Tag Archives: bailout

Unjustified Bonuses Paid By Taxpayers

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AIG bonuses are ‘an outrage’ says President Obama, and he speaks for us all.  How can the senior executives in AIG be so out of touch with reality that they rely on legal niceties to do what is so morally wrong?  Perhaps that lack of judgment and apparent unawareness of how the real world functions explains their appalling track record.  Well they seem to have shot themselves in both feet this time:

Barack Obama is vowing to pursue “every legal avenue” to stop a clutch of top executives at American International Group Inc. from pocketing multimillion-dollar bonuses, including some to employees who designed the risky credit instruments that helped topple the insurance giant.

The U.S. President joined congressional leaders and state regulators on Monday in demanding that the failed insurance giant, which has so far received more than $170-billion (U.S.) in government bailout cash, roll back $165-million in bonuses paid to employees over the weekend.  Outrage was the word of the day as news spread of the payouts, some reportedly as high as $6.5-million.

Not surprisingly, the Bonuses overshadow foreign bank payments, which could have drawn equally violent reactions.

When it emerged on Sunday that foreign banks had received more than $50bn of US federal funds as part of the AIG bail-out, big beneficiaries such as Deutsche Bank and Société Générale must have braced themselves for an outcry in Washington.

Any senior executive of any financial institution should have a keen awareness of what is going on around the world and consider carefully the most appropriate reactions. In the UK, the Financial Services Authority (FSA) will set out a banking clampdown.

Britain’s financial regulator, the FSA,  plans to clamp down on risky mortgage lending and City bonuses in a shake-up of banking rules due this week according to the British Sunday newspapers.

The FSA is planning a crackdown on management bonuses that reward short-term risk taking and will propose new rules on how banks should be run, including forcing them to hold more capital against risky trading, according to the Financial Sunday Express.  The regulator will also table new vetting procedures to ensure bank bosses are qualified to run financial institutions.

This follows up on assertion by the UK Prime Minister, Gordon Brown, that We won’t pay for bankers’ one-way bets.  He laid out a four-point plan to end the excesses of the bonus culture

Everywhere I go in Britain, I sense and share the anger and dismay of millions of hard-working people who have watched in disbelief during a year in which irresponsible practices in global banks have brought the world’s financial system close to collapse.  Only bold action to protect those endangered through no fault of their own will do.

Responsible senior bank executives should not need to have the politicians clamp down on them in this way.  It goes beyond the issue of legality, it is a simple question of morality.  President Obama has a massive popular movement supporting him as he tries to do whatever it takes to re-establish this in the financial world.

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More Bank Bailouts – Keep The Pumps Working

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The river of money is what keeps economies flowing.  That is why governments are putting all efforts into getting the banking system functioning well.  Others in need like  pensioners may well question why those rich banks seem to be first in the lineup but without the banks there is nothing.

In the UK the government has now unveiled a second bank rescue plan. 

The U.K. government unveiled a second bank rescue plan Monday designed to jumpstart lending and bolster the stability of the nation’s financial system.

The announcement made early Monday marks a dramatic new step for U.K. officials trying to contain a growing banking crisis. Under the plan, the British Treasury will set up a wide scale insurance program aimed at protecting banks against further losses and guarantee bank assets backed by mortgages and other loans.

Meanwhile in the US the government’s Troubled Asset Relief Program (TARP) needs some modification to get things back on track.

Economy is getting worse and banks’ books are still weighed down with junk. Obama will deliver a ‘message’ for Wall Street to get credit flowing, aide says.  It’s back to square one.  The deepening financial crisis, which is undermining the government’s rescue efforts, is prompting federal officials to revisit the original bailout measures. These include taking toxic assets off institutions’ balance sheets by moving them into a so-called “bad bank,” according to published reports.

One can only hope that the banks do effectively use the support they are getting.  Then at least there is one less problem for all the rest of us to worry about.

Footnote: If you are interested in books on Banks, then why not visit the Banks section of the Money Bookstore.

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US Bailout Now $8 trillion

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The $8 trillion bailout is the CNN headline this morning.  The latest slice seems to have a different objective:

Many details of Obama’s rescue plan remain uncertain. But it’s likely to cost at least $700 billion – and that would push Uncle Sam’s bailouts near $8 trillion.

Obama’s estimated $775 billion plan could serve as the next step in the recovery efforts. While most of the Fed’s programs have been aimed at boosting lending, Obama’s economic stimulus plan is aimed primarily at job creation and consumer spending.

These huge numbers are mind-boggling and so far away from the reality that most seniors face as they attempt to balance their budgets and live within their means.  Nevertheless it is fascinating to contemplate President Elect Barak Obama’s dilemma faced with all those economic levers that might be used.

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One Law For The Rich, And …

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With so many seniors in dire straits around the world, it can be distressing to read the headlines.  CNN has a particularly upsetting one: Where’s the bank bailout money?

“What the banks have said largely is that we’re using the money to stimulate the economy, to get the economy moving,” said Sarah Binder, a senior fellow at The Brookings Institution, a Washington think tank. “That’s far, far too general to know what … the banks are doing with the money.”

The vague responses from the banks should not come as a shock, said one U.S. House Financial Services Committee member who opposed the bailout.

“One of the fundamental problems with the Wall Street bailout was the people who had caused the problem were never called in front of Congress to explain what they had done, what needed to be done,” said Rep. Thaddeus McCotter, a Michigan Republican.

One hopes that those who do not have lobbyists will be kept in mind too.  However it is often the squeaky wheel that gets the oil.

Footnote: If you are interested in books on Money, then why not visit the Money section of the Money Bookstore.

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