AP study finds $1.6B went to bailed-out bank execs

The 116 banks that so far have received taxpayer dollars to boost them through the economic crisis gave their top tier of executives nearly $1.6 billion in salaries, bonuses and other benefits in 2007, an Associated Press analysis found.

That amount, spread among the 600 highest paid bank executives, would cover the bailout money given to several banks that have shared in the $188 billion that Washington has doled out in rescue packages so far.

Some banks trimmed their executive compensation in the face of faltering performance that foreshadowed the current economic crisis, but they still granted multimillion-dollar packages. Benefits included cash bonuses, stock options, personal use of company jets and chauffeurs, home security, country club memberships and professional money management, the AP review of federal securities documents found.

Such bonuses amount to a bribe for executives "to get them to do the jobs for which they are well paid in the first place," said Rep. Barney Frank, the Massachusetts Democrat who chairs the House Financial Services committee.

"Most of us sign on to do jobs, and we do them best we can," said Frank. "We're told that some of the most highly paid people in executive positions are different. They need extra money to be motivated!"

The AP review of annual reports that the banks file with the Securities and Exchange Commission found that the average paid to each of the banks' top executives was $2.6 million in salary, bonuses and benefits.

Among other findings:

-- Lloyd Blankfein, president and chief executive of Goldman Sachs, took home nearly $54 million in compensation last year. The company's top five executives received a total of $242 million.

This year, Goldman's seven top-paid executives will work for their base salaries of $600,000, with no stock or cash bonuses, the company said. Last spring, before Wall Street's staggering losses and layoffs mushroomed, Goldman described its pay plan as essential to retain and motivate executives "whose efforts and judgments are vital to our continued success, by setting their compensation at appropriate and competitive levels." Goldman spokesman Ed Canaday declined to comment beyond that written report.

The New York-based company, after gains last year, on Dec. 16 reported its first quarterly loss since it went public in 1999. It received $10 billion in taxpayer money on Oct. 28.

-- Even where banks cut back on pay, some executives were left with seven- or eight-figure compensation that most people can only dream about. Richard D. Fairbank, the chairman of Capital One Financial Corp., took a $1 million hit in compensation after his company had a disappointing year, but still got $17 million in stock options. The McLean, Va.-based company received $3.56 billion in bailout money on Nov. 14.

-- John A. Thain, chief executive of Merrill Lynch, topped all corporate bank bosses with $83 million in earnings last year. Thain, a former chief operating officer for Goldman Sachs, came to Merrill Lynch in December 2007, avoiding the blame for a year in which Merrill lost $7.8 billion. Since he began work late in the year, he earned $57,692 in salary, a $15 million signing bonus and an additional $68 million in stock options.

Like Goldman, Merrill tapped taxpayers for $10 billion on Oct. 28.

The AP review comes amid sharp questions about the banks' commitment to the goals of the Troubled Assets Relief Program, a law designed to buy bad mortgages and other troubled assets. Last month, the Bush administration changed the program's goals, instructing the Treasury Department to pump tax dollars directly into banks to prevent wide economic collapse.

The program set restrictions on some executive compensation for participating banks, but did not limit salaries and bonuses unless they had the effect of encouraging excessive risk to the institution. Banks were barred from giving golden parachutes to departing executives and deducting some executive pay for tax purposes. Some banks are forgoing bonuses and restricting other compensation.

The records detailing last year's pay packages show that personal financial advice was among the executive perks. Wells Fargo of San Francisco, which took $25 billion in taxpayer bailout money, gave its top executives up to $20,000 each to pay financial planners.

At Bank of New York Mellon Corp., chief executive Robert P. Kelly's stipend for financial planning services came to $66,748, on top of his $975,000 salary and $7.5 million bonus. His car and driver cost $178,879. Kelly also received $846,000 in relocation expenses, including help selling his home in Pittsburgh and purchasing one in Manhattan, the company said.

Goldman Sachs, paying as much as $233,000 for an executive's car and driver, told its shareholders that financial counseling and chauffeurs were needed so executives would have more time to focus on their jobs.

JPMorgan Chase chairman James Dimon ran up a $211,182 tab for private jet travel last year when his family lived in Chicago and he was commuting to New York. The company received $25 billion in bailout funds.

Banks cite security to justify personal use of company aircraft for some executives. But Rep. Brad Sherman, D-Calif., questioned that rationale, saying executives visit many locations more vulnerable than the nation's security-conscious commercial air terminals.

Sherman, a member of the House Financial Services Committee, said pay excesses undermine development of good bank economic policies and promote an escalating pay spiral among competing financial institutions -- something particularly hard to take when banks then ask for rescue money.

He wants them to come before Congress, like the automakers did, and spell out their spending plans for bailout funds.

"The tougher we are on the executives that come to Washington, the fewer will come for a bailout," he said.

Companies start competing for bailout money

Insurers, automakers and American subsidiaries of foreign banks all want the Treasury Department to cut them a piece of the largest government rescue in U.S. history.

The betting is that many with their hands out will be successful, especially with financial markets in a stomach-churning dive and predictions the economy is about to tumble into a deep recession.

These groups argue that the credit squeeze is so severe and the risks to the economy so dire that their industries need financial support as well.

The Treasury is considering requests from a variety of industries, but has not decided whether to expand the program, officials said Saturday.

Lobbying efforts are intensifying.

The Financial Services Roundtable wrote Treasury officials on Friday requesting that the initiative to buy $250 billion in bank stock grow to cover insurers, auto companies, securities dealers and U.S. subsidiaries of foreign companies, including banks. The Treasury's plan is intended to bolster banks' tattered balance sheets and get them to resume making loans.

As the Treasury now interprets it, these additional groups would not participate in the bank stock program. They could receive help from a separate part of the $700 billion rescue that will buy bad assets from financial institutions.

Steve Bartlett, the president of the Roundtable, urged the Treasury to broaden the definition of those eligible for the stock purchase program.

"The institutions that are excluded play a vital role in the U.S. economy by providing liquidity to the market," Bartlett wrote Neel Kashkari, the Treasury Department official running the bailout program.

Referring to U.S. subsidiaries of foreign companies, Bartlett said, "This is a global crisis and to not recognize the U.S. firms controlled by foreign banks or companies would create further impediment to the market's recovery."

A financial industry official said Treasury Secretary Henry Paulson met over the past week with various groups, including hedge fund managers, that were petitioning for assistance. The official spoke on condition of anonymity because the Treasury has not made a decision.

This official said the discussions with insurance industry executives were being held in advance of what are expected to be disappointing earnings reports by some insurance companies in the coming week.

The official said the insurance industry would like to get government purchases of their stock on a mandatory basis, duplicating the agreement Paulson struck two weeks ago with nine major banks.

Paulson pressured the big banks to go along with the program as a way of removing the stigma that might be attached to the payments if only a few major banks had received them.

Some insurers technically would be eligible for stock purchases now if they own subsidiaries that are savings and loan institutions regulated by the Office of Thrift Supervision.

Last month, American International Group, the country's largest insurance company, received an $85 billion loan from the Federal Reserve. Since then, it has gotten further support in an effort to withstand the biggest upheavals on Wall Street since the Great Depression.

Complicating the government's decision-making is that the Bush administration will not be in charge after Jan. 20. Paulson, who has said he has no intention of staying on the job, has pledged to consult with both campaigns on his bailout actions.

Democrat Barack Obama's presidential campaign said Friday it supported the effort by the auto industry to get money from the $250 billion made available for stock purchases. That would be in addition to $25 billion recently approved by Congress for low-interest loans to help the struggling industry retool and build fuel efficient vehicles.

The debate over expanding the bailout comes as the Treasury is rushing to get money out the door to the primary recipients: banks that sharply curtailed lending after suffering billions of dollars of losses on mortgage-related assets as home foreclosures soared in the housing slump.

Lawmakers are pressuring the Treasury to do more in the foreclosure area, as well.

Sheila Bair, head of the Federal Deposit Insurance Corp., told Congress about efforts to provide government-backed loan guarantees for mortgages that are reworked to help homeowners in danger of default. That would give banks an incentive to speed up refinancing efforts because the government would back part of the reworked loan.

The Treasury also is moving ahead to get bank stock purchases approved. It announced on Oct. 14 that it was spending $125 billion to buy stock in nine of the largest financial institutions. An announcement was expected Friday about a second round involving 20 to 22 other banks.

But it was decided each bank would announce its own agreements with the Treasury, out of concern that excluded banks could suffer a stock sell-off from disappointed investors.

PNC Financial Services Group Inc. announced Friday it was acquiring National City Corp. for $5.58 billion, in what was the first instance of a bank using fresh investments from the bailout program to make an acquisition. PNC said it had received $7.7 billion in cash through selling stock to the government under the program.