Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
The Best “Pick-and-Shovel” Play for the Online Grocery Boom - 18th July 19
Is the Stock Market Rally Floating on Thin Air? - 18th July 19
Biotech Stocks With Near Term Catalysts - 18th July 19
SPX Consolidating, GBP and CAD Could be in Focus - 18th July 19
UK House Building and Population Growth Analysis - 17th July 19
Financial Crisis Stocks Bear Market Is Scary Close - 17th July 19
Want to See What's Next for the US Economy? Try This. - 17th July 19
What to do if You Blow the Trading Account - 17th July 19
Bitcoin Is Far Too Risky for Most Investors - 17th July 19
Core Inflation Rises but Fed Is Going to Cut Rates. Will Gold Gain? - 17th July 19
Boost your Trading Results - FREE eBook - 17th July 19
This Needs To Happen Before Silver Really Takes Off - 17th July 19
NASDAQ Should Reach 8031 Before Topping - 17th July 19
US Housing Market Real Terms BUY / SELL Indicator - 16th July 19
Could Trump Really Win the 2020 US Presidential Election? - 16th July 19
Gold Stocks Forming Bullish Consolidation - 16th July 19
Will Fed Easing Turn Out Like 1995 or 2007? - 16th July 19
Red Rock Entertainment Investments: Around the world in a day with Supreme Jets - 16th July 19
Silver Has Already Gone from Weak to Strong Hands - 15th July 19
Top Equity Mutual Funds That Offer Best Returns - 15th July 19
Gold’s Breakout And The US Dollar - 15th July 19
Financial Markets, Iran, U.S. Global Hegemony - 15th July 19
U.S Bond Yields Point to a 40% Rise in SPX - 15th July 19
Corporate Earnings may Surprise the Stock Market – Watch Out! - 15th July 19
Stock Market Interest Rate Cut Prevails - 15th July 19
Dow Stock Market Trend Forecast Current State July 2019 Video - 15th July 19
Why Summer is the Best Time to be in the Entertainment Industry - 15th July 19
Mid-August Is A Critical Turning Point For US Stocks - 14th July 19
Fed’s Recessionary Indicators and Gold - 14th July 19
The Problem with Keynesian Economics - 14th July 19
Stocks Market Investors Worried About the Fed? Don't Be -- Here's Why - 13th July 19
Could Gold Launch Into A Parabolic Upside Rally? - 13th July 19
Stock Market SPX and Dow in BREAKOUT but this is the worrying part - 13th July 19
Key Stage 2 SATS Tests Results Grades and Scores GDS, EXS, WTS Explained - 13th July 19
INTEL Stock Investing in Qubits and AI Neural Network Processors - Video - 12th July 19
Gold Price Selloff Risk High - 12th July 19
State of the US Economy as Laffer Gets Laughable - 12th July 19
Dow Stock Market Trend Forecast Current State - 12th July 19
Stock Market Major Index Top In 3 to 5 Weeks? - 11th July 19
Platinum Price vs Gold Price - 11th July 19
What This Centi-Billionaire Fashion Magnate Can Teach You About Investing - 11th July 19
Stock Market Fundamentals are Weakening: 3000 on SPX Means Nothing - 11th July 19
This Tobacco Stock Is a Big Winner from E-Cigarette Bans - 11th July 19
Investing in Life Extending Pharma Stocks - 11th July 19
How to Pay for It All: An Option the Presidential Candidates Missed - 11th July 19
Mining Stocks Flash Powerful Signal for Gold and Silver Markets - 11th July 19
5 Surefire Ways to Get More Viewers for Your Video Series - 11th July 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Ridiculous Whining at Citigroup, Bank of America Over Bonuses

Politics / Credit Crisis Bailouts Mar 21, 2009 - 03:34 AM GMT

By: Mike_Shedlock

Politics Best Financial Markets Analysis ArticleIt's going to be interesting to see how quickly Congress and the administration caves in to banks and Wall Street after expressing so much indignation about bonuses over the last week.

Here is the backdrop.


  • Senator Chuck Grassley said AIG "Sucking The Tit Of The Taxpayer".
  • President Obama said "It's hard to understand how derivative traders at AIG warranted any bonuses, much less $165m in extra pay"
  • Obama pressed Treasury Secretary Timothy Geithner to "pursue every single legal avenue" to block the bonuses.

House Passes 90% Tax On Bonuses

The indignation was round one. For additional discussion of round one, please see Bonus Bonanza Bingo, a Blessing In Disguise .

In round two Bonus Tax Heads to Senate After House Passes 90% Levy .

The Senate plans to vote next week on steep levies on employee bonuses after the House overwhelmingly approved a 90 percent tax on bonuses at American International Group Inc. and other companies receiving bailout funds.

The Senate's proposal on companies that got federal money would place a 70 percent tax on the bonuses. Half that amount would be paid by employees, half by the companies.

The 328-93 House vote came amid a national outcry over $165 million AIG paid in bonuses last week after receiving $173 billion in bailout funds as part of the government's efforts to stabilize credit markets. President Barack Obama said he was “stunned” by the bonuses and vowed to recoup the money. Nineteen state governments have begun probes of the AIG bonuses.

“Paying excessive bonuses to the same group of folks that helped get us into this crisis is simply unacceptable,” Senate Finance Committee Chairman Max Baucus said in a statement. “Millions of Americans continue to struggle to get by, counting their dollars, and Congress needs to do the same.”

The House measure would cover companies receiving 75 percent of federal bailout funds, according to the Ways and Means Committee. The Senate proposal would affect a larger pool of workers and the chamber may vote on it next week, said its primary sponsor, Baucus, a Montana Democrat.

Meanwhile, House Financial Services Committee Chairman Barney Frank proposed legislation late yesterday to ban payments at companies getting U.S. aid until the government is repaid.

More Than $250,000

The House bill passed yesterday would affect employees earning more than $250,000 who received bonuses from companies that received more than $5 billion in aid from the Troubled Asset Relief Program.

“These people are getting away with murder,” said House Ways and Means Committee Chairman Charles Rangel of New York. “They're getting paid for the destruction they've caused to our communities.”

The House's 90 percent tax would apply to bonus payments made after Dec. 31, 2008, and it would cease when the U.S. government's investment in the company fell below $5 billion. The tax wouldn't apply to any bonus returned to a company, or to commissions or fringe benefits.

About $3.6 billion in Merrill Lynch & Co. bonuses wouldn't be affected by the new legislation because they were paid before Dec. 31. Bonuses for employees at Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co., Goldman Sachs Group Inc. and Morgan Stanley would be affected because they were paid after Dec. 31.

Banks Fight Back

Hold your horses because round three has begun. Citigroup and Bank of America fired the opening salvos. Please consider Wall Street chiefs grumble about bonus-tax bill .

Citigroup Inc. (C) Chief Executive Vikram Pandit and Bank of America Corp. (BAC) Chief Executive Ken Lewis issued strongly worded internal memos about the proposed tax legislation, according to the online edition of The Wall Street Journal, while J.P. Morgan Chase & Co. (JPM) Chief Executive Jamie Dimon sought to reassure his top executives that the firm is engaging with lawmakers on the matter.

Citi's Pandit criticized the proposed legislation in a memo to employees on Friday, arguing that it could result in the firm losing top talent.

"It would affect countless number of people who will find it difficult, if not impossible, to pay back the bonuses that they earned," Pandit said.

Bank of America's Lewis, for his part, said that he's written to lawmakers about why the proposed tax legislation "is of such grave concern to us," adding that it has "the potential to damage the ability of the government to engineer a financial recovery.

Spare Me The Sap

Citigroup should not be in existence at all. It is a failed zombie bank, kept alive only by the government (taxpayer) guarantee of $300 billion of likely worthless debt, and additional cash infusions amounting to billion of dollars.

Everyone at Citigroup ought to be damn thankful they have a job at all. The same applies to Bank of America.

Pandit's statement is particularly galling "It would affect countless number of people who will find it difficult, if not impossible, to pay back the bonuses that they earned ".

Exactly how many earned anything? Even if they did, why should that be my problem as a taxpayer?

When it comes to being treated fairly, taxpayers have earned that right. Instead we have to listen to ridiculous whining by the CEOs of two failed organizations, begging for taxpayer handouts.

Supposedly this "top talent" will go elsewhere. If so, that would be a good thing especially if it led to the dismantling of Citigroup. I am damn tired of "too big to fail" and all the crap that goes with it.

However, I doubt that anyone is going anywhere. Pray tell exactly who is hiring?

Fannie, Freddie Regulator to Stand Behind Retention Bonuses


Those that believe regulation is the answer to this mess need only consider Fannie, Freddie Regulator to Stand Behind Retention Bonuses .

The regulator for Fannie Mae and Freddie Mac said he still supports the companies' retention bonuses for senior executives.

“The loss of key personnel would be devastating to the companies and to the government's efforts to stabilize the housing system,” Federal Housing Finance Agency Director James Lockhart said in a letter today to House Financial Services Committee Chairman Barney Frank. “FHFA initiated these programs prior to conservatorship as we and our advisors agreed that they were critical to a successful conservatorship. I still believe that.”

Lockhart Is A Fool

Lockhart is a fool. Any regulator in his right mind would be attempting to shut down Fannie Mae and Freddie Mac as opposed to guaranteeing bonuses of "key personnel".

There are exactly ZERO key personnel at Fannie Mae and Freddie Mac because the organizations should not exist at all.

If Lockhart was suggesting keeping people on only so long as to totally dismantle Fannie and Freddie that would arguably be a different matter. Unfortunately that is not what he is saying.

By the way, there is no such thing as a "successful conservatorship". Conservatorship is always and everywhere a failure, by definition.

"Fool" is arguably the wrong word. If Lockhart shut down Fannie and Freddie he would be out of a job. Perhaps "leach" or "parasite" is a better word.

Obama to Weigh Impact of Bonus Tax on Credit Flows

Inquiring minds are wondering if round four is where Obama wimps out. Please consider Obama to Weigh Impact of Bonus Tax on Credit Flows .

President Barack Obama will consider what impact taxing employee bonuses paid by companies that receive taxpayer aid will have on credit flows, his spokesman said.

Obama is balancing assuaging “taxpayer anger and frustration” about bonus payments at American International Group Inc. and other companies with the need to “stabilize the financial system and ensure that credit flows from banks and lending institutions,” White House Press Secretary Robert Gibbs told reporters at a briefing today.

The financial-services industry is warning that allowing a steep tax on bonuses may cause some banks to consider exiting the Troubled Asset Relief Program before their competitors are healthy enough to do so, risking a new freeze of the nation's credit markets.

“This will undermine the recovery efforts,” said Scott Talbott, senior vice president for government affairs at the Financial Services Roundtable, an industry trade group in Washington. “It will decrease industry interest in participating in any recovery program and cast a pall over existing and future contracts.”

Obama said yesterday the vote on the House measure “rightly reflects the outrage” over disclosure of payouts at companies like AIG. He said he looks forward to getting the final legislation.

Gibbs today stopped short of saying Obama would sign the House bill. “That's the evaluation that is being undertaken here,” Gibbs said.

Now we get to see who wimps out first. Will it be Congress, Obama, the banks, or a joint effort?

I am hoping the legislation passes and every bank returns 100% of the TARP funds in response. Reckless lending got us into this mess, it cannot possibly get us out of this mess.

By Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Click Here To Scroll Thru My Recent Post List

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management . Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

Visit Sitka Pacific's Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

I do weekly podcasts every Thursday on HoweStreet and a brief 7 minute segment on Saturday on CKNW AM 980 in Vancouver.

When not writing about stocks or the economy I spends a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com .

© 2009 Mike Shedlock, All Rights Reserved

Mike Shedlock Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules