In the waning days of the Bush administration, and before the implementation of restrictions on some executives’ pay, the highest paid bankers at 17 of the firms bailed out by the Bush Treasury’s Troubled Asset Relief Program (TARP) also got bonuses totaling $1.6 billion in the period from October 2008 to February 2009.
Kenneth Feinberg, the Obama administration’s special master on executive pay, issued a report today identifying the 17 banks, many of them among the nation’s largest, following an inquiry into compensation at all firms receiving TARP funds. The report does not include specifics on the amounts paid out at any of the banks.
NPR reports:
At a news conference on Friday, Feinberg stressed that the firms did nothing illegal, but that their actions reflected “bad judgment” that was “contrary to the public interest.”
Later, President Obama, speaking briefly at the White House, said the review was meant to put firms on notice “that continued to pay out lavish bonuses” as they received government assistance.
The inquiry focused on the five month period during which banks received TARP money but were not yet subject to the new compensation oversight provisions. During those five months alone nearly 3 million American workers had their jobs taken from them by the Great Recession caused by Wall Street and the Bush administration’s failures.
Of the 17 banks identified, 6 have not yet repaid the TARP funds. NPR provides a list:
Here are the 17 firms that Feinberg says made ill-advised payments. Those that have not yet fully repaid taxpayer bailouts are listed in bold:
* American Express
* AIG
* Bank of America
* Boston Private Financial Holdings
* Capital One
* CIT
* Citigroup
* JPMorgan Chase
* M&T Bank
* Morgan Stanley
* Regions Financial
* SunTrust Banks
* Bank of New York Mellon
* Goldman Sachs
* PNC Financial Services Group
* U.S. Bancorp
* Wells Fargo
Tags: banks, TARP, Wall Street
Under the headline “Banks receiving government aid cut loans” in this morning’s USA Today:
Banks that received federal assistance during the financial crisis reduced lending more aggressively and gave bigger pay raises to employees than institutions that didn’t get aid, a USA TODAY/American University review found.
When the Bush administration’s Treasury Secretary Henry Paulson first demanded the TARP funds from Congress in late 2008, he said they would be used to buy the “troubled assets” on bank balance sheets. But that idea was rather fleeting, replaced quickly with the scheme of simply giving the funds principally to the biggest banks to shore up their capital needs.
Throwing money at the banks with no strings attached — virtually no compensation provisions and no requirements to generate lending — allowed Wall Street to survive, prosper and go right back to business as usual.
Without a robust revival of lending, especially to small- and mid-sized businesses, private sector job growth will continue to be inadequate by any measure. Meanwhile, the biggest Wall Street firms, having benefited from the Bush administration’s bailouts, are again generating mega-profits and mega-bonuses trading all manner of higher-risk instruments.
While the outlines of the Wall Street reform plan taking shape in the Senate are generally strong and sound, whether they will be enough to force a real change in the way the financial sector either helps or hinders Main Street remains to be seen.
That’s why it will be important to watch how the plan might be strengthened. Look in particular for possible amendments from Senators such as Sherrod Brown of Ohio and Ted Kaufman of Delaware that could limit the size and scope of banks. It is possible that Senator Byron Dorgan of North Dakota, who was the Senate’s most outspoken critic of the deregulation of Wall Street in 1999, may offer his own amendments to strengthen the regulatory system. Senator Maria Cantwell of Washington is also said to be considering a revived Glass-Steagall provision to once again separate commercial banks from securities trading and investment banking.
Those are just some of the things that will need to be done to make Wall Street reform potent enough to force at least a greater portion of the financial sector toward doing the job of aiding, instead of undermining, jobs and the economy.
Tags: banks, TARP, Wall Street Reform
The Obama administration this week announced a new plan to use remaining TARP funds to boost lending by community and other smaller banks. The idea is to make more credit available for small businesses, to help them grow and create more jobs — and do that with funds still available under the Troubled Asset Relief Program.
This is one good step, and hopefully will be joined by many more good steps to begin to generate real recovery on Main Street.
But to seriously address the devastating employment crisis nationwide, and the weight of the recession on our still-fragile economy and neglected infrastructure, something bigger and bolder must be done.
Here is such a plan in a nutshell:
Direct TARP repayments to help capitalize a new National Infrastructure Development Bank.
Here’s how it might work:
Congress and the Obama administration could work to amend the TARP-authorization legislation to include two types of provisions. One would be to systematically schedule stepped up TARP repayments where and when they are institutionally feasible. The other would be to direct the repayments toward the ongoing and continued capitalization of a National Infrastructure Development Bank, which itself would be created under separate legislation.
The idea for such an Infrastructure Bank is not new. New York Times columnist Bob Herbert promosed it in his May 25 piece this year titled Our Crumbling Foundation
I’m not sure that the catastrophic job losses of this recession, the worst since the Great Depression, have really sunk into the public’s consciousness. And that would mean that the ground has not been prepared for the kind of high-powered remedies needed to get the economy back into some kind of reasonable shape.
America has become self-destructively shortsighted in recent decades. That has kept us from acknowledging the awful long-term consequences of the tidal wave of joblessness that has swept over the nation since the start of the recession in December 2007. And it is keeping us from understanding how important the maintenance and development of the infrastructure is to the nation’s long-term social and economic prospects.
It’s not just about roads and bridges, although they are important. It’s also about schools, and the electrical grid, and environmental and technological innovation. It’s about establishing a world-class industrial and economic platform for a nation that is speeding toward second-class status on a range of important fronts.
The infrastructure bank would be authorized to issue bonds, provide loans and offer loan guarantees to finance large-scale projects. The idea would be to leverage substantial amounts of private capital in support of such projects, and to make more prudent decisions about which projects move ahead.
If the U.S. is to have any hope of getting its economic act together over the next few years, there will have to be a much greater focus on putting people back to work. Rebuilding the infrastructure is the place to start.
Senate Banking Committee chairman Sen. Chris Dodd (D-CT) has long been an advocate of a new National Infrastructure Bank and earlier this year noted:
“President Obama co-sponsored our infrastructure bank legislation as a senator and endorsed the idea during his campaign. So, I’m hopeful to see action on the bill this year.”
Democratic Congresswoman Rosa DeLauro (CT-3) has already introduced legislation this year to launch the National Infrastructure Development Bank, along with colleagues including Representatives Anthony Weiner (NY-9), Keith Ellison (MN-5) and Steve Israel (NY-2), and the proposal has attracted broad support from labor, economists and business.
The National Infrastructure Development Bank Act would fund and create a bank that would direct public and private dollars toward infrastructure projects of national or regional significance – a proposal included in the Obama Administration’s budget, as well as the Budget Resolution.
The National Infrastructure Development Bank, modeled after the European Investment Bank, would leverage private sector dollars to invest in transportation, environmental, energy and telecommunications infrastructure projects. It would objectively consider the economic, environmental, social benefits and costs of infrastructure projects, as well as other specific criteria, and fund projects of significance. The Bank would provide investment opportunities that would supplement current federal programs creating jobs, spurring economic growth and rebuilding an infrastructure system for the 21st century.
Initial capitalizations from stepped up TARP repayments could also be supplemented by the Federal Reserve as well as reinvestments of TARP profits where they exist. Public-private partnerships could be brought together to boost the bank’s lending.
Now, there will be those who would say we must immediately use repaid TARP funds to reduce the deficit, and that redirecting TARP repayments in this way would extend those deficits.
But the problem is you can’t simply move paper around to reduce the deficits in any sustained way. And we are simply not going to be able to do that unless we generate sustained economic growth. Sustained deficit reduction requires sustained economic growth. It was, after all, the relatively sustained growth of the 1950s that allowed us to pay down the debts necessarily incurred by first fighting to offset the Great Depression, and then fighting World War II.
And with the real economy stuck in a liquidity trap with both high unemployment and little traction for growth, a bigger, bolder plan like this one is needed.
Tags: recovery, TARP
