The Associated Press is reporting(1) that there is growing bipartisan demand that no monies from the EESA bailout bill be used to bolster executive pay.
“Funds made available under the economic rescue package should not be used to pay for bank acquisitions, raises and executive bonuses,” wrote House Republican leader John Boehner of Ohio.
House Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Harry Reid, D-Nev., wrote “to express concern about the level of compensation” for top executives at banks set to receive bailout dollars.
The comments from Reid and Pelosi come after it was reported that “recent news reports revealed executives from six institutions in the program are set to receive billions of dollars.”(2)
Additionally some banks are using their EESA money to acquire other banks and thrifts and not make loans or other lines of credit available. One example is “PNC Financial Services Group Inc.’s Oct. 24 takeover of National City Corp. in Cleveland after receiving $7.7 billion from the government.”(3)
In his column on Saturday, Joe Nocera of The New York Times told about a conference call that he had listened in on recently between employees and executives of JPMorgan Chase. Asked how an infusion of $25 billion of bailout funds would change the bank’s lending policy, an executive said the money would be used to buy other banks.
“I think there are going to be some great opportunities for us to grow in this environment, and I think we have an opportunity to use that $25 billion in that way,” the executive said. He added that the money could also be used as a backstop in case “recession turns into depression or what happens in the future.”(4)
Meanwhile you have Senator Waxman demanded that the nation’s nine largest banks prove they are not using an emergency infusion of $125 billion in taxpayer funds to lavish their executives with wealthy bonuses.(5) In the article Scott Talbott, of the Financial Services Roundtable, which represents the nation’s most powerful banks, brokerages and insurers, said -
“Waxman’s barking up the wrong tree. We reject his basic premise. The institutions fully intend to use the money to start making loans.”
In response to the growing pressure from constituents, Reid and Pelosi have drafted a joint letter to Secretary Paulson -
The Reid/Pelosi letter urges Paulson to “go beyond the letter of the law” to keep the payments in check. “We hope you will seriously consider strengthening the restrictions on executive compensations that apply to institutions participating in the CPP,” it said. “We would urge you, in particular, to consider the possibility of further restrictions on the use of ‘golden parachutes’ at such institutions.”(6)
Most of the outrage comes after the Guardian reported that Wall Street will be paying their executives $70 billion in compensation -
Guardian report revealed that six distressed institutions had drawn up pay plans, including substantial discretionary bonuses, worth more than $70bn for the first nine months of the year.(7)
Executives are still raking in the money even as or after their institutions have failed or taken EESA money.
- AIG had agreed to freeze $19 million in compensation for its former chief executive and another $600 million that was set aside for other executives.(8)
- Citigroup and JP Morgan – 25.9 billion each in compensation/bonuses.(9)
- Goldman Sachs – 11.4 billion.(9)
- Morgan Stanley – 10.73 billion.(9)
- Merrill Lynch – 11.7 billion.(9)
Start Footnotes
- See full AP article here. [↩]
- Source of quote on executive pay here. [↩]
- Source of PNC quote here. [↩]
- Source of quote here. [↩]
- See full article on Waxman and House Committee on Oversight and Government Reform here. [↩]
- Source of Paulson letter quote here. [↩]
- See full Guardian article here. [↩]
- Source here. [↩]
- Source here. [↩][↩][↩][↩]
End Footnotes.
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