Despite the worst financial crisis since the Great Depression, Wall Street firms expect to pay billions in executive bonuses after being shored up with billions in taxpayer dollars.
Merrill Lynch & Co. lost money for five straight quarters and its stock dropped 70 percent this year. Yet, it set aside about $6.7 billion to pay bonuses this year, according to a Bloomberg analysis.
"I think it's sickening when I hear these stories," Democratic Rep. Jason Altmire of McCandless said Wednesday. "The Wall Street firms are tone deaf. They don't understand the American people are outraged at this type of behavior."
Many banks paying bonuses are receiving billions in capital from the Treasury department as part of the government's $700 billion financial rescue plan. The Troubled Asset Relief Program, known as TARP, was announced in September.
Stock brokerage giant Merrill Lynch is receiving $10 billion from the government. The struggling institution is merging into Bank of America.
Bank of America, which is getting $15 billion from TARP, is offering bonuses equaling up to 100 percent of revenue Merrill's brokers generate, in order to retain them, said Bloomberg.
"The public is angry about this, and they should be," said Joan Claybrook, president of Public Citizen, a consumer advocacy organization in Washington.
"(Wall Street executives) are the ones who caused this economic crisis, and they are the ones who should be asked to sacrifice," said Claybrook.
National City Corp. is not receiving government money -- but tried to. The struggling Cleveland-based bank applied to the Treasury for money but was told Oct. 19 it would not receive any, according to a recent Securities and Exchange Commission filing.
Five days later, National City agreed to merge into PNC Financial Services Group in a $5.6 billion deal. PNC, in turn, will get $7.7 billion -- more than enough to cover the acquisition -- from the Treasury in exchange for preferred stock.
National City spokeswoman Kristen Baird Adams declined to discuss the issue yesterday, saying it was "inappropriate for us to comment for your story on bonuses, given our pending merger with PNC."
PNC spokesman Fred Solomon said: "PNC will comply with the rules governing TARP participants, and the (board's) compensation committee shortly will start the annual process of carefully considering compensation decisions."
The Wall Street bailout passed by Congress states the five highest-paid executives cannot receive rich severance packages known as "golden parachutes," but it doesn't address bonuses. Altmire said he voted against the bailout for that reason.
"Wall Street firms will say the money isn't from the bailout," said Altmire. "But there is no separate pot of money. You have all the money in your budget, and you decide what to do with it."
Said Claybrook: "The deal was the $700 billion bailout would provide money to banks to increase their liquidity to extend credit to businesses and the public.
"The public's irritation with this is we're going into debt as a nation to try to save the economy, and then these banks are using the money to pay bonuses to executives," she said. "The cost is equal to about $3,000 to $4,000 per citizen, yet many are losing their homes. It's morally and economically wrong."
Fifth Third Bancorp, which operates 13 branches in the Pittsburgh region, is another TARP recipient -- $3.45 billion. The Cincinnati bank's stock fell 63 percent this year.
"At this particular point in time, we do not have a decision with respect to executive bonuses. That's a decision that will be made in January 2009," said bank spokesman Debra DeCourcy.
Bank of New York Mellon Corp. is receiving $3 billion from the government in exchange for preferred shares in the New York-based institution. It was among the nine major institutions chosen by the Treasury to jump-start TARP.
"We are not using the $3 billion from the capital infusion to pay bonuses or dividends," said BNY Mellon spokesman Ron Gruendl. The bank hasn't determined executive bonuses for 2008, he said.
Spokesmen for Citizens Financial Group could not be reached for comment.
No comments:
Post a Comment