Banks Paid $32.6B in Bonuses While Receiving $175B in Bailout Funds

Nine of the nation’s biggest banks that received $175 billion in taxpayer dollars through TARP, gave employees $32.6 billion in bonuses in 2008, the office of New York Attorney General Andrew Cuomo said Thursday in a report detailing the payouts.

– Citigroup Inc. (NYSE:C) and Merrill Lynch, which has been taken over by Bank of America (NYSE:BAC), posted $54 billion in combined losses last year. They received $55 billion in federal TARP money. Nonetheless, the two struggling investment banks awarded nearly $9 billion in bonuses.

– At Merrill the top 149 received $858 million. In total the bank, which lost $27.6 billion for the year, paid out $3.6 billion, including a combined $121 million to four top employees.

– Citigroup, gave 738 of its employees bonuses of at least $1 million, even after it lost $18.7 billion during the year. The bank’s top four recipients received a combined $43.7 million.

– Bank of America, which also received $45 billion in TARP money, paid $3.3 billion in bonuses, with 172 employees receiving at least $1 million and the top four recipients receiving a combined $64 million.

– Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS), and JPMorgan Chase & Co. (NYSE:JPM), paid out a total of $18 billion in bonuses in 2008 while receiving a combined total of $45 billion of government bailout money. Together, the three firms earned $9.6 billion last year. The report said bonuses for Goldman, Morgan Stanley and JPMorgan Chase, were “substantially greater” than the banks’ net income.

Those are just some of the findings in Cuomo’s report titled No Rhyme or Reason: The ‘Heads I Win, Tails You Lose’ Bank Bonus Culture.

“There is no clear rhyme or reason to the way banks compensate and reward their employees,” Cuomo’s office said in the 22-page report which was sent to Congress Thursday. “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. Bonuses and overall compensation did not vary significantly as profits diminished.”

Banks have said they are forced to pay their top performing employees to prevent them from defecting to competitors.

“We recognize, of course, that there can be situations where the distribution of profits to employees who created real profits would be appropriate even though the overall firm may have lost money,” Cuomo said. “This might be the case, for example, where one division of a firm earned large profits but another division lost profits.”

“A principled and consistent approach would, however, balance the need to reward and retain those who created profits with the need for bonuses to reflect the overall performance of the firm.

“In any event, our investigations have shown numerous instances where large bonuses were paid to individuals in money-losing divisions at firms who saw either substantially reduced profits or losses in 2008.”

The U.S. House Financial Services Committee approved legislation on Tuesday that would allow regulators ban incentive pay at banks and give shareholders a vote on bonuses. The bill would let banking agencies and the SEC to bar compensation practices that push financial companies to take inappropriate risks.

Disclaimer: This page contains affiliate links. If you choose to make a purchase after clicking a link, we may receive a commission at no additional cost to you. Thank you for your support!

Be the first to comment

Leave a Reply

Your email address will not be published.


*

This site uses Akismet to reduce spam. Learn how your comment data is processed.