Bank CEOs Beg For Bailout, Their Jobs
Federal windfall, yes; accountability, no.
Business schools around the country would be wise to add a new course to this fall's curriculum: How to Run A Bank into the Ground, But at the Last Minute Get it Rescued by the Government, Thereby Saving Your Cushy, High Paying Job.
Guest speakers from the American banking industry would be easy to come by.
Despite having sopped up hundreds of billions of dollars from US taxpayers, the Associated Press reports almost 9 out of 10 of the most senior executives at banks which have received federal bailout money still have their jobs. It appears the only way to get fired is to perform so poorly that your bank gets snatched up by another for a song:
- Ken Thompson, CEO Wachovia, gone. Bought by Wells Fargo (WFC).
- Kerry Killinger, CEO Washington Mutual, gone. Bought by JPMorgan Chase (JPM).
- Alan Schwartz, CEO Bear Stearns, gone. Also bought by JPMorgan.
- Stan O'Neal and John Thain, CEO Merrill Lynch, gone. Bought by Bank of America (BAC).
Most of the above crept quietly out of the spotlight after their respective departures to avoid Congressional inquiries about their lavish pay and severance packages. Others, however, have gone less quietly.
John Thain, for example, has become a bit of a media mainstay after reports of his $1.2 million office redecoration were leaked to the press. To his credit, Thain is repaying the money. However, he was also spotted last week -- just before news of his $35,000 commode hit the press -- making a scene at a New York restaurant by conspicuously ordering tap water; the sincerity of his act is suspect, to say the least.
Among the banking titans who managed to keep their jobs, despite needing to be rescued by the Treasury Department, Federal Reserve, FDIC or some combination thereof:
- Ken Lewis, CEO Bank of America: $25 billion in capital and $118 billion loss protection.
- Vikram Pandit, CEO Citigroup (C): $25 billion in capital and over $300 billion in loss protection (although, to be fair, Pandit inherited a mess and his predecessor Chuck Prince was shown the door way back in late 2006).
- John Mack, Morgan Stanley (MS): $10 billion in capital, used in part to buy Smith Barney from Citigroup.
- Lloyd Blankfein, Goldman Sachs (GS): $10 billion in capital.
- John Stumpf, Wells Fargo: $25 billion in capital so his firm could keep paying its dividend, despite recording its first loss since 2001.
Meanwhile, layoffs in the financial sector have topped 100,000 in the past 2 years.
More troubling still: With last night's news of the possible creation of a "bad bank" to absorb the illiquid, worthless assets clogging up existing banks' balance sheets, most banks will continue to be run by the incompetent boobs who drove them to insolvency in the first place.
Okay, maybe "incompetent boob" is a bit harsh. To be sure, these men are well-educated, shrewd, and groomed for some of the most challenging jobs in the world of business. Nevertheless, their collective willingness to allow wild risk-taking, insane leverage and virtually non-existent risk management should at the very least cost them their current positions.
After all, now that we, the people, are shareholders in nearly every major financial institution in the country -- without any voting say as to how they're run -- the least our elected representatives could do is kick out the incompetent boobs who got us here in the first place.
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