SavvySugar

Citi Jet Purchase: $50 Million, 12-Seat Plane Despite $45 Billion Bailout

Myst — Mon, 26 Jan 2009 10:37:16 -0800

The New York Post's Jennifer Keil and Chuck Bennett reported in Monday's paper that Citigroup, which has received $45 billion in government bailout funds, is about to upgrade to a new $50 million, twelve-seat corporate jet.

The plane, the Dassault Falcon 7X, is a luxurious jet with a range of 5,950 nautical miles (meaning it can fly from New York to all of Europe and South America, as far east as Riyadh, and as far west as Honolulu or Petropavlovsk, Russia). The Post reports it has "plush interior with leather seats, sofas and a customizable entertainment center."

The Dassault website describes the wide, generously appointed cabin, but says the "the airplane's most welcome feature may be Dassault's breakthrough environmental system." It touts "quieting acoustics" and advanced temperature monitoring that contribute to a more comfortable passenger experience.

The Post also reports that Citi executives are "quietly trying to unload two of their older Dassault 930EXs," worth approximately $27 million each.

This is some bullsh*t. You're taking hardworking people's money to spend on something so frivolous as this. I don't understand these executives. Their salaries alone could be used to purchase one of these. Why use OUR money to do it?

GOP Chasing Wall Street Donors

stephley — Thu, 04 Feb 2010 17:01:22 -0800

Republicans are stepping up their campaign to win donations from Wall Street, trying to capitalize on an increasing sense of regret among executives at big financial institutions for backing Democrats in 2008.

In discussions with Wall Street executives, Republicans are striving to make the case that they are banks' best hope of preventing President Barack Obama and congressional Democrats from cracking down on Wall Street.

GOP strategists hope to benefit from the reaction to the White House's populist rhetoric and proposals, which range from sharp critiques of bonuses to a tax on big Wall Street banks, caps on executive pay and curbs on business practices deemed too risky.

Democrats have dominated Wall Street's fund-raising circles in recent elections. Mr. Obama himself raised millions of dollars from employees of Goldman Sachs Group Inc., Citigroup Inc., J.P. Morgan Chase & Co. and other Wall Street firms.

Now, at least some Wall Street executives have reduced their political contributions to the Democratic Party and its candidates, according to fund-raising reports and interviews with executives at financial-services firms.

Last week, House Minority Leader John Boehner of Ohio made a pitch to Democratic contributor James Dimon, the chairman and chief executive of J.P. Morgan, over drinks at a Capitol Hill restaurant, according to people familiar with the matter.

Mr. Boehner told Mr. Dimon congressional Republicans had stood up to Mr. Obama's efforts to curb pay and impose new regulations. The Republican leader also said he was disappointed many on Wall Street continue to donate their money to Democrats, according to the people familiar with the matter.

A spokeswoman for J.P. Morgan declined to comment.

"I sense a lot of dissatisfaction and a lot of buyer's remorse on Wall Street," said Rep. Eric Cantor (R., Va.), the second-ranking House Republican and a top Wall Street fund-raiser for his party.

A complete picture of Wall Street's 2009 campaign donations won't be available for a few weeks. Through the third quarter, campaign-finance reports show that some major Wall Street players began sending an increasing share of their donations to Republicans. Many of those donations came toward the end of this period, because many banks had essentially shut down their political giving at the height of the financial crisis.

Through the first nine months of 2009, about 54% of donations from Bank of America Corp.'s political action committee and employees went to Republicans, according to campaign-finance data compiled by the nonpartisan Center for Responsive Politics. That was a switch from the 2008 campaign, when 56% of the company's donations went to Democrats. Shirley Norton, a BofA spokeswoman, said it doesn't base PAC donations on party affiliation.

Donations from the PACs and employees of J.P. Morgan and Citigroup also trended toward Republicans during the same period, according to the data. Spokeswomen for the banks declined to comment.

During the 2008 campaign, Mr. Obama received nearly $15 million in donations from people who worked in the securities and investment industry, according to the CRP data. Employees of Goldman Sachs donated nearly $1 million to his campaign. By contrast, Mr. Obama's Republican opponent, Arizona Sen. John McCain, received $8.7 million from the securities and investment sector, according to the data.

Wall Street executives who supported Mr. Obama during the presidential campaign said there had been growing signs of discontent. These Democrats predicted that the unease would depress fund raising as the 2010 election heats up.

One major Democratic fund-raiser on Wall Street said that some people who raised money for Mr. Obama's campaign felt burned. "They put themselves on the line internally with their companies for Obama, and now they look stupid," this person said.

The White House referred calls seeking comment on Wall Street donors to the Democratic National Committee. A DNC spokesman said: "It's not surprising that Republicans are seeking money from the same banking industry they are the champions of. The relationship between Wall Street and Republicans is symbiotic."

Recently, Mr. Obama has repeatedly blasted the banking industry and Wall Street in speeches, leading critics to charge that he is vilifying Wall Street for political purposes.

"I see people that philosophically oppose Obama's policies getting a lot more engaged," said former Republican Sen. Phil Gramm, who now serves as the vice chairman of investment firm UBS Securities LLC.

http://online.wsj.com/article/SB2000142405274870357500457504361221646179...

THE MAGIC CIRCLE

liliblu — Fri, 27 Mar 2009 15:41:13 -0700

Posted: Friday, March 27, 2009 2:17 PM by Petra Cahill

From NBC's Chuck Todd

In the midst of the congressional outrage over bonuses and bailouts, many of the very firms who benefitted from TARP funds are still making political donations. And the politicians are still taking them.

According to the latest F.E.C. data for February, several members of Congress who have been critical of the federal government’s bailout of U.S. companies have received campaign contributions just in the last six weeks – from the firms they bailed out.

Campaign-finance-reform advocate Fred Wertheimer says the government's been bailing out banks and other major "too-big-to-fail" firms -- as these same companies continue to use their PACs to make contributions. "It all adds up to kind of a magic circle involving the government, TARP recipients, members of Congress, and campaign contributions." The reality, of course, is that these contributions, individually, aren't a lot of money. But many members of Congress (including Speaker Pelosi and Financial Services Chair Barney Frank) have decided against taking any of the money. The optics of this for both the banks and for the members of Congress is bad, and only feeds the credibility problems both entities have with the American public.

Video: NBC’s Chuck Todd reports on the political contributions some politicians are getting from businesses and other organizations receiving bailout money.

So who is getting money and giving it right back to the politicians? Here’s a list of companies who received at least $1 billion in TARP funds and in February alone also gave money to members of Congress or national parties:

(Note: more TARP-recipients may have given money in February but not every company PAC reports their contributions monthly, some do it quarterly, meaning we won't know until mid-April if these figures are actually higher)

Citigroup
Bank of America
Goldman Sachs
U.S. Bancorp employee PAC
Chrysler
American Express
KeyCorp
BB&T
Huntington Shares

Now here’s a list of House leadership and banking committee members who got money from these bailed-out companies:

(Note: Some members of Congress received contributions directly to their campaign accounts and some received money to their leadership PACs.)

Steve Austria, R-Ohio, $1,000 from Huntington Shares
Spencer Bachus, R-Ala., $5,000 from Bank of America
Melissa Bean, D-Ill., $5,000 from Bank of America
Roy Blunt, R-Mo., $1,500 from U.S. Bancorp employee PAC
John Boehner, R-Ohio, $5,000 from Bank of America; $5,000 from American Express; $1,500 from U.S.
Bancorp employee PAC
Kevin Brady, R-Texas, $1,000 from Citigroup; $1,000 from American Express
Eric Cantor, R-Va., $2,500 from Citigroup; $5,000 from Bank of America; $1,000 from Chrysler; $2,500
from American Express
Jim Clyburn, D-S.C., $1,000 from Bank of America; $5,000 from Bank of America
Joe Crowley, D-N.Y., $5,000 from Bank of American
Joe Donnelly, D-Ind., $1,000 from Chrysler
Vern Ehlers, R-Mich., $1,200 from Huntington Shares
Jeb Hensarling, R-Texas, $1,000 from Citigroup; $5,000 from Bank of America
Steny Hoyer, D-Md., $1,500 from Bank of America; $5,000 from Bank of America
Lynn Jenkins, R-Kan., $1,000 from Citigroup; $1,000 from Bank of America; $1,000 from U.S. Bancorp
Jim Jordan, R-Ohio, $1,000 from Huntington Shares
Mary Jo Kilroy, D-Ohio, $1,000 from Huntington Shares
Leonard Lance, R-N.J., $1,000 from Citigroup; $2,000 from Goldman Sachs
Kevin McCarthy, R-Calif., $1,000 from Citigroup; $5,000 from Bank of America
Greg Meeks, D-N.Y., $5,000 from Bank of America
Gary Miller, R-Calif., $1,000 from Bank of America
Gwen Moore, D-Wis., $2,500 from Bank of America
Richard Neal, D-Mass., $4,000 from Citigroup; $5,000 from Bank of America; $1,000 from American
Express
Randy Neugebauer, R-Texas, $1,000 from U.S. Bancorp employee PAC
Devin Nunes, R-Calif., $5,000 from Bank of America
Glenn Nye, D-Va., $250 from BB&T
Mike Pence, R-Ind., $1,000 from Chrysler
Earl Pomeroy, D-N.D., $1,000 from Chrysler
Mike Rogers, R-Mich., $1,000 from Chrysler
Pete Sessions, R-Texas, $5,000 from Bank of America
Lamar Smith, R-Texas, $1,000 from American Express
Pat Tiberi, R-Ohio, $1,000 from Huntington Shares
Mel Watt, D-N.C., $1,000 from Bank of America; $1,000 from BB&T; $1,000 from U.S. Bancorp
employee PAC

But Senators also benefitted:

(Note: Both Reid and Shelby say they returned their checks.)

Michael Bennet, D-Colo., $1,000 from U.S. Bancorp employee PAC
Robert Bennett, R-Utah, $1,000 from Chrysler
Sherrod Brown, D-Ohio, $1,000 from Chrysler
Richard Burr, R-N.C., $5,000 from Bank of America
Tom Carper, D-Del., $620 from Citigroup; $1,000 from Bank of America; $5,000 from Bank of America
Jim DeMint, R-S.C., $2,000 from Citigroup; $1,000 from Bank of America; $2,000 from BB&T; $1,000
from U.S. Bancorp employee PAC
Johnny Isakson, R-Ga., $1,000 from Citigroup
Blanche Lincoln, D-Ark., $1,000 from Bank of America
Bob Menendez, D-N.J., $5,000 from Bank of America
Jeff Merkley, D-Ore., $2,500 from Citigroup; $4,000 from Bank of America
Harry Reid, D-Nev., $1,000 from U.S. Bancorp employee PAC
Richard Shelby, R-Ala., $5,000 from Bank of America
Arlen Specter, R-Pa., $2,000 from Chrysler
George Voinovich, R-Ohio, $5,000 from Bank of America

And so did the Parties.

The Democrats:
(Note: Both the DSCC and the DCCC say they never received the checks Bank of America reported in their March FEC report)

NDCPAC, $5,000 from Citigroup, $5,000 from Bank of America
Blue Dog PAC, $5,000 from Citigroup; $5,000 from Bank of America
DSCC , $15,000 from Bank of America
DCCC, $15,000 from Bank of America
FourOhDems, $1,000 from Huntington Shares

And the Republicans:

HouseConFund, $5,000 from Bank of America
GOP Main Street, $5,000 from Bank of America
NRSC, $15,000 from Bank of America
NRCC $15,000 from Bank of America

Interestingly, Goldman Sachs actually reported members of Congress who refused to cash their checks, including Rep. Stephanie Herseth, D-S.D., Rep. Pete DeFazio, D-Ore., and then-Congressman and now chief of staff, Rahm Emanuel.

Want to know if your Congressman is getting these contributions?
Check out the FEC’s reports on "Campaign Reports and Data" and "Disclosure Data Search" to search by donor or politician).
(Note: some companies have multiple PACs, like Bank of America.)

What about whether or not your Congressman’s contributors have taken bailout money?
Try here at the Treasury TARP Transactions List.

http://firstread.msnbc.msn.com/archive/2009/03/27/1868569.aspx

Treasury to order bailed-out firms to slash pay

Roarman — Thu, 22 Oct 2009 10:02:04 -0700

WASHINGTON – The Treasury Department on Thursday is expected to order seven companies that have not paid back last year's government bailouts to halve their top executives' average compensation.

The cuts apply to the 25 highest-paid executives at banks and other companies that received the most assistance, with salaries being slashed by as much as 90 percent, according to a person familiar with the matter.

Kenneth Feinberg, the special master at Treasury appointed to handle compensation issues as part of the government's $700 billion financial bailout package, is making the pay decisions. He is scheduled to release the details Thursday afternoon.

The seven companies are Bank of America Corp., American International Group Inc., Citigroup Inc., General Motors, GMAC, Chrysler and Chrysler Financial.

Elizabeth Warren, who heads the Troubled Asset Relief Program's oversight committee, said Thursday on CBS's "The Early Show" that reports of pending slashes in executive salaries are "real."

Smaller companies and those that have repaid the bailout money, including Goldman Sachs Group Inc. and JPMorgan Chase & Co., are not affected.

Tom Wilkinson, a GM spokesman, said Wednesday that the auto company was "currently in discussions with Mr. Feinberg's office regarding executive compensation. We will have further information once those discussions have concluded."

GMAC has "been working on a proposal that aims at embodying the principles set forth for compensation along with balancing the need to retain critical talent necessary to execute our turnaround. Until we receive notification about that plan, we have no further comment," said Gina Proia, a spokeswoman.

Chrysler Group issued a similar statement. Representatives for Chrysler Financial, Bank of America, Citigroup and AIG declined to comment.

But company officials and lobbyists earlier this month said Bank of America, Citigroup, GMAC Financial Services and others were reworking their pay plans to ensure compensation reflects executive performance. They're giving executives more of their compensation in stock and stock options, and spreading pay over a longer period. They are also adopting plans to recapture some pay when bets go bad.

The changes are not limited to those on Feinberg's list. JPMorgan Chase & Co. and Goldman Sachs Group Inc. also are compensating senior employees with more stock and less cash.

In the AIG trading division, the arm of the company whose risky trades caused its downfall, no top executive will receive more than $200,000 in total compensation, the person familiar with Feinberg's plan said. The giant insurance company has received taxpayer assistance valued at more than $180 billion.

In an August filing with the Securities and Exchange Commission, AIG disclosed that new CEO Robert Benmosche would be paid $7 million a year, with the potential to make millions more in performance-based incentives. According to reports from the time, the package included $3 million initially with $4 million in stock to be held for five years as well as performance bonuses.

As CEO, Benmosche's pay would be considered outside of the $200,000 average compensation for AIG's trading unit. But, according to reports at the time, Feinberg saw splitting the salary and future stock bonuses as a model because it tied compensation to the company's long-range performance.

The administration will warn AIG that it must significantly reduce the $198 million in bonuses promised to employees in its financial services division, the person familiar with Feinberg's decisions said.

The pay restrictions for all seven companies will require any executive seeking more than $25,000 in special benefits - things such as country club memberships, private planes and company cars - to get permission for those perks from the government.

Until now, these companies were only required to provide guidelines for the use of such luxuries. The inspector general at Treasury who oversees the bailout program found a range of standards. GM, for instance, generally prohibits employees from flying in private jets for business travel. Bank of America, on the other hand, encourages senior management to use corporate aircraft "for safety and efficiency purposes."

Feinberg's decisions come days after administration officials voiced sharp criticism of plans by some firms, particularly those on Wall Street, to pay huge bonuses even as the country continues to struggle with rising unemployment and the effects of the recession.

Goldman Sachs, which has paid back its bailout money, has said it earmarked $16.7 billion for compensation so far this year, more than $500,000 per employee. Citigroup is paying $5.3 billion in bonuses to its employees and Bank of America $3.3 billion.

Elsewhere, Freddie Mac is giving its chief financial officer compensation worth as much as $5.5 million, including a $2 million signing bonus. The government-controlled mortgage finance company doesn't have to follow the executive compensation rules because it is being paid outside the TARP.

Congress passed legislation in February requiring Treasury to oversee pay at companies that took bailout money. Treasury created the pay czar's office in June as one means of implementing that law.

Treasury's rules require the special master to review pay for the 25 top earners at companies that received "exceptional assistance," examining overall pay structures and recapturing payouts that go against taxpayers' interests.

Feinberg on Tuesday told a Washington audience that negotiating with the companies was a study in contradictions.

"Perfect metrics, competitive pay, no excessive risk, loyalty to the company," he said. "What I have to do under the law - and everyone's waiting" is to create compensation packages "reflecting those often conflicting principals."

Feinberg has until Oct. 30 to design pay packages for top earners.

Source: http://news.yahoo.com/s/ap/20091022/ap_on_bi_ge/us_obama_executive_pay

An interesting read: Treasury Inc.: The Shadow National Debt

Grandpa — Tue, 20 Oct 2009 08:45:43 -0700

Treasury Inc.: The Shadow National Debt

J.W. Verret, guest-blogging • October 20, 2009 2:31 am

(SPOILER…This post describes how most of the NATIONAL DEBT and BUDGET DEFICIT is being FRAUDULENTLY HIDDEN by the OBAMA ADMINISTRATION)

It has been a rare opportunity to share with this forum my new paper, Treasury Inc.: How the Bailout Reshapes Corporate Theory and Practice, forthcoming with the Yale Journal on Regulation and available here. This week we have enjoyed a rigorous discussion about the implications of the government as a shareholder in the financial services and automotive industries.

As I expected from the Volokh community, the comments have offered a rigorous intellectual contribution to my work, and for many of the commentators I recommend reading the full paper for answers to their insightful questions. For this post, I will shift to the implications of Treasury Inc. for the federal budget, the subject of an in-process paper forthcoming with the Louisiana Law Review that will also be the focus of my comments at this years Federalist Society National Lawyer’s Convention.

Government deficits and debt have captured national attention in the last few months owing to their role in the venomous debate over health care reform. Our nation’s debt is officially $11 trillion. Yet the Obama Administration’s deceptive accounting practices for its ownership in the automotive and financial sectors hide a big slice of the real national debt and annual budget deficit. Vice President Cheney quipped that deficits don’t matter. Who knew that President Obama and Vice President Cheney had so much in common?

When Peter Orszag ran the Congressional Budget Office, he fought the Bush administration over consolidating Fannie and Freddie’s debt into the national budget. His position was that two principles of government accounting require consolidation. Principle one, we control these companies; principle two, we guarantee their debt. For more, take a look at, after I testified on this issue here, this press release from the Congressional House Oversight Committee about how I discovered the problem described in this post.

Orszag has been noticeably silent since joining the Obama Administration. Omitting appropriate liabilities from our government’s books is deceptive, allows us to borrow more than we should and feeds our habit for deficit spending.

The administration disputes its control of TARP companies. Yet the government tells GM what kind of cars to build and GM and Citigroup which directors to elect. It tells Fannie and Freddie which mortgages to subsidize. Secretary Geithner affirms that we stand behind the banks, which means we stand behind their debt as well. Budget consolidation principle one, check. Principle two, check.

This doesn’t mean we should consolidate debt of all companies taking TARP money, and government accounting principles aren’t fully prepared for this unique situation. Since the government is acting like a private investor by purchasing common stock, private financial accounting principles also provide useful guidance.

The first useful rule in financial accounting is that consolidation of debt is appropriate where a parent company controls another company by owning a majority of its stock. This covers GM at 60% Treasury ownership, AIG at 85%, and Fannie Mae and Freddie Mac at 100%. The second rule is that even if a shareholder has less than 50% ownership, if the equity and non-equity position of the parent combined make it the beneficiary of most of the company’s future profits, consolidation will also be appropriate. This should clearly cover Citigroup, with 34% government ownership (purchased with $40 billion of TARP money) and an additional $301 billion in outstanding guarantees from Treasury.

Look only at the outstanding debt of these five TARP companies (out of over 600 of them). Citigroup has $1.8 trillion in debt; AIG, $807 billion; Fannie and Freddie, $5.2 trillion; and GM, $10 billion. This means the Administration is hiding $7.8 trillion of the national debt. (As a comparison, Bernie Madoff hid $50 billion in other people’s money and is reviled as the crook of the century. The current administration, by the way, is hiding $7.8 trillion of the nation’s debt.)

The Obama administration predicts annual budget deficits of $1.75 trillion this year, $1.1 trillion next year and similar amounts going forward. Now, let’s consider adding $7.8 trillion to the national debt. Amounts added to the national debt should be added over time (in accounting jargon, amortized) into the annual budget deficit. Over 10 years, that’s an extra $780 billion each year. This means the annual budget deficit would increase by roughly 80%.

Sure, one day we may be able to sell off our government’s equity interests in TARP companies, and eventually remove them from our nation’s balance sheets. That would be great, and fiscal hawks would be happy to buy the champagne (nothing but Cristal, with a toast from special guest P Diddy) for such a celebration.

Until then, let’s remember that accounting statements for governmental bodies and private companies alike are intended to portray accurate pictures of those organizations at a certain point in time, reflecting the uncertainty of the future and the likelihood that significant owners (or residual credit holders) of most of a firms assets are likely to stand behind that firms debts, for no other reason that it is in their self interest. Particularly when a shareholder stands as both a creditor AND an unchecked regulator of the company in which they hold shares.

When the U.K. recently recognized in its budget the debt from its two bank bailouts, its national debt doubled overnight. Warnings later emerged that the U.K.’s Triple-A bond rating may be in jeopardy, unprecedented for a modern Western nation.

If we properly accounted for our debt and deficit, we might be in the same situation. A downgrade of U.S. debt may even be beneficial, a sign that we’ve hit rock bottom and need to recover from this deficit addiction. Credit warnings would result in a diminished appetite for Treasury bonds, force the Treasury Department to borrow at higher interest rates and curb its habit for runaway spending.

Administrations are short-lived. In three or seven years President Obama and his staff will retire to the benefits of speaking fees, consulting contracts and cable news appearances. But the debt remains, and it is a legacy by which our children will rightly judge us. If we permit this administration to use accounting wizardry to hide our debts, we should not be surprised when we are judged harshly.

The full faith and credit of the U.S. is not a depthless well, and the administration’s current budget policies risk turning Treasury bonds into the ultimate subprime loan. Future generations could be saddled with inflation, increased taxes and interest payments on Treasury bonds that take up an ever-increasing share of the federal budget. It’s time for this administration to bring transparency to the federal budget process by accounting for TARP holdings properly.

http://volokh.com/2009/10/20/treasury-inc-the-shadow-national-debt/

Way to go...Why not tax the bankers out of the USA

cine_lover — Sat, 21 Mar 2009 11:15:33 -0700

This is just a little taste of socialism and what happens when the government has control. I understand and fully agree that what AIG was wrong, but taxing people 90% is no better and a dangerous move.

http://www.bloomberg.com/apps/news?pid=20601087&sid=am3Q_20T0S44&refer=w...

Citigroup, Bank of America, JPMorgan Criticize Limits

By Elizabeth Hester

March 21 (Bloomberg) -- Citigroup Inc., Bank of America Corp. and JPMorgan Chase & Co., recipients of more than $100 billion in U.S. rescue funds, criticized congressional proposals to tax Wall Street bonuses.

Bank of America Chief Executive Officer Kenneth Lewis called the tax “unfair” in a memo to employees yesterday, while Citigroup’s Vikram Pandit said his bank is “working in every appropriate way with policymakers.” JPMorgan’s Jamie Dimon held a conference call with about 200 executives, saying the firm is concerned about retention and is working with lawmakers.

The banks are responding to an outcry in Congress over $165 million in bonuses paid by American International Group Inc. after the insurer received $173 billion in federal bailout funds. The Senate will vote next week on levies on bonuses after the House of Representatives approved a 90 percent tax on bonuses at companies that received bailout funds.

“People are very anxious about this getting too widespread, this notion that no one on Wall Street or in banking deserves any money,” said Seamus McMahon, a consultant with Booz & Co. in New York, who works with financial firms.

Banks, worried that the proposals are distracting employees, are trying to reassure staff and keep them focused on clients. Lewis said the taxes could cause “unintended harm” and delay the recovery of the financial system. Dimon urged workers to call politicians and voice their opinions, a spokesman said.

‘Talented People’

“The work we have all done to try to stabilize the financial system and to get this economy moving again would be significantly set back if we lose our talented people because Congress imposes a special tax on financial services employees,” Pandit said in the memo, whose contents were confirmed by a Citigroup spokesman.

Citigroup removed the people who caused its financial distress and acted quickly to strengthen the business, Pandit wrote. “You have been invaluable in our collective efforts to put the company on solid footing,” he wrote, saying the legislation would affect people who would find it “difficult, if not impossible,” to repay bonuses.

The House bill would affect employees whose household income is more than $250,000 at companies that received more than $5 billion. JPMorgan took $25 billion as part of the first round of infusions. Citigroup got $45 billion and agreed to allow the government to become its biggest shareholder. Bank of America, including Merrill Lynch, has received $45 billion in cash and a backstop on $118 billion in assets.

Paying Back

Firms that repay enough bailout funds to reduce the government’s investment below $5 billion will be exempt, said Laurence Tribe, a constitutional law professor at Harvard Law School.

“I am very concerned about our ability to retain some of our most valuable associates,” Lewis wrote in his memo to employees obtained by Bloomberg. “The very best performers on our team will always have offers from competitors.”

In a separate e-mail to his own employees, Jes Staley, head of JPMorgan’s asset-management unit, said that the bank is “working hard on all of the challenges we are currently facing.”

JPMorgan’s e-mail, whose contents were confirmed by spokeswoman Mary Sedarat, didn’t offer any detail about the New York-based firm’s position on pending legislation.

“While it is necessary and appropriate to keep my comments brief, given the evolving issues, please know that the Operating Committee and Government Relations are working hard on all of the challenges we are currently facing,” the e-mail from Staley said. “Thank you sincerely for staying focused on our clients and our business.”

AIG, whose compensation policies before and after its U.S. bailout are being investigated, has turned over information on its executive bonuses to Connecticut’s attorney general.

Misery math: Great Recession by the numbers

starangel82 — Sun, 11 Oct 2009 17:43:13 -0700

NEW YORK - A year ago this weekend, the Dow Jones industrial average had just finished a slow-motion crash. Over eight days, it fell 2,400 points, or 22 percent, and stood at 8,451.

One year later, the Dow is at 9,865. It's up 51 percent from a 12-year low of 6,547 on March 9 - when some investors feared the financial world was coming to an end.

But the complete story of the Dow's journey since the economy soured goes back a little further. Two years ago this week, on Oct. 7, 2007, the Dow set its record high of 14,164.

What followed was a three-act play. For five months, from October 2007 through the collapse of investment bank Bear Stearns in mid-March 2008, the Dow fell 2,000 points in an orderly fashion as investors anticipated a garden-variety recession. From mid-March until Labor Day in early September, the Dow rose and fell but was little changed. Right after Labor Day, Fannie Mae, Freddie Mac, Lehman Brothers and AIG failed over 10 days. The credit markets froze, and investors panicked, fearing another Great Depression. There were rallies amid the downward spiral that ensued, but over six months - until the low on March 9 - the Dow fell 5,000 points.

So where do we stand today?

The seven-month rally since March has yet to wipe away all the losses, but few expected that the Dow would be edging back to 10,000 so soon. Unemployment is close to 10 percent, but other parts of the economy are stabilizing. Consumers are still hunkered down, but retail sales showed a slight gain in September. The panic of last fall has been replaced by the resignation that the worst is over but it might be years before the economy booms again.

"The problems that we're dealing with - there's a little bit less urgency," says Alan Levenson, chief economist at T. Rowe Price Associates. "We've stopped what could have been fatal bleeding."

Here's a by-the-numbers look at the stock market and the economy since the eight-day crash one year ago:

* $11.2 trillion: Total losses in the stock market from the Dow's peak in October 2007 to the March 2009 bottom.
* $4.6 trillion: Total gains in the stock market since March 9.
* 6: The number of the 10 worst point drops in the 113-year history of the Dow that occurred in 2008. The 777-point drop on Sept. 29, 2008, ranks No. 1.
* 3: The number of the 10 worst percentage drops that occurred in 2008. The Sept. 29 decline of 9 percent is the third-biggest behind 22.6 percent on Oct. 19, 1987, and 10 percent on April 14, 2000.
* 92 percent: Decrease in Citigroup Inc.'s share price from Oct. 10, 2008, ($13.90) to March 9 ($1.05).
* 341 percent: Increase in Citigroup's share price from March 9 to Friday's close of $4.63.
* 18-20: The historical average for the Volatility Index of the Chicago Board Options Exchange, also known as the VIX, or "Fear Index."
* 89: Where the VIX peaked last October.
* 23: Where the VIX was on Friday.
* 16 percent: The amount by which the Dow's closing level on Friday was higher than its average close the previous 200 days. Earlier this month the number hit 20 percent, the highest since the early 1980s.
* $6.5 trillion: Value of assets in stock mutual funds at end of 2007.
* $3.7 trillion: Value at the end of 2008.
* $4.5 trillion: Value at the end of August.
* -$72 billion: Net cash flow (money put in minus money taken out) for stock mutual funds in October 2008.
* -$25 billion: Net cash flow in March.
* $4 billion: Net cash flow in August.
* $9: The amount, out of every $10 investors put into mutual funds in August, that went into bond funds.
* $855.40: The price of an ounce of gold on Oct. 10, 2008.
* $1,048.60: The price of an ounce of gold on Friday.
* 6.2 percent: Unemployment rate a year ago.
* 9.8 percent: Unemployment rate today.
* 95.2: Consumer confidence two years ago. Reading above 90 means the economy is on solid footing; above 100 signals strong growth.
* 25.3: Consumer confidence in February - record low.
* 53.1: Consumer confidence today.
* 2.8 percent: Decline in retail sales in October and December 2008.
* 2.7 percent: Increase in retail sales in August.
* 4.75 percent: Federal funds rate two years ago.
* 1 percent: Fed funds rate last October.
* 0 - 0.25 percent: Fed funds rate today.
* 4.81 percent: London interbank offered rate (LIBOR), the amount banks charge each other to borrow money for three months, at its peak, on Oct. 10, 2008.
* 0.28 percent: Three-month LIBOR rate Friday.
* -0.5 percent: Personal savings rate in 2005 as home prices were soaring.
* 6.9 percent: Personal savings rate in May.
* $975 billion: Credit card debt held by Americans last September.
* $899 billion: Credit card debt held at the end of August, down 8 percent.
* 7 million: Home resales in 2005, a record year.
* 4.5 million: Home resales in January at annual rate.
* 5.1 million: Home resales in August at annual rate.
* $245,000: Median price of homes sold in 2006 - record high.
* $213,000: Median price of homes sold last October.
* $195,000: Median price of homes sold in August.

Source: MSNBC

Regulators Debate Pros, Cons Of 'Too Big To Fail'

Roarman — Wed, 28 Oct 2009 06:15:14 -0700

A draft bill before Congress seeks to protect taxpayers from having to bail out big financial institutions by giving vast powers to a new regulatory council. The regulators would set rules for financial firms that pose a systemic risk either because of their size or their connection to other firms. The bill does not, however, limit the size of financial institutions.

Some high-level policymakers say large firms pose too much danger to the financial system and to taxpayers. Among the most prominent advocates of some limitation on the size of banks is former Federal Reserve Chairman Alan Greenspan.

"If they're too big to fail, they're too big," he said recently. Mervyn King, head of the Bank of England, expressed similar sentiments in a speech last week.

But speaking Friday at a conference on Cape Cod in Massachusetts, the current Fed chairman, Ben Bernanke, disagreed.

"We can address these issues in a way that doesn't destroy the economic value of large, complex multifunction firms through other mechanisms," he said.

Global Reach

So what is the economic value of huge firms like Citigroup or Bank of America?

"Global banks are financial service providers to global firms," says professor Charles Calomiris of Columbia University.

They are like big automakers that make cars in many countries and sell cars in even more: They need to raise capital around the world and have to manage exchange rate risk since they sell cars in many currencies.

"They have complex financial needs having to do with hedging," Calomiris says. "We're not going to be able to serve the needs of large global firms with mom-and-pop banks."

Calomiris acknowledges that the failure of very large firms poses a potential danger to economies and taxpayers. But he thinks that with better regulation, including higher capital requirements, the danger can be managed, and he generally agrees with the Obama administration's approach.

Calomiris thinks it's particularly important to put in place a better system for assessing the level of risk that financial firms are taking.

But former International Monetary Fund chief economist Simon Johnson, who's now a professor at the Massachusetts Institute of Technology, says relying on tougher regulation won't work.

"The basic problem is that the financial sector can hire the best, most talented people. It can pay them extraordinary amounts of money," he says. "They will always get ahead of the regulators."

Working Across Markets

Johnson agrees capital requirements must be raised, and he says the revolving door between Wall Street and its Washington regulators must be bolted shut.

But, he says, at the top of the list should be limiting the size of financial firms to no more than $100 billion in assets. That's about one-tenth the size of the largest global bank - certainly large enough to serve the needs of global businesses. He says most of the companies he knows already work with multiple banks because different banks are good at different things.

"Particularly if you're working across so many markets, you really want people with excellent local knowledge. So you can work with a network of financial institutions and you can hedge any kind of position you have with multiple contracts with smaller players," Johnson says. "In fact it's probably not wise in this day and age to rely on one provider of financial services. You're less likely to get a good price that way."

Calomiris says he disagrees; because of their economies of scale, he says, bigger firms can charge less for their services.

He argues there's another benefit of big global banks: They've given small firms in emerging markets more access to capital. In Mexico, he says, six families dominated the banking industry and wouldn't lend to competitors. Their banks crumbled during the Mexican financial crisis of the '90s.

"And so we got a huge entry of foreign-owned branches in Mexico, which has completely changed the political economy of the banking system. It now operates at an arms-length efficient banking system, not a network for crony capitalism."

Johnson says that's just exchanging one set of powerful players for another.

"And the view that our banks are only good and forces for progressive change is, I have to say, a little New York-biased," he says. "Most of the people in the world don't see it that way, and with good reason."

Finally, Johnson says, any benefits of very large banks have to be measured against the potential cost of failure, which the current crisis has demonstrated is immense.

Source: http://www.npr.org/templates/story/story.php?storyId=114226906

From Great Britain: Geithner aides made millions on Wall Street (Again MSM= MIA)

Grandpa — Thu, 15 Oct 2009 08:46:34 -0700

Geithner aides made millions on Wall Street

By Tom Braithwaite in Washington
Published: October 14 2009 20:49 | Last updated: October 14 2009 20:49

Obama administration officials now working on fixing and regulating the financial system were beneficiaries of several million dollars in pay from Wall Street and private equity companies, it has been revealed.
Financial disclosure forms show that prior to joining the government, Gene Sperling, a senior Treasury adviser, was paid $887,727 by Goldman Sachs and $158,000 for speeches to companies that included Stanford Group, the company run by Sir Allen Stanford, who has since been charged with fraud.
Mr Sperling’s compensation from Goldman was for work on a philanthropic project. His overall pay, including for his main job at the Council on Foreign Relations, totalled $2.2m in the 13 months to January.
The forms, which were first obtained by Bloomberg, showed that Matthew Kabaker, another adviser in the Treasury, earned $5.8m at Blackstone, the private equity firm, in the two years before joining the administration to work on plans to support banks and spur lending. Much of the compensation was in stock.
Lewis Alexander, another adviser, was chief economist to Citigroup before joining the administration; he was paid $2.4m in the last two years.
Even though some of the officials whose previous salaries were disclosed are senior, many were appointed as “counselors”, meaning they escaped Senate confirmation hearings which could have highlighted their past remuneration and employment at a time of heightened animosity towards the financial industry.
Earlier this month the release of the telephone call logs of Tim Geithner, Treasury secretary, showed he had numerous conversations with a number of Wall Street executives, sparking allegations that the administration was too close to the industry.
Officials argued then and on Wednesday that it was important to have skilled people working for the government as it crafted complicated financial rescues and for Mr Geithner to communicate with financial sector executives. Mr Geithner, the former president of the Federal Reserve Bank of New York, has never worked on Wall Street.
Mr Obama, however, has hit out at the culture that he said prevailed before last year’s financial crisis – at a time when many of the Treasury officials were working on Wall Street and related businesses.
“We will not go back to the days of reckless behaviour and unchecked excess that was at the heart of this crisis, where too many were motivated only by the appetite for quick kills and bloated bonuses,” he said at a speech in New York last month.
Previous releases of disclosure forms revealed the $5.2m paid to Lawrence Summers, chief economic adviser to the White House, by DE Shaw, the hedge fund, in the two years before he joined the administration.
The disclosures come during a complicated time for the relationship between the Obama administration and business, with officials accused of being too close to companies on the one hand and encountering increased criticism from business lobby groups on the other.
The US Chamber of Commerce on Wednesday launched its “campaign for free enterprise”, arguing the private sector was under threat from various over-reaching government plans, including for a Consumer Financial Protection Agency and a cap-and-trade scheme to reduce carbon emissions
http://www.ft.com/cms/s/0/f012c4b2-b8f6-11de-98ee-00144feab49a.html

Robert Rubin's Free Ride How does Clinton's treasury secretary escape blame for the market meltdown?

Grandpa — Sat, 10 Jan 2009 12:37:31 -0800

Robert Rubin's Free Ride How does Clinton's treasury secretary escape blame for the market meltdown?

By Timothy NoahPosted Friday, Jan. 9, 2009, at 5:48 PM ET (Slate Magazine)

Robert Rubin, the former treasury secretary in the Clinton administration, left his high-ranking position at Citigroup today dogged by criticism for his role in the bank's ongoing financial trouble. In an Oct. 30, 2008, "Chatterbox," Timothy Noah insisted that Rubin had unfairly escaped blame for the current financial crisis. The article is reprinted below.
housing bubble has burst. The financial services industry is a ward of the state. Insurance companies and automakers are tottering on the brink of bankruptcy. Consumer credit is drying up along with consumer confidence. Banks have stopped lending money, and big corporations have started laying workers off. The stock market is at a five-year low. But amid the greatest financial panic since the Great Depression, the market for one asset stubbornly resists correction: the immaculate reputation of Robert Rubin, former treasury secretary and pre-eminent economic wise man of the Democratic Party.
Rubin hasn't been treasury secretary since 1999, and he certainly bears less responsibility than Alan Greenspan, Phil Gramm, Christopher Cox, and assorted other Republican pooh-bahs. American voters, who are expected to favor the Democratic presidential ticket this Tuesday, aren't wrong to assign the principal blame for this crisis to the GOP. But the financial deregulation that allowed markets to boil over began well before President George W. Bush took office. Three decisions relevant to the market meltdown-two of them unambiguously bad in retrospect, the third a likely source of future trouble-can be attributed to Rubin.
Derivatives. In 1998, Brooksley Born, chair of the Commodity Futures Trading Commission, proposed bringing derivatives under her jurisdiction. Rubin joined forces with Greenspan and Arthur Levitt Jr., then chairman of the Securities and Exchange Commission, to successfully derail the proposal in Congress. Rubin shared Born's worry about the derivative market's unregulated growth, and in his 2003 memoir, In an Uncertain World (co-authored by Jacob Weisberg, editor-in-chief of the Washington Post Co. unit that includes Slate), Rubin would later write that derivatives "should be subject to comprehensive and higher margin limits." So why did he oppose Born? Rubin doesn't discuss the episode in In an Uncertain World, but according to an Oct. 15 article by Anthony Faiola, Ellen Nakashima, and Jill Drew in the Washington Post, Rubin fought Born's plan for essentially political reasons: So "strident" a power grab by the CFTC, Rubin believed, would invite legal challenge, which in turn would create havoc in the derivatives market. Unfortunately, after killing off Born's proposal, Rubin never developed a less "strident" regulatory alternative-even after the September 1998 collapse of the Long Term Capital Management hedge fund, attributed in large part to its extensive investment in derivatives, demonstrated that concerns about these unregulated financial instruments were extremely well-founded. As a consequence of Rubin's obstruction and inaction, the market for one particular derivative-credit-default swaps-grew like a noxious weed. The credit-default swaps were unregulated insurance contracts on securities derived partly from subprime mortgages. If indiscriminate subprime mortgages were the vehicle that brought about the market meltdown, credit-default swaps were the fuel.
Greenspan. As the previous example demonstrates, in economic decision-making Rubin was often joined at the hip to Alan Greenspan, the Reagan-appointed chairman of the Federal Reserve Board who served until February 2006. (A famous February 1999 Time magazine cover dubbed Rubin, Greenspan, and Rubin's deputy and successor Lawrence Summers as "The Committee To Save the World.") Greenspan, whose press was once even more ecstatically favorable than Rubin's-Bob Woodward titled his 2000 book about Greenspan Maestro-has since been identified as the principal architect of the economic meltdown. That's not only because he resisted regulation of derivatives more emphatically than Rubin ("I think of him constantly cheerleading on derivatives," Greenspan's onetime deputy, Princeton economist Alan Blinder, recently told Peter S. Goodman of the New York Times) but also because he failed to rein in the subprime lending that created the meltdown and encouraged the housing bubble by keeping interest rates low. If Greenspan is Public Enemy No. 1, then the guy who got Bill Clinton to reappoint Greenspan surely ranks as Public Enemy No. 6 or 7. That would be Rubin. In early 1996, when Greenspan's term as Fed chairman was due to expire, Clinton considered replacing Greenspan with Felix Rohatyn. Rubin talked him out of it. In Maestro, Woodward makes clear that Rubin's view was shared by many others, including the more liberal Laura Tyson, who succeeded Rubin as director of the National Economic Council, and Vice President Al Gore. But Rubin's endorsement carried the most weight. Woodward crafts a tender homoerotic scene out of Rubin's telling Greenspan he's gotten the nod from Clinton:
Rubin was … at the G-7 meeting in Paris, where he and Greenspan had a chance to speak privately. Taking advantage of a quiet moment, they walked together toward a series of large plate-glass windows at one end of the room, with a view of Paris before them. The two men had established a feeling of trust, perhaps as much as two adult males in high government posts might find possible. For Greenspan, such friendship, closeness and agreement gave him a sense that they were working for the same firm. Greenspan had once remarked privately, and only half-jokingly, that he considered Rubin the best Republican secretary of the treasury ever, though he was a Democrat.
"When you get back," Rubin said, "the president's going to want to talk to you." Greenspan could tell by the body language that it was all favorable.
Glass-Steagall. This 1933 law prevented commercial banks from doing investment banking (and vice versa). In his 2002 book, The Roaring Nineties, Nobel Prize-winning economist Joseph Stiglitz (an adversary of Rubin's in the Clinton White House) identifies Rubin as a prime mover in the 1999 repeal. The principal argument in favor of repealing Glass-Steagall was that financial institutions-most notably, Citigroup, where since 1999 Rubin has been a sort of rainmaker/consigliere-had already worked out ingenious ways to circumvent it. New York Times financial columnist Joe Nocera recently pointed out that repeal of Glass-Steagall enabled Citigroup, J.P. Morgan, and Bank of America to survive while stand-alone investment banks Bear Stearns, Merrill Lynch, and Lehman Bros. went belly-up. The argument against Glass-Steagall's repeal was that it would encourage banks to extend too much credit to companies whose stock their financial arms were trying to sell. It has yet to be demonstrated that this conflict of interest contributed to the current meltdown. But as the crisis accelerates the sort of mergers made possible by the 1999 repeal-according to Nocera, the big banks that just received a $125 billion investment from Treasury are already saying, entre famille, that they will spend the money not on loans but on mergers-opportunities for such abuses will multiply. Another problem with bank consolidation is that it will create more financial institutions deemed "too big to fail." As Robert Reich recently observed in his blog, if government needs to bail out giant corporations because their failures would wreck the entire economy, that's an excellent reason not to allow these corporations to become so big in the first place.
Say what you will about Greenspan, he has publicly admitted error. So has Arthur Levitt. Rubin, though, is in no rush to voice regret, and no one seems inclined to press the issue.
Rubin's genius for avoiding bad press is legendary. In a rare critical piece about Rubin in the March 2007 American Prospect, Bob Kuttner wrote that in reviewing newspaper and magazine features published about Rubin during the previous two decades, he "literally could not find a single feature piece that was, on balance, unflattering." Kuttner missed a column I wrote in 2002 complaining about the scant coverage given to a sleazy phone call Rubin made to a Treasury undersecretary about Enron just before that company went bust. (Citigroup was one of Enron's biggest creditors.) But I take his point: As far as most journalists are concerned, Rubin walks on water. The man's ability to do so even as the deregulatory culture he helped foster comes crashing down-the only significant knocks I can find are in one column by Robert Scheer, one by Robert J. Samuelson, and one by Harold Meyerson-is nothing short of extraordinary.
Rubin's Teflon is so scratch-proof that Barack Obama can enlist him to represent his campaign on CBS's Face the Nation without worrying that John McCain's ever-more-desperate campaign will make an issue of it. The program's host, Bob Schieffer, asked not a single question about Rubin's roles in blocking Born's proposal to regulate derivatives, in reappointing Greenspan, or in repealing Glass-Steagall. Fareed Zakaria did a little better on GPS (the awkwardly titled CNN show he hosts), remembering at least to ask Rubin whether he regretted his deregulatory policies during the Clinton administration. Rubin replied that regulating derivatives would have been politically impossible. Zakaria didn't follow up by noting the well-publicized collapse of Long Term Capital Management. On neither show was Rubin asked what role he may have played in Citigroup's loading up on mortgage-backed securities polluted by subprime loans. Zakaria (who is thanked in the acknowledgments to Rubin's memoir for reviewing the manuscript) set the tone at the start of his interview by quoting Clinton's description of Rubin as "the most effective treasury secretary since Alexander Hamilton."
It's time to reconsider that judgment. Rubin has been widely touted for treasury secretary in an Obama administration, but in the GPS interview Rubin wisely removed himself from consideration. Perhaps he knows that Senate Republicans would never question him as gently as Zakaria and Schieffer did.