Lehman sought millions for execs while seeking aid

NF Reporter · 10-06-2008, 09:46 PM

AP - The now-bankrupt investment bank Lehman Brothers arranged millions in bonuses for fired executives as it pleaded for a federal lifeline, lawmakers learned Monday, as Congress began investigating what went so wrong on Wall Street to prompt a $700 billion government bailout.

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waltky · 10-07-2008, 07:58 PM

Corrupt practices should be criminal instead of just 'unethical'...

After Bailout, AIG Execs Lounged At Resort
WASHINGTON, Oct. 7, 2008 - House Panel Probe Into Market Crisis Also Reveals Insurance Giant Hid Risky Practices

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Less than a week after the federal government had to bail out American International Group Inc., the company sent executives on a $440,000 retreat to a posh California resort, lawmakers investigating the company's meltdown said Tuesday. The tab included $23,380 worth of spa treatments for AIG employees at the coastal St. Regis resort south of Los Angeles even as the company tapped into an $85 billion loan from the government it needed to stave off bankruptcy. The retreat didn't include anyone from the financial products division that nearly drove AIG under, but lawmakers were still enraged over thousands of dollars spent on catered banquets, golf outings and visits to the resort's spa and salon for executives of AIG's main U.S. life insurance subsidiary.

"Average Americans are suffering economically. They're losing their jobs, their homes and their health insurance," House Oversight Committee Chairman Henry Waxman, D-Calif., scolded. "Yet less than one week after the taxpayers rescued AIG, company executives could be found wining and dining at one of the most exclusive resorts in the nation." The hearing also revealed that AIG executives hid the full range of its risky financial products from auditors as losses mounted, according to documents released Tuesday by a congressional panel examining the chain of events that forced the government to bail out the conglomerate. The panel sharply criticized AIG's former top executives, who cast blame on each other for the company's financial woes.

"You have cost my constituents and the taxpayers of this country $85 billion and run into the ground one of the most respected insurance companies in the history of our country," said Rep. Carolyn Maloney, D-N.Y. "You were just gambling billions, possibly trillions of dollars." AIG, crippled by huge losses linked to mortgage defaults, was forced last month to accept the $85 billion government loan that gives the U.S. the right to an 80 percent stake in the company. Waxman unveiled documents showing AIG executives hid the full extent of the firm's risky financial products from auditors, both outside and inside the firm, as losses mounted.

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waltky · 10-21-2008, 02:56 AM

Kucinich raises bonus inquiry...

Call for inquiry into Wall Street bonuses
Tuesday October 21 2008 - Pay plans add insult to injury, says congressman as rewards ignore shareholders' losses

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US congressman Dennis Kucinich has called for an inquiry into remuneration proposals at Wall Street's top banks, after a Guardian report revealed that six distressed institutions had drawn up pay plans, including substantial discretionary bonuses, worth more than $70bn for the first nine months of the year. Kucinich, an outspoken Democratic opponent of the US taxpayer's $700bn bank bail-out, said his staff would immediately begin asking Wall Street firms set to benefit what plans they had to distribute bonuses.

"When Congress placed restrictions on excessive executive pay, it had no intention of permitting business as usual with respect to bonus structures," he said. "It would add insult to injury to ask taxpayers not only to bail out a firm, but to pay for bonuses as well. The Guardian's report necessitates an immediate inquiry." Banks continue to peg pay deals to net income. One banking source said 45-50% of net revenue - paid largely in salary and discretionary bonuses - remained an industry standard. This formula does not take into account the huge losses by bank shareholders, many of them pension funds, as firms have queued up to slash the carrying value in their accounts of toxic assets, predominantly sub-prime mortgage-backed securities.

Leading the asset write-downs and losses has been Citigroup, which booked a $55.1bn hit. Merrill Lynch, rescued from collapse last month by a takeover offer from Bank of America, has booked $52.2bn to date. Morgan Stanley, JP Morgan Chase, Lehman Brothers and Goldman Sachs have respectively reported write-downs and losses related to the sub-prime market of $15.7bn, $14.3bn, $13.8bn and $4.9bn. All six banks have as a result been forced to seek multibillion-dollar cash injections to shore up their capital cushions, further denting the holdings of loyal investors. Despite these moves, the banks failed to end panic selling. In a last-ditch attempt to save the system, five of them this month sought bail-out cash from the US taxpayer as part of a $700bn rescue package. The sixth, Lehman, had already collapsed.

More Call for inquiry into Wall Street bank bonuses | Business | The Guardian

waltky · 11-05-2008, 05:01 AM

Bonus backlash brewing...

Wall Street bonus backlash brewing
November 4, 2008: Big banks face a difficult decision over bonuses this year. Some experts claim that the old way of compensating workers may soon have to change.

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Wall Street now has a new worry: bonus season. There are already rumblings that the notoriously lavish payments for bankers and traders could be cut in half from a year ago, following what has been an abysmal year for the securities industry. Just a year ago, the bonus pie was worth about $33.2 billion, which broke down to an average of $180,420 for the more than 180,000 individuals employed by Wall Street firms at the time, according to the New York State Comptroller's office.

At the same time, opposition to big bonuses has snowballed in recent weeks after Congress effectively saved some of the country's biggest financial firms from certain disaster. Lawmakers on both sides of the aisle - including House Republican Leader John Boehner, R-Ohio, and House Financial Services Committee Chairman Barney Frank, D-Mass. - put the first nine banks and securities firms that received a government capital injection on notice that they will not tolerate companies using the money to pay bonuses.

Similarly, New York state Attorney General Andrew Cuomo has demanded information about this year's bonuses from many of these companies, which include Goldman Sachs, Morgan Stanley, Citigroup and JPMorgan Chase. But compensation experts say they are hard-pressed to believe that most finance pros won't get a payday this year.

"You've got to pay the army that is generating the results for the organization - there is no question about that," said Dave Swinford, president and CEO of the compensation consulting firm Pearl Meyer & Partners. The same may not necessarily be said for the industry's top executives. Some could forgo their payday in order to avoid a hellish backlash from both politicians and taxpayers.

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