Bank Bailout: When a Bonus Exceeds Earnings, How is It Not Fraud?
New York State Attorney General Andrew Cuomo put out a report called “No Rhyme or Reason,” which demonstrates that the "Too Big To Fail" banks that got all that lovely tax payer money last Fall—when Hank Paulsen pulled his little bait and switch maneuver on Congress (you know, asking for trillions to help out homeowners by buying up toxic mortgages, while instead handing over the money to the banks with virtually no strings attached?)—have paid out MORE in bonuses to their top executive, than they actually made. (By the way, the report’s title really does sum up what happened.)
Citigroup and Merrill Lynch each lost more than $27 billion (a total of at least $54 billion if my math is correct), and were bailed to the tune of $55 billion in taxpayer money. Yet, they chose to pay out bonuses of $5.3 billion and $3.6 billion respectively. That is $8.9 billion in your tax dollars that passed directly through these banks and into the hands of the Masters of the Universe who control those banks.
Goldman Sachs, Morgan Stanley, and J.P. Morgan Chase paid out bonuses that totaled much more than the bank actually earned. (Go read the WaPo article for the dollar amounts.)
I do not want to hear the “we had to pay the bonuses to keep key people” crap. If none of the banks had paid bonuses, since no bonuses were justified for poor performance, than no key people would have had incentive to leave in a fit of pique.
But much more important, not paying out the bonuses would have driven home the lesson to the MOTU class that actions have consequences, and taking crazy risk that makes ordinary homeowners suffer and throws thousands of people out of work also will cause Wall Street to suffer. By insulating the risk takers from the consequences of their own actions, the Government has guaranteed that the MOTU will take those same kinds of irresponsible, crazy risks again. And continue to whine every time someone uses the word “regulation.”
I’m sorry, can somebody explain to me how calling these payments a “bonus,” which implies that it is a reward for good performance, is not a fraud?