Is this what we're spending $700 billion on?
Bankers' bonuses equal one-tenth the bailout
| If we had geonomics -- taxed privilege, not efforts, and disbursed revenue to the citizenry in general, not just insiders -- a bailout would not be happening. Since it is, to help you keep track of the $10 trillion and growing federal debt, we trim, blend, and append five 2008 articles: (1) Taxpayers for Common Sense’s Weekly Wastebasket of Oct 31; (2) The Guardian of Oct 18 by Simon Bowers; (3) the Leader-Telegram of Eau Claire Wisconsin of Oct 24; (4) AFP of Nov 4; and (5) USA Today of July 30 by John Waggoner and Barbara Hansen. |
by Jeffery J. Smith, November 2008
- TCS: Banking Bailout Bucks
The Treasury Department’s $700 billion bailout buys taxpayers preferred shares in the banks. What are taxpayers getting for their money? The promise was that the relatively healthy banks getting the cash would start lending again, defrosting the frozen credit markets.
So far, the money is going to pay either bank dividends, satisfy old debts, or to shore up their bottom lines -- and, see below, pay bonuses and take over smaller banks. While banks are a business and see their job as looking out for their shareholders, now that taxpayers are significant investors, they should be working in the nation's interests as well.
Government officials argued that attaching strings to the funds would discourage healthy institutions from participating. But it was the banks and other borrowers who asked taxpayers for the money.
Where should the government draw the line? Now automakers are lining up for tax dollars, too. Yet Little Business can lose money just as well as Big Business.
- Guardian: Wall Street banks in $70bn staff payout
The government's cash has been poured into banks on the condition that excessive executive pay would be curbed. Yet financial workers at Wall Street's top banks are to receive pay deals worth more than $70bn, equivalent to 10% of US government bailout package.
A substantial proportion is expected to be paid in discretionary bonuses -- for their work so far this year.
Germany's Deutsche Bank, on the other hand, said many of its leading traders would join Josef Ackermann, its chief executive, in waiving millions of euros in annual payouts.
While bank executives reap huge gains, many investors in the banks are wiped out. Since the start of the year, shares in Citigroup and Goldman Sachs have declined by more than 45%. Merrill Lynch and Morgan Stanley have fallen by more than 60%. Lehman Brothers collapsed.
At one point the Morgan Stanley $10.7bn pay pot was greater than the entire stock market value of the business; staff, on receiving their remuneration, could club together and buy the bank.
JJS: Bankers don’t always get away with it, at least not foreign bankers. A US federal judge sentenced three British bankers to 37 months in prison each for their roles in the collapse of Enron (MarketWatch, Feb. 22, 2008)
While we give money to big banks who lost billions and still refuse to lend, little banks who were left out still make loans and pay dividends. But where does the money come from?
- L-T: Bailout money used for takeover
Eau Claire-based Citizens Community Bancorp, the holding company for Citizens Community Federal, recently announced a quarterly dividend of 5 cents per share. The cash dividend is the 17th quarterly dividend paid since the bank's mutual-to-stock conversion in March 2004.
In others news regarding banks with ties to the Wisconsin and Minnesota area:
Associated Banc-Corp reported net income of $37.8 million, or 30 cents a share, for the third quarter ending Sept. 30 compared with $71.7 million in the year-ago period. Associated also reported a cash dividend of 32 cents per share, the company's 155th straight quarterly cash dividend.
U.S. Bancorp reported a total deposit growth of $4.4 billion, or 3.2 percent, for the third quarter that ended Sept. 30. Diluted earning per common share was 32 cents, lower than the 62 cents reported for the third quarter of 2007.
PNC Financial Services Group s is acquiring National City for $5.58 billion, the first bank to use fresh investments from the federal bailout to make an acquisition.
- AFP: Is the bailout keeping us out of recession?
Thirty US states were mired in recession in September, and 19 others are at risk of falling into recession -- a decline in a state's GDP on average over a six-month period, compared with the prior six-month period -- in the coming months, a survey by ratings agency Moody's Investors Service said.
JJS: Better use the stats than professional economists’ guesses. The closer that a survey of the pros got to the actual downturn, the more sanguine economists became.
In the USA Today survey of 54 economists at corporations, universities, and trade associations of April, 67% thought the economy was in recession. In July, only half thought the U.S. was in recession and said the economy was likely to narrowly avoid a recession this year.
A better indicator than GDP, which can be puffed up by government spending, are such as employment, personal income, industrial production and retail sales.
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Jeffery J. Smith runs the Forum on Geonomics.
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Also see: Stocks may fall, but execs' pay doesn't
Eliot's Mess
Usury, tax evasion, golden parachutes -- bankers go scot free |
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