used to be a fairly stodgy profession, limited as banks were to safe, prudent investments. NOW this cancer has taken over the credit-market bloodstream, and these guys have found a way to make money by threatening to kill the host if he doesn't feed them. Cancer's eventually kill the host anyway. Scheer is right in his last paragragh, there WAS a choice. Do we remake the finance sector FIRST, and then throw money at it, or do we throw money at what it currently IS, and THEN remake it? As Obama etal struggle with new regulations, one of the things that is resisting them is their own money, given to bankers, who now pay lobbiests to resist reregulation. I think they made a mistake. They should have let the banks die of their gambling, nationalized them under new management, and THEN opened the taxpayer money spigot to restart the credit markets. They ALL should have gone the way of Lehman Bros. Difficult in the short term, but better for the country in the long term, and an appropriate justice for predatory behavior.
Sioux Rose
Ubrew you sure give the bankers a free pass! Talent? My dog could have made decisions less costly to the global financial system! And the worst part about it is that while taxpayer currency is drawn in copious supplies to supposedly fill the hole, the dam has never been repaired! The more we pour in, the more they can pour out. NO sane regulatory protocols have been put in place! There is a genuine personality disorder at work here, and it could be termed "Excessive Greed Disorder." It's found in inordinately high percentages among Wall St executives (and their wannabe staffs) and their banker peers. Please don't apologize for the way the market has bamboozled the American taxpayer, while taking investors 'round the world along for what should be an illegal (therefore holding penalties, not bonuses!) ride!
Yeah. I think the danger with hating the banksters, though, is that it mistargets the problem. They are as predatory as their markets allow them to be. Lax enforcement of domestic regulations hatched these bubbles, but international regulations have never even been passed. These guys play domestic and international markets off one another. Not only do we need to reregulate the domestic finance sector, but clear international rules (and sanctions) need to be developed, or they will continue to play musical chairs with finance. In a wild-west world, a moral banker is the nice guy who finishes last, soon swallowed by the amoral predators. That will continue until rules are passed and enforced, and that's unlikely until the link between bankster money and DC is severed. I'm not hopeful. But I'm not sure complaining about the fact that these guys are greedy is useful (of course, they say that swearing actually does ease the hurt of a bee-sting). The problem is in DC, and is part of the larger problem of corporate financing, which to me is also part of a larger problem of maldistribution of wealth (i.e. when we pamper the investor/owners, and whip the working class, we should expect corporatocracy eventually).
Sioux Rose
UBREW: I agree with your post, however, it still seems to go easy on bankers. Who is behind the lobbying that has helped to deregulate banks so that they can gamble the public's money (our savings, etc) on Wall St? The climate is toxic, of course, but the bankers did their part to "pollute the waters." The way I see it, those sharks at the various firms who accepted that cool million knowing their firms earned NO profit, and knowing lots of hard working people are taking a loss so they can have that false gain, are criminal. If I know my boss is in on something illegal and I still take a big check from him, am I not complicit? Perhaps it's time to place HONOR on the "Endangered Species" list.
I don't hate Thomas Montag. I just want him and his ilk to stop stealing my money and to give every nickel they stole back with interest. I have issues with people that steal. Grand larceny offends me.
I'm glad the author of the article calls them according to their real business model (banditry), not the "bad actors" milquetoast term of Krugman.
History repeats itself, first as tragedy, second as farce. - Karl Marx
In the banksters defense:
They renegotiated my brother's mortgage to help him avoid foreclosure, nice guys that they are.
He will now officially own the house on his 85th birthday.
But his payments dropped from $1700/month all the way down to $1550! So, like, whoo hoo!
I know this is a long shot and will require public cooperation but going local on the currency and switching to credit unions will make us immune from the banking bandits.
It's not a long shot if people do it.
The corporate sector makes most decisions.
The corporate sector makes all decisions according to profit.
The $$ changes, the policy changes.
I agree. RichM nailed me again on this but read his reply and mine to his for details.
RichM, I understand and I agree with what you said. That's why I acknowledged that it's a long shot. I don't expect switching to credit unions to affect these banks overnight. It will take a really long time and endured public cooperation will be needed. Yes, it is as difficult as getting people to vote 3rd parties. But what we must overcome is the powerless feeling. Time can be a killer that makes us feel that it's impossible. However, taking our chances can only help. I don't expect to convince everyone. However, after some time, I want to be able to prove that what I did was the right thing to do and that they too will benefit. That's where we need to start. I'm for trying as many good venues as possible.
PS: It is true that depositors and even those invested in those BoA stocks will be very difficult or even impossible to convince. I only expect to convince a few people over the next month or two. It may not look like much but it could theoretically get more people to switch depending upon the proving and convincing and how that works out. Again, we're going to have to try as many venues as possible and see what works and what doesn't. In addition, we must see which methods work out the best. I think the smaller methods could add up. I could be wrong too but I'm willing to take chances.
"The finance aristocracy, in its mode of acquisition as well as in its
pleasures, is nothing but the rebirth of the lumpen proletariat on
the heights of bourgeois society." from The Class Struggles in France
by Karl Marx
"take the most degraded tweaker you can find, put him a thousand-dollar suit, and send him to wall street." from I Can't Believe This Is Happening! by kloro
Right wing Republican Capitalists are never wrong, its the peoples fault for borrowing money they could not repay.
And , so the banks played the derivitives high risk leverage game, how would they know people wouldn't pay back the loans, once again its the peoples fault.
But , the banks knew they could bundle the loans and sell them to Fannie and Freddy.
So this Right Wing Republican ring of rober barons stole from the American taxpayer 100's of billions of dollars.
For that, we can thank both political partys in Washington.
Endless War, Banker Bailouts, loss of jobs to cheap labor over seas.
All of this being allowed by our elected officials.
God Bless the rich Republicans in America, and the deaf , dumb and stupid Right wing evangelical Christians who believe they have been chosen to protect America by becoming stazi spys for these Corporate Republican Fake Christian crooks.
Right Wing Gang Stalkers are Domestic Terrorists that are funded by the same people who are stealing our money and our freedoms.
I recently discovered that when Banksters like Henry Paulson (former CEO of Goldman Sachs) leave their positions to work for the government, they have to sell their shares in that bank to avoid blatant "conflicts of interest". In so doing, they DO NOT have to pay any taxes on those $$Millions in shares that were handed out to them over the years.
Henry Paulson left Goldman with some $200 Million and avoided paying taxes, thereby saving himself somewhere in the vicinity of $35 Million. That was before he demanded $700 Billion in TARP money to save the to-big-to-fail gambling casinos. Goldman got about $30 Billion in total; some directly and the rest indirectly from money that AIG received.
Good for Mario Cuomo. When Spitzer was called out, I thought Albany had finally devolved to a complete 100% wasteland of petty morons and connivers. Unfortunately, I do not think the bailouts specified penalties for misappropriation of public funds. This is one of those many things that is probably legal but should be a crime.
We had the Rockefeller Drug Laws. There, a wealthy man living in Westchester County estates sponsored laws that put thousands of poor kids in jail for years for smoking pot and such.
How about having the Hector Jr. Banking Laws? A neighborhood teen from the Bronx sponsors laws to put bankers in jail for years for robbing the public of millions, billions of dollars, and such.
BTW, Once again the stock market is going up. However, I do not see a corresponding rise in employment. Does anyone know the basis upon which the market is rising? Is this another bubble? Or is something happening that is likely to improve the lives and financial security of the general public?
Joe
I do not understand referendums. How is a referendum initiated? With petitions? Does every state use referendums?
If the people signed petitions to call for independant investigations into the fraud of everyone involved in receiving TARP funds could a referendum get on a ballot? If if did and was passed overwhelmingly would it happen? Or would the big guns pull out their sleezy little lawyers and holler the old unconstitutional story? Just curious...