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Feinberg: Bank Bonuses Were Unmerited

From an outraged New York Times:

Federal Report Faults Banks on Huge Bonuses

By ERIC DASH

July 22, 2010

With the financial system on the verge of collapse in late 2008, a group of troubled banks doled out more than $2 billion in bonuses and other payments to their highest earners. Now, the federal authority on banker pay says that nearly 80 percent of that sum was unmerited.

Just as a thought experiment, mind you, try to imagine how much could be cut from the federal, state and local budgets if government pay were based on merit. Now throw in all of the public sector jobs.

Would that not end just about all of our budget deficits on every level and take care of the underfunded pensions, as well?

We need to expand Mr. Feinberg’s powers. He is wasting his time piddling around with a handful of banks.

In a report to be released on Friday, Kenneth R. Feinberg, the Obama administration’s special master for executive compensation, is expected to name 17 financial companies that made questionable payouts totaling $1.58 billion immediately after accepting billions of dollars of taxpayer aid, according to two government officials with knowledge of his findings who requested anonymity because of the sensitivity of the report.

Which averages out to $92 million a bank. By the way, weren’t a lot of these bonuses based employee contracts? Maybe they weren’t in these cases, but they often are in other businesses.

The group includes Wall Street giants like Goldman Sachs, JPMorgan Chase and the American International Group as well as small lenders like Boston Private Financial Holdings. Mr. Feinberg’s report points to companies that he says paid eye-popping amounts or used haphazard criteria for awarding bonuses, the people with knowledge of his findings said, and he has singled out Citigroup as the biggest offender.

Even so, Mr. Feinberg has very limited power to reclaim any money. He can use his status as President Obama’s point man on pay to jawbone the companies into reimbursing the government, but he has no legal authority to claw back excessive payouts.

Mr. Feinberg’s political leverage has been weakened by the banks’ speedy repayment of their bailout funds. Eleven of the 17 companies that received criticism in the report have repaid the government with interest, so they have no outstanding obligations to reimburse.

It’s it odd the way the New York Times put this? They sound positively crushed that these banks paid back their loans.

As a result, Mr. Feinberg will merely propose that the banks voluntarily adopt a “brake provision” that would allow their boards to nullify or alter any bonus payouts or employment contracts in the event of a future financial crisis. All 17 companies have told Mr. Feinberg that they will consider adopting the provision, though none has committed to do so.

Mr. Feinberg wants to ‘brake’ the banks.

Mr. Feinberg is expected to call the payouts ill advised but not unlawful or contrary to the public interest, the people with knowledge of his report said.

That is kind of him. Though note how far down in the story this detail is mentioned.

On Wall Street, meanwhile, profits and pay have already rebounded. Goldman Sachs is on pace to hand out an average of $544,000 per worker in salary and bonuses, though many could earn several times that amount. JPMorgan Chase’s investment bank is on track to pay its workers, on average, about $425,000, while the average Morgan Stanley employee could collect about $260,000

These are outrageous sums. Who do these people think they are? Public servants? City managers?

Mr. Feinberg spent five months reviewing compensation paid to each company’s 25 highest earners between October 2008, when the first bailouts were dispensed, and February 2009, when the stimulus bill took effect. He narrowed his scrutiny to about 600 executives at 17 banks, with payouts totaling $2.03 billion.

Mr. Feinberg’s criteria for identifying the worst offenders were large payouts, in aggregate or to specific individuals; overly generous exit packages; or a failure to provide clear performance criteria or other rationale for extra pay.

Mr. Feinberg then approached each of the 17 companies with his proposed remedy during conference calls over the last two weeks. The 11 companies that have fully repaid their bailout money are American Express, Bank of America, Bank of New York Mellon, Boston Private, Capital One Financial, Goldman Sachs, JPMorgan, Morgan Stanley, PNC Financial, US Bancorp and Wells Fargo.

The six companies that have not fully repaid their bailout funds are A.I.G, Citigroup, the CIT Group, M&T Bank, Regions Financial and SunTrust Banks

Roughly two-thirds of the outsize payouts were from bonuses awarded to Andrew Hall and another trader who were part of the bank’s Phibro energy trading unit.

Why weren’t these gentlemen just rewarded with extra carbon credits?

Citigroup sold that business to Occidental Petroleum last fall, under pressure from Mr. Feinberg, after the disclosure that Mr. Hall had received a $100 million payout.

Mr. Feinberg is not expected to name individual executives who received the highest awards

Why not? Should they not be put in the publically humiliated, like the Chinese did during the glorious days of the ‘Cultural Revolution’?

Aren’t we enjoying our very own ‘Cultural Revolution’?

What is Chinese for ‘Czar’?

This article was posted by Steve on Friday, July 23rd, 2010. Comments are currently closed.

8 Responses to “Feinberg: Bank Bonuses Were Unmerited”

  1. NoNeoCommies says:

    Why work for the banks if they can nullify contracts?
    If you are smart enough to fill these positions, you can probably get voted into a congressional seat where you can rape the taxpayers while enriching yourself and never be called to heel by your “fellows” (just ask Charlie Rangel).

  2. BillK says:

    Let’s also never forget most of these banks never wanted any TARP cash; they were told to take it.

  3. confucius says:

    Chinese for “czar” is 沙皇. (Pronounced “O-bah-mah.”)

  4. tranquil.night says:

    Feb. 10 (Bloomberg) — President Barack Obama said he doesn’t “begrudge” the $17 million bonus awarded to JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon or the $9 million issued to Goldman Sachs Group Inc. CEO Lloyd Blankfein, noting that some athletes take home more pay.

  5. canary says:

    Obama & Tim Geithner knew the bonus language was in the contract, and they’d have done no different than the bank executives done. Just Like

    Michelle Obama took money for poor sick people, when she wasn’t working at that hospital.


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