Thursday, June 25, 2009
TARP Recipients Citigroup And Goldman-Sachs Handing Out Windfall Pay Hikes And Bonuses, And Senator Bob Bennett Helped Set The Stage
TARP (Troubled Assets Relief Program) recipients Citigroup and Goldman-Sachs are showing their gratitude to the American people for their generosity - by handing out windfall pay hikes and bonuses to executives and employees in a year when millions of other Americans have lost jobs and homes. Stories published by MoneyNews, CNNMoney, CNBC, ABC News, and BusinessAndMedia.
Citigroup, which received $45 billion in TARP funds according to CNN, intends to raise employees' base salaries by as much as 50 percent this year to offset smaller annual bonuses. For some Citigroup investment bankers and traders, the changes could mean salary increases of as much as 50 percent, depending on their position. Legal and risk management employees, as well as those in the credit card and consumer banking units, whose pay is typically skewed toward salary, rather than bonuses, are expected to receive smaller increases. In addition, Citigroup also plans to award millions of new stock options to employees; the increase in stock is further discussed on Republic Broadcasting. Company officials declined to discuss the issue on the record with media sources, but explained that the changes would bring the bank's compensation plan in line with the general Wall Street view that bonuses are a form of deferred salary and not one-time payouts.
Of course, Citigroup regurgitated the tired old canard about how they want to remain "competitive" and to "attract the best employees". They further claimed that "any salary adjustments are not intended to increase total annual compensation, rather to adjust the balance between fixed and variable compensation".
The Obama Administration's new "pay czar" Kenneth Feinberg held introductory meetings this week with Citigroup executives and their counterparts at several other companies that have received federal bailout funds. Feinberg has the authority to set compensation for only the top 100 employees at troubled companies, according to the paper.
The American public seems split on this issue. A CNBC poll indicates that out of 1802 respondents as of this post, 49 percent say it's O.K. for them to raise pay, 45 percent say No, and 6 percent are Not Sure. However, CNBC tends to attract wonks who are more favorably disposed to the financial industry, so it may not be representative of "flyover" opinion.
This comes on the heels of an earlier report that Goldman-Sachs was planning to pay out the highest bonuses in its 140-year history. Their earnings are up for several reasons — including a lack of competition, along with increased revenue from trading foreign currency, bonds and fixed income products. However, Goldman-Sachs has already returned $10 billion of Federal bailout funds, so they're free of any Federal constraints.
TARP would not have happened without Congressional approval. And one of the Senators approving it back in October was Utah's Bob Bennett. On his official website, Senator Bennett explained, “I strongly supported the economic rescue plan in October because we were facing a total collapse of the world’s financial markets within days; it was a true emergency and we averted that collapse. Interbank lending has resumed and some liquidity has been injected into the market as a result. I don’t agree with every decision that has been made with respect to how the first half of the money has been used. However, the money has been invested in assets that will allow the taxpayers to recover it over time".
Does Senator Bennett agree with the use of TARP funds to provide windfall bonuses and salaries to investment bankers? Was that one of the decisions he didn't agree with? He will get the opportunity to answer that question numerous times during the next nine months, as four Republican challengers and one Democratic challenger for his seat seek to hold him accountable and even replace him. "Bailout Bob's" days may be numbered.