Posted by Mary Bottari on August 21, 2009

A short time ago, New York Attorney General Andrew Cuomo released a report focusing on the bank bonuses paid out by the biggest banks in 2008, the same year they were bailed out by federal taxpayers. The report notes that in many instances the bank bonuses exceeded bank profits, the implication being that taxpayer dollars were being used to subsidize the salaries of the ace banking executives who created the financial crisis in the first place.

Highlights from the report No Rhyme or Reason: The Heads I Win, Tails You Lose Bank Bonus Culture include:

Two firms, Citigroup and Merrill Lynch, suffered massive losses of more than $27 billion at each firm. Nevertheless, Citigroup paid out $5.33 billion in bonuses, and Merrill paid $3.6 billion in bonuses. Together, they lost $54 billion, paid out nearly $9 billion in bonuses and then received TARP bailouts totaling $55 billion.

For three other firms—Goldman Sachs, Morgan Stanley, and JPMorgan Chase—2008 bonus payments were substantially greater than the banks' net income. Goldman earned $2.3 billion, paid out $4.8 billion in bonuses, and received $10 billion in TARP funding. Morgan Stanley earned $1.7 billion, paid $4.475 billion in bonuses, and received $10 billion in TARP funding. JPMorgan Chase earned $5.6 billion, paid $8.69 billion in bonuses, and received $25 billion in TARP funding. Combined, these three firms earned $9.6 billion, paid bonuses of nearly $18 billion, and received TARP taxpayer funds worth $45 billion.

In sum, Mr. Cuomo wrote:

Thus, when the banks did well, their employees were paid well. When the banks did poorly, their employees were paid well. And when the banks did very poorly, they were bailed out by taxpayers and their employees were still paid well.

Why hasn’t anyone been prosecuted for looting the American taxpayer? Indeed, the number of prosecutions involving the banking boondoggle is—dare I say it? Criminally small.

One "bonus bailout" did end up in court. You remember the brouhaha when it became known that Merrill Lynch (headed by John Thain of the million dollar bathroom remodel) paid out a $3.6 billion dollar bonus package to executives shortly after it had lost $27 billion and shortly before it was acquired by [Bank of America] (BofA)? Well, the Securities and Exchange Commission (SEC) stirred from its decade-long snooze and decided to investigate the bonus bonanza. Eventually, it fined the company for not telling its shareholders about the package. All well and good, except it fined the company $33 million, which is less than 1% of the $3.6 billion looted from taxpayers.

Fortunately, a federal judge, Jed Rakoff, who was required to review the settlement, flatly refused to approve it. Judge Rakoff said that BofA and Merrill had "lied to their shareholders." He said that the $3.6 billion in bonuses paid by Merrill, as the ailing brokerage giant was taken over by the bank, was "effectively from Uncle Sam." At least this judge is demanding more accountability. The next hearing on the issue will be on August 24th.

So, will SEC chair Mary Shapiro be handed a spine and a double expresso? Will Merrill’s John Thain and BofA’s Kenneth Lewis be cuffed? Stay tuned.

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Mary Bottari is the director of the Real Economy Project to be launched by the Center for Media and Democracy in September, 2009.

Mary Bottari

Mary Bottari, CMD's Deputy Director, is an experienced policy wonk and consumer advocate who has served as a senior analyst on trade.

Comments

Welcome, and I hope you pull no punches in your remarks. Read a little of Matt Taibi's The Great Derrangement and you'll know what I mean by that. Also, reach out to others like Naomi Klein and such with views differing from the "market mavens" on the "hill" and elsewhere. Globalization may be unstoppable but it could at least offer more social justice than the "freedom to choose" your own form of poverty or employment as the market's solution to every g.d. thing.

The honest working man in U.S gets boned, and the big mouths who run the country pretend they are doing a great job. President Obama was "hope", but now every "working" American needs to wake up too! I love the judges who stand up for your people, those who have integrity to use their authority to challenge the actions of the real thieves who will cripple the country.
Do something to stop the greedy finance crowd from killing a great nation

I wish there was something we could do...but I think it's too late. By the time people in this country wake up, it will be too late. My dear friends, we are all indentured slaves to corporate America. The middle class has been reduced to lower class, and the poor are almost in the streets...it's a shame. I'm watching the memorial service for Teddy Kennedy right now and thinking that...our lion, our voice...is gone. We have no one to stick up for us anymore. We're going to have to do this for ourselves, but...I fear that we, the American People, just don't have it in us anymore. Corporate America has ALL the politicians in their pocket!! You know it's funny, we keep voting the same players in, expecting different results, but you know what ?? That's insanity !! Doing the same things over and over and over and expecting a different result IS INSANITY !!! People, WE NEED TERM LIMITS, so we don't keep doing the same thing over and over again. Our goverment is in bed with corporate america and looking out for THEIR INTEREST, not ours !! We also need to let corporate america know that we are in a different time, and AMERICA THE CASH COW IS DONE !! Why is it that CEO's in this country make more than our president for DOING NOTHING ??! WHY IS THAT...BECAUSE WE LET THEM !!! People use what God gave you...THINK, THINK, THINK !!!

I agree with your post entirely.

I think where we've failed is in elementary and secondary education. When I was young, we talked about civic responsibilities seriously. As my child goes through the system today, I must raise that subject and educate him myself, hoping that he will help reverse the trend someday.

It is ultimately up to us to create thinking children.

I think that many people do not understand two things about business, generally.

First, business leaders simply don't care. They don't care about you, what you think, whether or not you have a job, or whether or not you don't like their bonus payouts.

Second, they do whatever they want simply because they can.

So, why do we allow that?

Siimply put, "we, the people" don't allow it. Rather, our leaders allow it. And allow it they must, in order to pay for their re-election campaigns and to connect their families to amazing business opportunities.

On regulation itself -- I'm no fan of government regulation but, as we found in 1929 and 2008, the costs of insufficient regulation far outweigh the benefits. Moreover, if the regulatory bodies themselves remain under-powered and morally disconnected, then even reasonable regulation will never work.

Can this be changed?

Perhaps it is time for public financing of federal electoral campaigns... Can it be worse than what we have now?