As bankers were arriving in Washington to absorb some populist rage from a congressional panel, I learnt that 696 individuals at Merrill Lynch and Co. got bonuses last summer. You remember Merrill Lynch, the once-proud institution that on the eve of its implosion was bought by Bank of America Corp. (BoA), a company that later got billions of dollars in government bailout money?
I would very much like to locate Employee 697. If 696 people who helped destroy the company still got at least $1 million (Rs4.87 crore) each for their effort, imagine what No. 697 must have done not to get it. Did he lend his cousin money to buy a pool hall or dip into the till in broad daylight rather than just wait for the cash to come to him for a job badly done?
My turn: TARP recipient financial institution leaders appearing before the House financial services committee on Capitol Hill in Washington on Wednesday: (from left) Goldman Sachs’ Lloyd Blankfein, JPMorgan Chase’s Jamie Dimon, Bank of New York’s Robert Kelly, Bank of America’s Ken Lewis, State Street’s Ronald Logue, Morgan Stanley’s John Mack, Citi’s Vikram Pandit and Wells Fargo’s John Stumpf. Larry Downing / Reuters
It had to be something pretty drastic to cross the line drawn by former Merrill chief John Thain, who will go down in history as the man who couldn’t work in an office without a $1,400 wastebasket and $35,000 commode while people were losing their homes. “Secretly and prematurely,” we learnt from New York attorney general Andrew Cuomo, Thain gave bonuses totalling $121 million to four top executives, and $3.6 billion in all, with Bank of America’s “apparent complicity”. The only people who didn’t know were the financial geniuses at the treasury and the taxpayers, who take it in the wallet again.
All these years I’ve wondered why I never put enough money together to buy a summer cottage. I understand now. I should have spent the last few years screwing up a bank. I’m sure I could have figured out how to do it so as not to find myself passed over like Employee 697. By now I’d own a mansion. If I were as good at failing as former Lehman Brothers Holdings Inc. chief executive officer Richard Fuld, I’d own six.
Wednesday was a very bad day on Capitol Hill for the increasingly angry public, who thought Congress might carry pitchforks and torches for them at hearings featuring eight bankers.
Together, the group consumed $125 billion of government rescue funds, and counting. Together, they give new meaning to “let them eat cake”, with most keeping their fleets of aircraft, one contracting to buy a new jet, some taking luxurious junkets, and others taking out costly full-page ads to justify junkets, all the while not using the government money to shore up the foundering credit market.
With the “Government Sachs” people of the Wall Street-friendly George W. Bush administration gone, Congress and the new administration were going to take on all of that. No more mister nice guy. House financial services committee chairman Barney Frank and his posse were going to humiliate the guys in the well-tailored suits the way they did the auto executives. What a disappointment. There was a little chiding here and criticism there, but overall the members exuded disappointment, as if they were parents upset—but understanding—that the family car got dented. Hey, the kids are going to do better.
Citigroup Inc. CEO Vikram Pandit acknowledged that his intended purchase of a corporate aircraft was a mistake, a sign that he is “embracing the new realities”. Note that he didn’t cancel it before it was discovered.
BoA’s Ken Lewis let it be known that he had arrived at the hearing by train. He could have rolled in on a Big Wheel and it wouldn’t make up for what he’s done. The previous day, treasury secretary Timothy Geithner was no more reassuring. It was obvious that the new financial rescue plan wasn’t going very far to correct the old plan.
The idea of channelling the money through home owners, which would fix just about every troubled mortgage, was rejected earlier, and The New York Times reported that an Obama adviser who wanted to fire bad bankers and set stringent rules for the next tranche of money was overruled.
After hearing repeatedly about “an outline” and getting no specifics on the plan, senator Lindsey Graham, a South Carolina Republican, looked straight at Geithner and said, “You have no clue.” That’s scary. Remember Geithner was the one whose tax shenanigans we had to overlook because he was too big to fail.
To get a feel for the character of the people we are dealing with, listen to the audio of a conference call obtained by the The Huffington Post.
In it, Morgan Stanley co-president James Gorman reassured his employees about their bonuses. “Please do not call it a bonus,” Gorman said. “It is an award.” He wanted to remove any “anxiety” they were feeling, as if they had consciences. Gorman explained that it takes money to retain your best employees. Really? There’s competition for executives who drove the economy off the cliff? “I can hear you clapping from here in New York,” Gorman concluded.
On Capitol Hill, they huffed and puffed ever so slightly while preparing to give billions to the same bad banks led by the same bad bankers. Frank said with a whimper and not a bang, “We have to use existing institutions,” adding that some benefits will go to those running the banks. Representative Peter King says we should stop blaming bankers. Please no more wrecking the car. Here’s your allowance.
There’s a trickle of hope for some justice for those who took advantage of the public-for-private gain. There is a new special inspector general looking at 38 cases of misuse of rescue funds. Perhaps we should keep Gitmo open for financial detainees. Dick Cheney is gone, so there will be no waterboarding, but the interrogation techniques should be sharper than the questions asked on Wednesday.