Economic intervention at work

[Kratos]

Millionaire players on the New York Mets and the Manchester United soccer team should be slapping high-fives over the government bailouts. The reason: The money is helping to pay their salaries. Without $45 billion in government help and a $306 billion backstop on its portfolio of rotten mortgage-backed securities, Citigroup would likely have disappeared. If so, the bank would have reneged on a $400 million, 20-year deal to name the new Mets stadium "Citi Field." Now, one New York pol quipped, "Citi-Taxpayer Field" might be a better name. And thanks to $144 billion in bailout money, AIG can make good on the $47 million it had agreed to pay for the right to plaster its logo on Manchester United soccer jerseys for the next 18 months. Glory, glory, Man United. AIG says it won't renew the contract and has eliminated other sports sponsorships.

Many banks are playing "Let's Make a Deal" and building empires with bailout money, instead of using it to make loans that help the economy. Shortly after PNC Financial Services got a $7.7 billion cash injection, it announced a buyout of National City. BB&T and Zions Bancorporation have said they have the urge to merge -- now that they've collectively pocketed $4.5 billion in bailout funds. Bigger banks mean less competition and higher fees for the taxpayers who helped fund these deals. And the mergers have created more banks that are "too big to fail" -- so when they come back for more money, it'll be even harder to say no. BB&T says it would buy only "problem" banks, in the spirit of the bailout program.

Cleveland's National City bank was run so badly that it was virtually ruined, mainly by imprudent exposure to subprime mortgages. Management's reward for creating this colossal disaster: $200 million in golden parachutes. And taxpayers will get fleeced a second time. Because of a last-minute change in tax rules, PNC Financial Services, which bought National City, will get about $725 million in income-tax credits. Those credits stem from the $19.9 billion PNC expects to lose on bad loans made by National City.

U.S. taxpayers were told the $700 billion financial-system bailout would create jobs by helping the economy. Instead, one of the banks getting the most bailout money is plowing tens of billions of dollars into foreign companies. Bank of America, which will get $25 billion in bailout loans, recently spent about $7 billion to double its stake in state-owned China Construction Bank. B of A, whose CEO is Kenneth Lewis (pictured above), says it would've spent the money even without a cash infusion from the feds.

While taxpayers were still absorbing the shock of having to foot an $85 billion bill (a tab that later grew to $144 billion) to bail out American International Group, executives at the insurer headed straight for the exclusive St. Regis resort in Southern California just days after their company got the money. The $440,000 tab for their eight-day stay at the Tuscan-style resort included $150,000 for meals, $23,000 in spa charges and $7,000 for golf outings. AIG says the event was held mainly to reward performance of independent insurance agents and brokers who were not company employees.

Peter Kraus joined Merrill Lynch in early September to head up its strategy team. But Bank of America, bolstered by $25 billion in bailout money, won shareholder approval this month to take over Merrill. The deal will trigger a golden-parachute clause in Kraus' contract, allowing him to pocket as much as $25 million for his two months on the job, according to The Wall Street Journal.

Should taxpayers pay to keep executives who steered a company into a ditch? American International Group thinks so. It recently agreed to pay retention bonuses to 130 executives, including $3 million for Jay Wintrob, who heads the division that sells annuities. Last year, he earned $2.5 million in salary, bonus, stock and options. Other AIG execs will get more than $500,000, or about 200% of their salaries, to stay through 2009, according to Bloomberg. The insurer had previously promised to forgo bonus payouts as part of the bailout plan. AIG says retention bonuses are needed to keep execs from leaving while it restructures and that departures could cause the company's reinsurers to cancel contracts.

As millions of Americans learn what it's like to make ends meet on unemployment insurance, executives at banks getting taxpayer bailouts will continue to live the high life. Capital One Financial CEO Richard Fairbanks (pictured above) got $73.1 million in pay last year, according to The Corporate Library. That's 1,456 times the median household income of $50,233 earned by taxpayers footing the bill for Capital One's $3.55 billion federal bailout. Bank of America chief Kenneth Lewis last year took home $23 million, or 458 times the income earned by taxpayers covering his bank's $25 billion bailout. Both CEOs also make way more than the median of $8.85 million for CEOs at S&P 500 companies. Despite having to lean on taxpayers with modest incomes for help, both CEOs will likely continue to earn stratospheric pay. Neither bank has indicated it plans to cut CEO pay.

While hard times are forcing many Americans to stretch another year out of the family jalopy, the CEOs at banks getting bailout money will continue to ride -- and fly -- high. John Mack (pictured right), who heads Morgan Stanley, which has taken $10 billion in bailout money so far, enjoyed $356,000 worth of personal use of a corporate jet last year. JPMorgan Chase has gotten $25 billion in bailout money. Its chief, James Dimon (pictured left), took $211 million worth of use of a company jet last year. He used company cars at an estimated cost of $68,000. So far, neither company has indicated it will cut back on CEOs' personal use of corporate jets as part of its acceptance of taxpayer bailout money.

Citigroup, Bank of America and JPMorgan Chase each spent around $5 million lobbying the federal government during the first nine months of 2008. Citigroup is getting $45 billion in bailout money, while the two others are getting $25 billion each. You can expect millions of dollars of that money to be spent on wining and dining Washington lawmakers; none of the banks has indicated it plans to cut back on lobbying.

http://articles.moneycentral.msn.com...lide-number=10

[T_Own]

yep.. well they probably make the most through advertising, not by actually giving out loans

[Kratos]

yep.. well they probably make the most through advertising, not by actually giving out loans

what?
how do you make money through advertising if you aren't selling loans when loans are your product?

[Indymuscleguy]

Oh the banks arenn't going to give away that money too fast. Funny thing is...as foreclosures are at an all time high and credit card debt is also on an all time high...and jobs lost...who's going to have a credit score high enough to get a loan!

That's why I am telling all of my credit card companies that I am filing bankrupcy if they don't offer me fifty percent or better one-time payment to pay them off.

We are getting cheated by the banks and auto CFO's who FUC'ed everything up!

I don't have a late payment history. EVER. On any account. I want to get my piece of the pie and this is only one way I can see it working in my favor. Fuc the banks!

[T_Own]

what?
how do you make money through advertising if you aren't selling loans when loans are your product?

none of them spent all their money on random things, if most people see that they still have money to advertise, they will probably use the company over someone elses who is struggling right now.

[Indymuscleguy]

My burning question is...why did it seem that our economy went into the toilet overnight? It felt as if I went to bed one day and the next we went to Hel!

[Kratos]

none of them spent all their money on random things, if most people see that they still have money to advertise, they will probably use the company over someone elses who is struggling right now.

I can't find enough that makes sense about that post to respond. I'm not sure what you are trying to say.

[Indymuscleguy]

The lent money to people who couldn't afford the payments on cars, homes, and credit cards.

Once the housing market started to fail, job losses were happening, and sub-prime mortgages were jumping so high the money stopped coming in.

The CFO's of our lending institutions and the US auto industries used very bad judgement and I can't type enough to explain how I see it completly, but the worse has yet to come.

SOMEONE TELL ME...THOSE OF US WHO PAY ON-TIME....WHAT KIND OF BAIL-OUT DO WE GET?

[MuscleScience]

The lent money to people who couldn't afford the payments on cars, homes, and credit cards.

Once the housing market started to fail, job losses were happening, and sub-prime mortgages were jumping so high the money stopped coming in.

The CFO's of our lending institutions and the US auto industries used very bad judgement and I can't type enough to explain how I see it completly, but the worse has yet to come.

SOMEONE TELL ME...THOSE OF US WHO PAY ON-TIME....WHAT KIND OF BAIL-OUT DO WE GET?

Unless you went to and Ivy league school, sit on the board of directors for one of your buddies who is CEO and one of the Senators on the bail out committee was also your fraternity brother, you dont get sh-t accept your payroll deducted to pay for it all.

[Indymuscleguy]

Unless you went to and Ivy league school, sit on the board of directors for one of your buddies who is CEO and one of the Senators on the bail out committee was also your fraternity brother, you dont get sh-t accept your payroll deducted to pay for it all.

Agreed!

[Indymuscleguy]

^^bump^^

[Indymuscleguy]

^^bump^^

[T_Own]

what do you keep bumping it for?

I can't find enough that makes sense about that post to respond. I'm not sure what you are trying to say.

its hard to say, but if you think they put 50% of their money into ads, and 50% into the loans they give, i'm saying the people looking for a loan will look at all the companies, see a couple with big ads (like the ones the article talks about) and then some small companies with nothing in public, to the person looking for a loan, which looks better? a company that can afford to advertise everywhere, or a company that looks like they are barely keeping enough business to stay together?

[Kratos]

what do you keep bumping it for?



its hard to say, but if you think they put 50% of their money into ads, and 50% into the loans they give, i'm saying the people looking for a loan will look at all the companies, see a couple with big ads (like the ones the article talks about) and then some small companies with nothing in public, to the person looking for a loan, which looks better? a company that can afford to advertise everywhere, or a company that looks like they are barely keeping enough business to stay together?

When I bought my house, I went with a morgage company I had never heard of. They had the lowest rate. Who cares if the bank is around once they cut you the check. They always sell off the loans anyway. The bank I took out my loan with isn't the same bank I send a check every month. They sold my loan off after 1 year.

[Indymuscleguy]

^^nudge^^

[jimmyinkedup]

Lets not forget this all took place as a result of the amending of the sub prime mortgage lending act in 1995 by the now economically revered bill clinton ...and btw these companies did these loans b/c the government subsidized them for each loan they did. The top 2 companies that took advantage of the government "kickbacks" were fannie mae and lehman bros.... coincidence ..I think not..
oh and an aside the bil was sponsored/ voted for by ..yup mccain and also obama...at their respective levels of government...