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Guess Who's Getting a Christmas Bonus

by Sheldon C. Good 12-10-2009 | 3:30pm
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Do you think you'll get a Christmas bonus this year? I know one person who will -- the new chief executive who will take over for Ken Lewis at Bank of America.

The bank, whose board met Monday in search of Lewis's successor, yesterday announced its repayment of $45 billion in TARP money. This decision is good for the Treasury (and might be included in Obama's recent jobs stimulus) but also frees Lewis's successor (and corporate colleagues) from the reigns of pay czar Kenneth Feinberg. Basically, upon its return to public freedom, Bank of America would regain liberty to pay Lewis-like compensation (Lewis received $10 million last year).

Since taxpayers footed the bailout, Bank of America is reassuring us that it's repaying TARP money because cash flow has improved. Its current operations are up for interpretation. The bank is making money, mostly through trading stocks and bonds on Wall Street. But I'm also aware that the bank has recently been lending less and even lost $1 billion in its third quarter.

So how is a TARP payback economically feasible? In short, because the bank is using some available cash along with $19 billion it's raising from "common equivalent securities" (stock). But why pay back bailout money and dilute shareholders' earnings? One reason: executive compensation.

And BofA admits it. Notes from the bank's research analysts stress that giving back its $45 billion allowance eliminates "the competitive disadvantage relative to peers who [have] already repaid TARP," The New York Times reported.

Wait a minute. I thought the whole idea behind the bailout was to loan temporary credit to banks? And I thought banks were then supposed to do the same for us -- bail us out with increased credit lines for taxpayers and readily available lending for small businesses?

This is thanks but no thanks.

Bank of America argues it needs to pay top executives top executive salaries. So basically we bailed out the banks, the banks are now bailing out their executives, and we're left with business as usual. Bank of America now joins JPMorgan Chase & Co., Morgan Stanley, and Goldman Sachs Group as large banks that are public again. Citigroup and Wells Fargo aren't far behind, as they recently sought to repay their TARP money.

But wait -- this isn't only a bank issue. Similarly, General Motors plans to repay its loans by the end of 2010. Mark Reuss, president of North American operations, said he thinks that "everybody in this company wants that desperately." No kidding, because it means higher paychecks.

Reuss said that ultimately, "We want to make people in this country proud of General Motors, its employees and its dealers."

Sorry GM and Bank of America, but the only way to do that is to rediscover your values. It's time to leave behind the maxim that greed is good, because enough is enough.

Sheldon C. Good is the media assistant for Sojourners.

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by: JacobS

12-11-2009 @ 10:24am

If people have a problem with the way these banks are run, there's a simple solution. I do my business with a local credit union.

by: JacobS

12-11-2009 @ 10:24am

If people have a problem with the way these banks are run, there's a simple solution. I do my business with a local credit union.

by: PastorShawn

12-15-2009 @ 9:46pm

I'm not sure where the scandal is here. Banks are repaying taxpayer dollars back to the U.S. Treasury, and somehow that's a bad and greedy thing? (Keep in mind, many of the banks were forced to take TARP money whether they needed it or not).

Its also a scandal for a bank to remain competitive relative to other banks? Essentially the Sojourners position is that banks are bad when they have a poor financial performance, but banks are also bad when they desire to do well financially? Lack of competitiveness is bad, but competitiveness is also bad?

Essentially banks want the freedom to hire the best and brightest and most competent, but the Sojourners position is that its better to restrict a bank's ability to hire and staff its organization? Of course, this advice for banks comes from someone who thinks that issuing common stock is necessarily dilutive (Finance 101: it isn't). In reality, the relevant question from a financial perspective is whether the initiatives/projects funded by the new equity financing are positive NPV initiatives or not.

When I get to the end of Sheldon's posting I'm left wondering, "What point are you trying to make?" Seriously, I read the post in search of a coherent thought.

by: PastorShawn

12-15-2009 @ 9:46pm

I'm not sure where the scandal is here. Banks are repaying taxpayer dollars back to the U.S. Treasury, and somehow that's a bad and greedy thing? (Keep in mind, many of the banks were forced to take TARP money whether they needed it or not).

Its also a scandal for a bank to remain competitive relative to other banks? Essentially the Sojourners position is that banks are bad when they have a poor financial performance, but banks are also bad when they desire to do well financially? Lack of competitiveness is bad, but competitiveness is also bad?

Essentially banks want the freedom to hire the best and brightest and most competent, but the Sojourners position is that its better to restrict a bank's ability to hire and staff its organization? Of course, this advice for banks comes from someone who thinks that issuing common stock is necessarily dilutive (Finance 101: it isn't). In reality, the relevant question from a financial perspective is whether the initiatives/projects funded by the new equity financing are positive NPV initiatives or not.

When I get to the end of Sheldon's posting I'm left wondering, "What point are you trying to make?" Seriously, I read the post in search of a coherent thought.

by: myselfandi

12-10-2009 @ 4:34pm

didnt seet hat comeing did you. Its obviouse teh bail outs were a bust. a wast of money. Teh best way to get morals is to let one immorality bit them back. Like disciplining a child. But nope we just incourged it. they get immoral we say we will help but you better do better. If they crashed like they should have others might take notice. now all they notice is they cant fail. especially if they get big enough. I dont understanda administration that loathes big buiseness yet eagerly takes their money for campaignes and then bails them out while still takeing their money and calling them evil and corrupt. they scream see what capitialism does for you. THEN turns around and doesnt let capitalism take them out like it should. If they let capitalism work these corrupt selfish greedy companies will fail. And by the way Are you saying they ARE getting bonuses or are you SPECULATING they will.

by: PastorShawn

12-15-2009 @ 7:46pm

I'm not sure where the scandal is here. Banks are repaying taxpayer dollars back to the U.S. Treasury, and somehow that's a bad and greedy thing? (Keep in mind, many of the banks were forced to take TARP money whether they needed it or not).

Its also a scandal for a bank to remain competitive relative to other banks? Essentially the Sojourners position is that banks are bad when they have a poor financial performance, but banks are also bad when they desire to do well financially? Lack of competitiveness is bad, but competitiveness is also bad?

Essentially banks want the freedom to hire the best and brightest and most competent, but the Sojourners position is that its better to restrict a bank's ability to hire and staff its organization? Of course, this advice for banks comes from someone who thinks that issuing common stock is necessarily dilutive (Finance 101: it isn't). In reality, the relevant question from a financial perspective is whether the initiatives/projects funded by the new equity financing are positive NPV initiatives or not.

When I get to the end of Sheldon's posting I'm left wondering, "What point are you trying to make?" Seriously, I read the post in search of a coherent thought.

by: BlueDeacon

12-10-2009 @ 5:46pm

Excuse me, but an overemphasis on the "joys of capitalism" is precisely what caused the problems in the first place, going back to "supply-side" economics -- it never occurred to any of its apologists that such companies would lobby for favored treatment. Just look at the people who are screaming "Socialism!" concerning any health-care insurance bill; there's a reason for that.

by: myselfandi

12-10-2009 @ 4:34pm

didnt seet hat comeing did you. Its obviouse teh bail outs were a bust. a wast of money. Teh best way to get morals is to let one immorality bit them back. Like disciplining a child. But nope we just incourged it. they get immoral we say we will help but you better do better. If they crashed like they should have others might take notice. now all they notice is they cant fail. especially if they get big enough. I dont understanda administration that loathes big buiseness yet eagerly takes their money for campaignes and then bails them out while still takeing their money and calling them evil and corrupt. they scream see what capitialism does for you. THEN turns around and doesnt let capitalism take them out like it should. If they let capitalism work these corrupt selfish greedy companies will fail. And by the way Are you saying they ARE getting bonuses or are you SPECULATING they will.

by: PastorShawn

12-15-2009 @ 7:46pm

I'm not sure where the scandal is here. Banks are repaying taxpayer dollars back to the U.S. Treasury, and somehow that's a bad and greedy thing? (Keep in mind, many of the banks were forced to take TARP money whether they needed it or not).

Its also a scandal for a bank to remain competitive relative to other banks? Essentially the Sojourners position is that banks are bad when they have a poor financial performance, but banks are also bad when they desire to do well financially? Lack of competitiveness is bad, but competitiveness is also bad?

Essentially banks want the freedom to hire the best and brightest and most competent, but the Sojourners position is that its better to restrict a bank's ability to hire and staff its organization? Of course, this advice for banks comes from someone who thinks that issuing common stock is necessarily dilutive (Finance 101: it isn't). In reality, the relevant question from a financial perspective is whether the initiatives/projects funded by the new equity financing are positive NPV initiatives or not.

When I get to the end of Sheldon's posting I'm left wondering, "What point are you trying to make?" Seriously, I read the post in search of a coherent thought.

by: BlueDeacon

12-10-2009 @ 5:46pm

Excuse me, but an overemphasis on the "joys of capitalism" is precisely what caused the problems in the first place, going back to "supply-side" economics -- it never occurred to any of its apologists that such companies would lobby for favored treatment. Just look at the people who are screaming "Socialism!" concerning any health-care insurance bill; there's a reason for that.

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by: myselfandi

12-10-2009 @ 4:34pm

didnt seet hat comeing did you. Its obviouse teh bail outs were a bust. a wast of money. Teh best way to get morals is to let one immorality bit them back. Like disciplining a child. But nope we just incourged it. they get immoral we say we will help but you better do better. If they crashed like they should have others might take notice. now all they notice is they cant fail. especially if they get big enough. I dont understanda administration that loathes big buiseness yet eagerly takes their money for campaignes and then bails them out while still takeing their money and calling them evil and corrupt. they scream see what capitialism does for you. THEN turns around and doesnt let capitalism take them out like it should. If they let capitalism work these corrupt selfish greedy companies will fail. And by the way Are you saying they ARE getting bonuses or are you SPECULATING they will.

by: myselfandi

12-10-2009 @ 4:34pm

didnt seet hat comeing did you. Its obviouse teh bail outs were a bust. a wast of money. Teh best way to get morals is to let one immorality bit them back. Like disciplining a child. But nope we just incourged it. they get immoral we say we will help but you better do better. If they crashed like they should have others might take notice. now all they notice is they cant fail. especially if they get big enough. I dont understanda administration that loathes big buiseness yet eagerly takes their money for campaignes and then bails them out while still takeing their money and calling them evil and corrupt. they scream see what capitialism does for you. THEN turns around and doesnt let capitalism take them out like it should. If they let capitalism work these corrupt selfish greedy companies will fail. And by the way Are you saying they ARE getting bonuses or are you SPECULATING they will.

by: BlueDeacon

12-10-2009 @ 5:46pm

Excuse me, but an overemphasis on the "joys of capitalism" is precisely what caused the problems in the first place, going back to "supply-side" economics -- it never occurred to any of its apologists that such companies would lobby for favored treatment. Just look at the people who are screaming "Socialism!" concerning any health-care insurance bill; there's a reason for that.

by: BlueDeacon

12-10-2009 @ 5:46pm

Excuse me, but an overemphasis on the "joys of capitalism" is precisely what caused the problems in the first place, going back to "supply-side" economics -- it never occurred to any of its apologists that such companies would lobby for favored treatment. Just look at the people who are screaming "Socialism!" concerning any health-care insurance bill; there's a reason for that.

by: JacobS

12-11-2009 @ 10:24am

If people have a problem with the way these banks are run, there's a simple solution. I do my business with a local credit union.

by: JacobS

12-11-2009 @ 10:24am

If people have a problem with the way these banks are run, there's a simple solution. I do my business with a local credit union.

by: PastorShawn

12-15-2009 @ 7:46pm

I'm not sure where the scandal is here. Banks are repaying taxpayer dollars back to the U.S. Treasury, and somehow that's a bad and greedy thing? (Keep in mind, many of the banks were forced to take TARP money whether they needed it or not).

Its also a scandal for a bank to remain competitive relative to other banks? Essentially the Sojourners position is that banks are bad when they have a poor financial performance, but banks are also bad when they desire to do well financially? Lack of competitiveness is bad, but competitiveness is also bad?

Essentially banks want the freedom to hire the best and brightest and most competent, but the Sojourners position is that its better to restrict a bank's ability to hire and staff its organization? Of course, this advice for banks comes from someone who thinks that issuing common stock is necessarily dilutive (Finance 101: it isn't). In reality, the relevant question from a financial perspective is whether the initiatives/projects funded by the new equity financing are positive NPV initiatives or not.

When I get to the end of Sheldon's posting I'm left wondering, "What point are you trying to make?" Seriously, I read the post in search of a coherent thought.

by: PastorShawn

12-15-2009 @ 7:46pm

I'm not sure where the scandal is here. Banks are repaying taxpayer dollars back to the U.S. Treasury, and somehow that's a bad and greedy thing? (Keep in mind, many of the banks were forced to take TARP money whether they needed it or not).

Its also a scandal for a bank to remain competitive relative to other banks? Essentially the Sojourners position is that banks are bad when they have a poor financial performance, but banks are also bad when they desire to do well financially? Lack of competitiveness is bad, but competitiveness is also bad?

Essentially banks want the freedom to hire the best and brightest and most competent, but the Sojourners position is that its better to restrict a bank's ability to hire and staff its organization? Of course, this advice for banks comes from someone who thinks that issuing common stock is necessarily dilutive (Finance 101: it isn't). In reality, the relevant question from a financial perspective is whether the initiatives/projects funded by the new equity financing are positive NPV initiatives or not.

When I get to the end of Sheldon's posting I'm left wondering, "What point are you trying to make?" Seriously, I read the post in search of a coherent thought.

by: PastorShawn

12-15-2009 @ 9:46pm

I'm not sure where the scandal is here. Banks are repaying taxpayer dollars back to the U.S. Treasury, and somehow that's a bad and greedy thing? (Keep in mind, many of the banks were forced to take TARP money whether they needed it or not).

Its also a scandal for a bank to remain competitive relative to other banks? Essentially the Sojourners position is that banks are bad when they have a poor financial performance, but banks are also bad when they desire to do well financially? Lack of competitiveness is bad, but competitiveness is also bad?

Essentially banks want the freedom to hire the best and brightest and most competent, but the Sojourners position is that its better to restrict a bank's ability to hire and staff its organization? Of course, this advice for banks comes from someone who thinks that issuing common stock is necessarily dilutive (Finance 101: it isn't). In reality, the relevant question from a financial perspective is whether the initiatives/projects funded by the new equity financing are positive NPV initiatives or not.

When I get to the end of Sheldon's posting I'm left wondering, "What point are you trying to make?" Seriously, I read the post in search of a coherent thought.

by: PastorShawn

12-15-2009 @ 9:46pm

I'm not sure where the scandal is here. Banks are repaying taxpayer dollars back to the U.S. Treasury, and somehow that's a bad and greedy thing? (Keep in mind, many of the banks were forced to take TARP money whether they needed it or not).

Its also a scandal for a bank to remain competitive relative to other banks? Essentially the Sojourners position is that banks are bad when they have a poor financial performance, but banks are also bad when they desire to do well financially? Lack of competitiveness is bad, but competitiveness is also bad?

Essentially banks want the freedom to hire the best and brightest and most competent, but the Sojourners position is that its better to restrict a bank's ability to hire and staff its organization? Of course, this advice for banks comes from someone who thinks that issuing common stock is necessarily dilutive (Finance 101: it isn't). In reality, the relevant question from a financial perspective is whether the initiatives/projects funded by the new equity financing are positive NPV initiatives or not.

When I get to the end of Sheldon's posting I'm left wondering, "What point are you trying to make?" Seriously, I read the post in search of a coherent thought.