Will Obama Ignore Public & International Opinion – The New Auto Bailout – Tell Congress No More Bailouts

President Obama ackknowledged how unpopular the Bailout of the Detroit Auto Industry was during his infamous 60 Minutes interview this past Sunday. For those of you who may have missed it, here is a replay …..

The fact the President understands this sentiment makes the following article even more disappointing.

Washington’s reluctant auto bailout

The government isn’t happy about giving GM and Chrysler more money. But the two struggling automakers still are likely to get another big loan by March 31.

NEW YORK (CNNMoney.com) — General Motors and Chrysler LLC have about a week or less before they find out if they’ll get the additional help they need from taxpayers, creditors and unions to avoid bankruptcy.

What they already know is that any assistance they receive won’t be given happily.

The two companies face a March 31 deadline to win concessions from bondholders and unions in order to prove to the Treasury Department that they can be viable in the long term. Without such a finding, the government can recall the $13.4 billion it has already lent to GM and the $4 billion it loaned to Chrysler.

Few expect Treasury to take such a drastic step. Still, it’s clear that the automakers need more than the loans they already have received. Chrysler is on record as saying it needs as much as $5 billion in additional funds by March 31 to avoid being forced into bankruptcy.

And while GM now says it doesn’t face an immediate cash crunch, it has asked for up to $16.6 billion more in federal assistance, with most of that needed later this year. Its auditors have even said there is significant doubt about GM’s ability to stay in business without more loans. [The “immediate cash crunch” was avoided by having the Government assume responsibility for $5 Billion in payments owed to Auto Parts suppliers by GM & Chrysler – without that payment – agreed to earlier this month – both GM & Chrysler would currently be out of cash. http://money.cnn.com/2009/03/19/news/companies/auto_parts_bailout/index.htm?postversion=2009031919 ]

But it’s growing less certain that GM will be able to get enough concessions from its creditors to satisfy the government. On Sunday, an ad hoc committee of leading GM bondholders issued a statement saying they were not ready to agree to swap their current notes for a combination of new debt and stock.

According to the letter released by the bondholders’ financial advisors, the creditors are concerned GM may be headed for bankruptcy since the rebound in auto sales that the company is calling for in the turnaround plan it submitted to the government last month may not occur.

Without the government agreeing to give the bondholders some protections or more cash upfront, GM and Chrysler might not be able to restructure their debt in the manner called for in their turnaround plans. And without shedding debt, it will be difficult to win the necessary additional cost savings from the United Auto Workers that the union has already granted Ford Motor.

Shelly Lombard, lead auto analyst for debt research firm Gimme Credit, said it will be tough for GM and Chrysler to get approved for additional loans if they are unable to get more concessions from the creditors and the union. And she said a deal with creditors is looking more and more unlikely.

Obama’s tough talk

Perhaps most troubling for GM and Chrysler though is the fact that President Obama said in an interview on “60 Minutes” Sunday that while he wants to help the companies stay out of bankruptcy, they have yet to prove that they can remain viable. [Wasn’t that the deal – $13.4 Billion in cash and don’t come back without a plan showing you can be “viable”?]  

He acknowledged that, given the political uproar over bailouts in general, it may be difficult for his administration to agree to further help for the automakers while it is also fighting for a controversial bank rescue package that Obama said is his top economic priority.

“I just want to say the only thing less popular than putting money into banks is putting money into the auto industry,” Obama said during the interview.

Still, the automakers remain hopeful, at least on the record, that the federal help they are seeking will be approved in time to avoid bankruptcy.

They point to the $5 billion bailout of the auto parts sector announced by the Treasury Department last week as a sign that the Obama administration is committed to saving the automakers — even though a member of the government’s auto industry task force cautioned reporters that help for GM and Chrysler was a separate issue from loans for the parts makers.

The member of Obama’s auto industry task force, who spoke to reporters last week on the ground that his name not be used, said to expect some kind of announcement from Treasury about what’s next for GM and Chrysler ahead of the March 31 deadline. But he cautioned that won’t settle the issue.

“I don’t expect what we say before March 31 will be the final word on this situation,” he said. “It’s very big, very complicated.”

And that’s why Schnorbus and others say they expect negotiations between the automakers, government, creditors and the UAW will well go beyond next Tuesday’s deadline.

“I’m inclined to think they’ll get just enough federal help to keep the lights on,” Schnorbus said. “Treasury will give them a lifeline. But even with that, they’ll still be a long way from safely being out of harm’s way.”   http://money.cnn.com/2009/03/24/news/companies/automakers_bailout/index.htm

[The Government is considering putting more taxpayer money at risk! Why? To payback Union bosses? If helping GM and Chrysler were sound  business decisions, there would be a private market solution. Let them enter Bankruptcy and let the marketplace “buy” the viable parts of the Companies – like Tata’s purchase of Jaguar & Land Rover]      

Meanwhile Industry experts are raising additional “ed flags over the survival of GM & Chrysler. http://money.cnn.com/2009/03/11/autos/gm_trouble.fortune/index.htm?postversion=2009031112

GM has more troubles than you think

Bad cost-cutting ideas, poor efficiency and lousy cars – it’s going to take a lot more than the Volt to save General Motors.

NEW YORK (Fortune) — For the past several weeks, I’ve been trying to put myself in the shoes of the Treasury Department’s auto task force to figure out what its members should ask General Motors to do in order to become competitive again.

It isn’t easy, and here’s why:

The viability plan that GM submitted to the government is all about getting smaller – but it says very little about getting better. Fewer nameplates, fewer brands, fewer workers, fewer dealers – that’s supposed to be the way down the yellow brick road. Once GM gets sized right and gets its costs in line with its revenue, The Land of Oz awaits as soon as the market comes back.

To me, that is a fatal flaw. One of the oldest laws in business is that you can’t cost-cut your way to prosperity. And who knows when the market will come back?

Now lower costs are a necessary condition for GM’s survival. But they aren’t sufficient, because the automaker ranks below its biggest foreign rivals in operating smarts.

For one thing, GM isn’t as clever as Toyota and Honda about sharing parts among different models. According to an analysis of platform efficiency by CSM Worldwide, a Detroit-based forecasting and consulting firm, Toyota makes an average of 406,000 cars from each basic architecture, while Honda gets an amazing 509,000 cars. Higher volume means lower costs per car. So when GM by comparison, spins out a mere 350,000 units, it can’t hope to save as much.

Nor does GM run its plants as efficiently. When last measured by CSM, GM was operating at just 73% capacity, while Toyota was at 86% and Honda at 93%. Plants carry lots of fixed costs and burn a lot of cash when they aren’t running at full speed.

BUT most importantly, GM just doesn’t make very good cars and trucks. In Consumer Reports’ latest scorecard on automaker performance, the automaker ranked 14th out of 15, or next to last. Only Chrysler scored worse.

The leaders were the usual suspects: Honda, Subaru, and Toyota. To make it worse, Consumer Reports won’t even give a recommended rating to some newer GM cars like the Buck Enclave or Cadillac CTS because of poor reliability.

It is true that GM gets pulled down by some of its older models, Consumer Reports points out. But it’s been making cars for 101 years. Shouldn’t all its models be at least competitive?

No other car company that I know of expects to get a pass by brushing off its mistakes the way GM does. Can you imagine Toyota dissing its old Camrys and Corollas, and saying, “Wait until you see next year’s model?”

For another thing, GM has also been pursuing a disastrously wrong-headed development policy on hybrids. While the automaker was working on systems for low-volume trucks and buses with no consumer visibility, Toyota and Honda were building popular-priced hybrids that average people could actually buy.

As a result, Toyota is coming to market with a third-generation Prius that carries an EPA rating of 50 miles per gallon. And Honda just announced that its new Insight, which gets 43 mpg on the highway, will sell for $20,000.

GM’s current contender in that race is the most popular version of the Chevy Cobalt, which gets 25 mpg with a conventional engine. Meanwhile, the company is imploring everybody who will listen to wait for its $40,000 Chevy Volt, a so-called “range-extended” electric vehicle due 18 months from now. The Volt has flashy mileage numbers but is very expensive and will have limited utility for most drivers.

Eventually, GM is going to get rid of all its excess overheard. But if I were voting on more government loans, I’d want to hear how it is going to do things faster, smarter, and better:

  • How it is going to make its product development more responsive to actual customer needs.
  • How it is going to overhaul its marketing and advertising to better understand its buyers and what GM needs to do to repair its reputation.
  • And how to reform its distribution system to better serve customers.

I’m not confident that Treasury will ask the right questions, or that GM knows the answers. But I’m hoping. http://money.cnn.com/2009/03/11/autos/gm_trouble.fortune/index.htm?postversion=2009031112

GM auditors raise doubts about carmaker’s viability

DETROIT — General Motors (GM) was pushed a little closer to the brink on Thursday, getting a vote of no confidence from its auditors, who officially stated they don’t believe the automaker can continue as a going concern.

Although the “going concern” statement does little more than restate what GM itself had already said when it began asking for government aid last fall, the auditors’ statement forced GM to seek waivers from its creditors on loan agreements and could pose a significant handicap to its suppliers when they seek loans.


The Fate of Automaker Bailouts Elsewhere

Sweden says no to saving Saab

The Swedish government has responded to Saab’s desperate financial situation by saying, essentially, tough luck. Or, as the enterprise minister, Maud Olofsson, put it recently, “The Swedish state is not prepared to own car factories.” Governments all over the world are confronting the disintegration of the global automobile market in different ways, with loans, bailouts and takeovers. But Sweden’s approach has been particularly hard-nosed, and particularly unequivocal. “We are very disappointed in G.M., but we are not prepared to risk taxpayers’ money. This is not a game of Monopoly.” Saab was always known for its innovative engineering. But analysts say that in recent years, with General Motors’s emphasis on volume rather than individuality, it has lost its edge. “Under G.M.’s ownership, they denuded the intellectual content behind the brand,” said Peter Wells, who teaches at Cardiff Business School in Wales and specializes in the automotive industry. “Its products are not exciting enough, and Saab doesn’t have a strong brand identity anymore.” http://www.iht.com/articles/2009/03/23/europe/23saab.php

Germany not aiming to take Opel stake, Merkel says

BERLIN, March 22 (Reuters) – The German government is not aiming to take a stake in troubled carmaker Opel. Germany has said it decided to be sure no state support would find its way to GM. Opel has said it needs financial support to survive. http://www.cnbc.com/id/29826461

Political News

Monday, 25th March 2009

Jaguar Land Rover says does not want govt bailout

Struggling British luxury car maker Jaguar Land Rover said on Thursday it did not want a government bailout. Indian conglomerate Tata, the brand in the running to purchase Jaguar and Land Rover from Ford has been officially confirmed as the winning bidder. Ford made the announcement yesterday. The deal involves the transfer of Jaguar and Land Rover to Tata for $2.3 bn. Ford will not be keeping any stake in either brands, as it did when it sold Aston Martin last year.                                                                                               http://car-reviews.automobile.com/Jaguar/review/ford-says-tata-to-jaguar-and-land-rover/5574/

COMMENTARY: Fiat-Chrysler Link Is Nice Idea, but Futile Without Money

The deal is being considered by some as the salvation of Chrysler.  The prolongation of Chrysler’s likely dissolution is the more viable assessment of Tuesday’s announced Fiat-Chrysler deal because it includes no cash infusion to Chrysler. The terms of the alliance, as presented, bring from Fiat no capital that could be used to shore up Chrysler’s foundering day-to-day operational outlook. It’s not a tactical solution to the overriding predicament: Chrysler needs cash and needs it now. The Fiat deal is like offering a starving man a patch of ground, a shovel and some seeds, saying, “Here, this will take care of your hunger.” http://www.autoobserver.com/2009/01/commentary-fiat-chrysler-link-is-nice-idea-but-futile-without-money.html

Chrysler’s Italian Job on the American People

Is there any doubt that when government starts to tinker with industry all sorts of nutty things come to pass? How about the proposed “global strategic alliance” between Chrysler and Fiat? Apparently, there is only one way to make Chrysler competitive with foreign car makers in the U.S.. And that is to have U.S. taxpayers put up $7 billion to essentially fund another foreign car maker’s takeover of Chrysler.

This swindle isn’t just pazzo–it is plain wrong. Hopefully, it will be killed before it ever makes it to Congress.

It is of course a remarkable coincidence that the Chrysler-Fiat scheme has popped up only a few weeks before Chrysler is to present its case for stand-alone viability to the U.S. Treasury.  But then again, no one really believes Chrysler is viable on its own. Not even the Italians.The “global strategic alliance” is, in fact, a flimsy “nonbinding term sheet.” And money?  The alliance is contingent on $3 billion in additional U.S. government loans to Chrysler. “The alliance does not contemplate that Fiat would make a cash investment in Chrysler or commit to funding Chrysler in the future.” Chrysler of course is running out of cash. And that is where you, the taxpayer, come in. The real beauty of the Chrysler-Fiat proposal. There are few losers in it except you, the U.S. taxpayer.

Fiat also gets an option of buying outright control of Chrysler within 12 months for the whopping sum of $25 million. [Fiat can buy Chrysler for $25 million in 12 months. Chrysler wants $3 Billion in cash but will be sold for $25 Million. Can I get that Deal, please! For every $8,000 the Government puts on the table it will cost Fiat $25 to buy Chrysler. The American Taxpayer will be paying for Chrysler’s purchase by Fiat. $25 Million! Heck, the UAW lost $25 Million running it’s Golf  Course over the last 5 years.  http://www.thetruthaboutcars.com/uaw-pisses-away-23m-on-golf-course-retreat/  If the UAW has $25 Million to “piss away” on a private golf course they should put their money where their collective mouth is and buy Chrysler – instead of asking the American Taxpayer to do so].


Contact Washington Now – Tell Them To Say No To Additional Automaker Bailouts: http://www.usa.gov/Contact.shtml

Obama Administration Just Can’t Stop – Another $5 Billion Down Auto-Maker Bailout Rathole – Congressional Approval Bypassed

You may have seen or heard this news snippet:

GM says it doesn’t need more cash in March. General Motors Corp. says its restructuring plan is starting to take hold, improving the automaker’s fortunes at least to the point that it won’t need a US$2 billion U.S. government loan instalment that it had requested for March.”   http://www.autonet.ca/autos/news/2009/03/12/8727786-ap.html

This article goes on to state that,

“Chief financial officer Ray Young said Thursday that GM formally told the Obama administration’s autos task force on Wednesday that it wouldn’t need the money this month. But in an interview with The Associated Press, Young would not say when the struggling automaker would need more government money or whether it will reduce the size of its loan request.  “It seems like our company-wide cost reduction efforts are moving well, as well as we’ve been able to defer spending that we previously anticipated in January and February,” Young said. “I think that’s a positive development.”

So, no additional cash is needed this month. Wow, what a remarkable turn around. 

Wait a minute, when something seems to good to be true, it usually isn’t true. Why, could something “be rotten in Denmark”, or in this case ”Detroit”. Might the Obama Administration be prevaricating again, say like feigning surprise over the AIG bonuses?

Auto suppliers to get $5 billion in aid – Government to provide financing for troubled auto parts suppliers

WASHINGTON (AP) — The Treasury Department, trying to stabilize the battered auto industry, said Thursday it will provide up to $5 billion in financing to troubled auto parts suppliers who are linked to Detroit’s carmakers.

The funds would be made available from the government’s Troubled Assets Relief Program, or TARP, said members of the Obama administration’s auto task force. It would create a financial entity similar to a revolving credit to provide financing for auto parts that large suppliers have shipped to the Big Three automakers but have not yet been paid for.

U.S. automakers — General Motors Corp., Chrysler LLC and Ford Motor Co. — would have the option of using the program and would be required to pay a 5 percent fee of up to $250 million to join. The car makers would designate the parts suppliers who need financing and the suppliers would have to agree to terms of the government-backed protection and pay a small fee for the right to participate.

GM and Chrysler, which have received $17.4 billion in government loans, said they would use the program. Ford, which has not sought the government aid, said in a statement it would not participate “as we remain viable and expect no issue with continued payments to our suppliers.”

Members of the auto task force, who spoke on condition of anonymity because their discussions have been private, said the financing was a first step in restructuring the auto industry. The panel is expected to provide a framework for the revamping of GM and Chrysler by March 31.

The move was intended to help with the cash flow needs and stability of distressed auto suppliers, whose collapse could lead to the disruption of car production by the Big Three and lead to significant job losses.

“The program will provide supply companies with much needed access to liquidity to assist them in meeting payrolls and covering their expenses, while giving the domestic auto companies reliable access to the parts they need,” Treasury Secretary Timothy Geithner said in a statement.  

Officials said foreign automakers with U.S. operations would not be eligible to use the so-called “supplier support program.”  


So if you work for one of the foreign owned, but domestically located auto plants, a plant that pays Local, State and Federal taxes in your Community – your employer and the Business that is a valuable member of your Community, will be put at a competitive disadvantage by using your private and that Companies Corporate tax payments to strengthen a competitor who made add nothing to your Community.

In addition, the Government will now make direct payment to the Auto Suppliers while GM & Chrysler will receive direct part shipments. I can’t wait to see the waste and cost control measures gone awry.

So now the Government will now make good on GM & Chrysler parts I.O.U.’s – payments that GM & Chrysler “deferred” so that the Government could make direct payment.

No GM did not need the $2 Billion March Bailout Money –  In it’s place the Government agreed to pay $5 Billion on behalf of GM directly to the GM parts creditors ….

Another payout at taxpayer expense – a plan with no plan – a bailout without an exit strategy – a public expenditure with no reasonable means of repayment ….

Isn’t enough … enough.

So GM doesn’t need any “March Bailout Money” 

What a sham! What a bunch of prevaricators!  


–verb (used without object), -cat⋅ed, -cat⋅ing.
to speak falsely or misleadingly; deliberately misstate or create an incorrect impression; lie.

evade, shift.


Make UAW Sell its Championship Golf Course Before a Bailout


A view of the finely groomed Black Lake golf course owned by the UAW. (Michigan Golf)
What do UAW executives and workers do to relax? They play golf at the union’s highly touted championship caliber Black Lake Golf Club, designed by Rees Jones. The UAW golf club is in secluded Onaway, MI, as part of the union’s Walter and Mary Reuther Family Education Center. Also part of Black Lake are a learning center, a practice facility with practice bunkers, chipping and putting greens, and a small, nine-hole par-three Little Course.Golf Digest named Black Lake as one of top “upscale public courses.” And Michigan Golf described the course as a “classic” that includes “wide, well-groomed fairways [that] provide ample room for big hitters.” But some big hitters get special privileges at Black Lake. Tee times can be reserved up to two weeks in advance by UAW execs, compared to only three days for non-UAW duffers. Cost to play Black Lake is $95 per round.

Remember all the much-deserved bad press Detroit’s high-paid Big Three executives received last month when they flew in their corporate jets to beg Washington for a tax-paid bailout? Has anybody in Congress or the media bothered to ask UAW head Ron Gettelfinger about his union’s assets and perks like Black Lake Golf Club?

As head of one of the nation’s most powerful unions, Gettelfinger doesn’t earn nearly as much as Detroit’s top CEOs. GM’s Rick Wagoner, for example, made more than $14 million last year. But Gettelfinger’s total compensation of nearly $160,000 annually far exceeds the U.S. median gross family income of $61,500 and puts him among the top five percent of all tax filers, according to U.S. Census Bureau and IRS data.

And the UAW is anything but poor, with net assets reportedly worth an estimated $1.23 billion. UAW membership has been declining for years, as it has for most major unions, but annual income from member dues, interest and other revenues exceeded $300 million in 2006.  


Michelle Malkin does some digging and comes up with a bunch more information, including a Detroit News investigation that found the Black Lake course is a big money loser for the UAW.





The 10 worst bailout boondoggles

Wall Street titans that have taken taxpayer cash are squandering money on spa retreats, golden parachutes and more. Weren’t the huge bailouts supposed to be spent on saving the economy?

By Michael BrushSo far, the Treasury Department has injected more than $250 billion into the U.S. financial sector.

But precious little has come back out in the form of loans that were supposed to help get the economy going again.

In the meantime, banks have been anything but shy about using billions of dollars for other purposes, many of which seem to have little to do with getting the U.S. economy rolling. Top bailout recipients have spent billions on everything from purchases of foreign companies to extravagant spa retreats and from exorbitant golden parachutes and executive pay packages to CEO use of corporate jets for private trips.

So we did a little monitoring ourselves, with the help of BailoutSleuth.com and other Web sites. Here’s what we found.

Pay to play

Citi Field © Jim McIsaac/Getty Images
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.

Empire building

Top bailout recipients 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.

Golden parachutes for failure

National City Bank © Aaron Josefczyk/Reuters/Landov 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.

A bailout for China?

Kenneth Lewis © Roger L. Wollenberg/UPI/Landov, Michael Lewis/CorbisU.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.
[The Bank Of China owns a significant amount of stock in Bank of America]

AIG’s $440,000 post-bailout party

St. Regis  Resort © age fotostock/SuperStockWhile 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.

How gold is my parachute?

Peter Kraus © Jin Lee/Bloomberg News/Landov   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.

Pay to fail

AIG © Everett Kennedey Brown/epa/CorbisShould 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.

Extravagant pay

Richard Fairbank © Michael Temchine/The New York Times/WpNAs 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.

Free use of a corporate jet for personal travel

James Dimon and John Mack © Jeff Kowalsky/Bloomberg News/LandovWhile 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.


congress © Mike Theiler/LandovCitigroup, 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.



$1.6 Billion In Taxpayor TARP Money Paid For Executive Bonuses & Lavish Perks

$1.6 billion went to bailed-out bank execs

Records show bonuses, chauffeurs, health club benefits

updated 2:03 p.m. ET, Sun., Dec. 21, 2008

Banks that are getting taxpayer bailouts awarded their top executives nearly $1.6 billion in salaries, bonuses, and other benefits last year, an Associated Press analysis reveals.

The rewards came even at banks where poor results last year foretold the economic crisis that sent them to Washington for a government rescue. Some trimmed their executive compensation due to lagging bank performance, but still forked over multimillion-dollar executive pay 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.


The total amount given to nearly 600 executives would cover bailout costs for many of the 116 banks that have so far accepted tax dollars to boost their bottom lines.


The AP compiled total compensation based on annual reports that the banks file with the Securities and Exchange Commission. The 116 banks have so far received $188 billion in taxpayer help. Among the findings:

  • The average paid to each of the banks’ top executives was $2.6 million in salary, bonuses and benefits.
  • Lloyd Blankfein, president and chief executive officer of Goldman Sachs, took home nearly $54 million in compensation last year. The company’s top five executives received a total of $242 million.
  • 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 officer of Merrill Lynch, topped all corporate bank bosses with $83 million in earnings last year. Thain, a former chief operating officer for Goldman Sachs, took the reins of the company 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 got $10 billion from taxpayers on Oct. 28.

Banks that got bailout funds also paid out millions for home security systems, private chauffeured cars, and club dues. Some banks even paid for financial advisers. Wells Fargo of San Francisco, which took $25 billion in taxpayer bailout money, gave its top executives up to $20,000 each to pay personal 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’ tab for leased cars and drivers ran as high as $233,000 per executive. The firm told its shareholders this year that financial counseling and chauffeurs are important in giving executives more time to focus on their jobs.

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


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