Week of 1.30.09
Bailed-Out Banks: Where They SpentAs banks decide how to use the $302 billion dollars in taxpayer money they've received so far, see how recent spending by these institutions reflects some questionable financial priorities.
Item: Executive Bonuses
Value: $165 million
In Brief: Insurance giant AIG, which has received $170 billion in federal bailout money since September 2008, has stirred up public outrage after it was revealed it paid $165 million in employee bonuses. The beneficiaries were employees of AIG's troubled financial products unit, the same unit seen as responsible for bringing the company to the edge of collapse. President Obama responded angrily to the bonuses, calling them an "inappropriate use of taxpayer money" and has proposed a new regulatory body to give the government more authority over financial institutions like AIG. The chief executive of AIG, Edward Liddy, testified before a highly charged Congressional hearing on Wednesday, March 18, calling the bonus payments "distasteful" but necessary to retain AIG's "best minds." Liddy said he has asked certain employees to return half of the money. Furious Democratic leaders in both houses of Congress are proposing legislation to impose high taxes on the bonuses.
Company: Northern Trust
Item: Golf Tournament
Value: In the millions, according to the website TMZ.com.
Included: Fancy dinners (seared salmon and petite Angus filet); expensive hotels (such as the Ritz Carlton); concerts by Sheryl Crow, Earth, Wind & Fire and Chicago. Female guests at the Chicago concert got trinkets from Tiffany and Co.
In Brief: The Chicago-based bank, which received $1.6 billion in government funds, was the title sponsor of the PGA Tour's Northern Trust that was played in mid-February at the Riviera Country Club in Los Angeles. The bank also hosted dinners and concerts for clients and employees who attended the weeklong event, according to TMZ. Democratic lawmakers, outraged by the news, are pressing the bank to return the money they spent on the events. Sen. John Kerry has proposed legislation restricting banks that received government funds from hosting, sponsoring or paying for conferences or entertainment events. Northern Trust said the events are part of the bank's global marketing activities and are focused on showing appreciation for clients and attracting new business.
Item: Luxury Corporate Jet
Value: $50 million
In Brief: Citigroup, which received $45 billion in bailout funds, had planned to purchase the state-of-the-art Dassault Falcon 7X, but chose to scrap its plans following pressure from President Obama. Citigroup said in a statement on Monday that it had paid a deposit in 2005 to acquire the jet and that breaking the deal could cost the bank millions in penalties.
Company: Merrill Lynch
Item: Office Redecoration
Value: $1.2 million
Area Rug: $87,000
Fabric for "Roman Shade": $11,000
Trash Can: $1,400
In Brief: Former Merrill CEO John Thain, who had his office refurbished only last year, resigned on January 22. His ouster followed reports that Thain rushed out billions of dollars in bonuses to Merrill employees in his final days as CEO. The move came as the brokerage firm suffered huge losses and just before it was taken over by Bank of America, which received $45 billion in bailout money. Thain said in a memo this week that he will repay the costs of the office redecoration, but defends his decision to authorize bonuses for Merrill employees.
Companies: Wall Street Financial Firms
Item: Wall Street Bonuses
Value: $18.4 billion
In Brief: Despite a crippling year for the financial sector and massive bailouts, workers on Wall Street racked up an estimated $18.4 billion in bonuses in 2008, according to a new report by the New York State comptroller.
Company: Bank of America
Item: Super Bowl Carnival
Value: Approx. $10 million
In Brief: Bailout recipient Bank of America sponsored a five-day event called "The NFL Experience", which featured 850,000 square feet of interactive games and entertainment for football fans and was covered with Bank of America products outside the Super Bowl stadium on February 1st. The company defended its sponsorship by saying the event was part of its "growth strategy" and was a way to "generate significant revenue streams." Officials declined to comment on exactly how much was spent at the football extravaganza, but insiders estimate the company spent around $10 million.
Item: New Mets Stadium
Value: $400 million
In Brief: Citigroup Inc is considering backing out of the $400 million marketing deal it made with the New York Mets in 2006 after the company was criticized for misplaced spending while receiving federal bailout funds. Although Citigroup said in a statement that "no TARP capital will be used for Citi Field or for marketing purposes," members of the U.S. House of Representatives have urged Treasury Secretary Timothy Geithner to pressure Citigroup into breaking their deal. So far the company has not made a final decision.
|Billions in Bogus Bonuses?
David Korten: Let Wall Street Fail
Show Me the TARP Money
Bailed-Out Banks: Where They Spent
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