by Deb Cupples | A couple of days ago, the Washington Post reported:
"Citigroup, one of the nation's largest lenders, yesterday agreed to abandon its long-standing opposition to a plan to let bankruptcy judges modify the terms of mortgages, a move that could help millions of distressed borrowers stay in their homes, Senate Democratic leade rs said yesterday.
"The startling turnaround reflects the changed political and economic realities of the nation's deepening recession. Citigroup's approval puts pressure on other lenders, potentially opening a new and more aggressive chapter in the government's foreclosure-prevention effort by giving some of the most troubled borrowers leverage to force lenders to forgive debt....
"'I want to commend Citigroup,' said Sen. Richard J. Durbin (D-Ill.), the No. 2 Senate Democrat. 'They showed real leadership on this, the first major financial institution to step forward and say, "We understand this is a crisis in America."'" (WaPo)
Talk about tails wagging dogs. Frankly, I agree with Hilzoy at Washington Monthly, who commented:
"You'd think they [the folks at Citi] would be happy that we haven't come after them with pitchforks, or at least sufficiently relieved that they've gotten their hands on our money without our requiring any real concessions of them that they'd refrain from asking for more. But noooooo..."
I'd like to go a step further. Executives throughout Wall Street should be happy that we haven't yet found a way to claw back all the compensation they questionably took from shareholders while said execs drove their companies into a ditch.
Yes, as a matter of fact, I do have a couple of examples to share: examples that I never tire of repeating.
In 2007, Goldman Sach's top five executives got $324 million
in compensation: that's just five guys in just one year. I don't know how much money the dozens (or hundreds) of other execs and managers took out of the company that year -- or over the last five years.
I do know this: every dollar that was funneled into an exec's pocket was one less dollar for the company to pay down debts or to keep on hand to offset future losses.
And yes, by 2007, the people running firms that had bought masses of mortgage-backed securities (MBOs) knew that the housing bubble would deflate, which would bring down the value of MBOs, which would increase the companies' losses.
So far, Goldman Sachs has received $10 billion in government-bailout funds.
My favorite example is Merrill Lynch. In 2006, Merrill Lynch purportedly had record earnings of $7.5 billion -- after Merrill's board of directors agreed to spend $5 to $6 billion on employee bonuses. Does that seem like a sound business practice?
Wouldn't the company (and its shareholders) have been better off if Merrill's Board and executives had instead reinvested the money in the company: i.e., paying off debts, financing growth, or saving money to cover future losses?
In September, Merrill Lynch was in such bad shape that it negotiating to be sold off to Bank of America. A few weeks later, Merrill Lynch was slated to receive $10 billion in taxpayer loans via the bailout plan.
If we, as a nation, hope to resolve the current economic crises and prevent future crises, then our representatives in Washington will have to start cleaning up corporate culture -- if only because corporate players have too much personal-financial incentive to keep things dirty.
Other Buck Naked Politics Posts:
* Cleaning up Political and Corporate Culture Could Help Economy
* Real Bonuses Based on Fake Profits
* Execs Made Millions While Driving Companies into Ditch
* Lehman Execs Redistribute Shareholder Wealth (to Themselves)
* AIG Execs Redistribute Shareholder Wealth (to Themselves)
* Are Bailout Funds Being Misused?
* Wall Street Bailout: Rep. Franks Sensible but not so Modest Proposal
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