|AP finds $1.6 billion went to execs of bailed-out banks|
cpowell on 11:21AM ET Sunday, December 21, 2008. Section: Daily
By Frank Bass and Rita Beamish
Sunday, December 21, 2008http://news.yahoo.com/s/ap/20081221/ap_on_bi_ge/executive_bailouts
Banks that are getting taxpayer bailouts awarded their top executives nearly
$1.6 billion in salaries, bonuses, and other benefits last year, an Associated
Press analysis reveals.
The rewards came even at banks where poor results last year foretold the
economic crisis that sent them to Washington for a government rescue. Some
trimmed their executive compensation due to lagging bank performance, but still
forked over multimillion-dollar executive pay packages.
Benefits included cash bonuses, stock options, personal use of company jets
and chauffeurs, home security, country club memberships and professional money
management, the AP review of federal securities documents found.
The total amount given to nearly 600 executives would cover bailout costs for
many of the 116 banks that have so far accepted tax dollars to boost their
Rep. Barney Frank, chairman of the House Financial Services committee and a
long-standing critic of executive largesse, said the bonuses tallied by the AP
review amount to a bribe "to get them to do the jobs for which they are well
paid in the first place.
"Most of us sign on to do jobs and we do them best we can," said Frank, a
Massachusetts Democrat. "We're told that some of the most highly paid people in
executive positions are different. They need extra money to be motivated!"
The AP compiled total compensation based on annual reports that the banks
file with the Securities and Exchange Commission. The 116 banks have so far
received $188 billion in taxpayer help. Among the findings:
-- The average paid to each of the banks' top executives was $2.6 million in
salary, bonuses and benefits.
-- Lloyd Blankfein, president and chief executive officer of Goldman Sachs,
took home nearly $54 million in compensation last year. The company's top five
executives received a total of $242 million.
This year, Goldman will forgo cash and stock bonuses for its seven top-paid
executives. They will work for their base salaries of $600,000, the company
said. Facing increasing concern by its own shareholders on executive payments,
the company described its pay plan last spring as essential to retain and
motivate executives "whose efforts and judgments are vital to our continued
success, by setting their compensation at appropriate and competitive levels."
Goldman spokesman Ed Canaday declined to comment beyond that written report.
The New York-based company on Dec. 16 reported its first quarterly loss since
it went public in 1999. It received $10 billion in taxpayer money on Oct.
-- Even where banks cut back on pay, some executives were left with seven- or
eight-figure compensation that most people can only dream about. Richard D.
Fairbank, the chairman of Capital One Financial Corp., took a $1 million hit in
compensation after his company had a disappointing year, but still got $17
million in stock options. The McLean, Va.-based company received $3.56 billion
in bailout money on Nov. 14.
-- John A. Thain, chief executive officer of Merrill Lynch, topped all
corporate bank bosses with $83 million in earnings last year. Thain, a former
chief operating officer for Goldman Sachs, took the reins of the company in
December 2007, avoiding the blame for a year in which Merrill lost $7.8 billion.
Since he began work late in the year, he earned $57,692 in salary, a $15 million
signing bonus and an additional $68 million in stock options.
Like Goldman, Merrill got $10 billion from taxpayers on Oct. 28.
The AP review comes amid sharp questions about the banks' commitment to the
goals of the Troubled Assets Relief Program (TARP), a law designed to buy bad
mortgages and other troubled assets. Last month, the Bush administration changed
the program's goals, instructing the Treasury Department to pump tax dollars
directly into banks in a bid to prevent wholesale economic collapse.
The program set restrictions on some executive compensation for participating
banks, but did not limit salaries and bonuses unless they had the effect of
encouraging excessive risk to the institution. Banks were barred from giving
golden parachutes to departing executives and deducting some executive pay for
Banks that got bailout funds also paid out millions for home security
systems, private chauffeured cars, and club dues. Some banks even paid for
financial advisers. Wells Fargo of San Francisco, which took $25 billion in
taxpayer bailout money, gave its top executives up to $20,000 each to pay
personal financial planners.
At Bank of New York Mellon Corp., chief executive Robert P. Kelly's stipend
for financial planning services came to $66,748, on top of his $975,000 salary
and $7.5 million bonus. His car and driver cost $178,879. Kelly also received
$846,000 in relocation expenses, including help selling his home in Pittsburgh
and purchasing one in Manhattan, the company said.
Goldman Sachs' tab for leased cars and drivers ran as high as $233,000 per
executive. The firm told its shareholders this year that financial counseling
and chauffeurs are important in giving executives more time to focus on their
JPMorgan Chase chairman James Dimon ran up a $211,182 private jet travel tab
last year when his family lived in Chicago and he was commuting to New York. The
company got $25 billion in bailout funds.
Banks cite security to justify personal use of company aircraft for some
executives. But Rep. Brad Sherman, D-Calif., questioned that rationale, saying
executives visit many locations more vulnerable than the nation's
security-conscious commercial air terminals.
Sherman, a member of the House Financial Services Committee, said pay
excesses undermine development of good bank economic policies and promote an
escalating pay spiral among competing financial institutions â€” something
particularly hard to take when banks then ask for rescue money.
He wants them to come before Congress, like the automakers did, and spell out
their spending plans for bailout funds.
"The tougher we are on the executives that come to Washington, the fewer will
come for a bailout," he said.
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