Tag Archives: Wall Street bailout

Pigs at Merrill Lynch – Thain sez “Bonuses all around!”

Pigs: n. also called hogs or swine, are a genus of even-toed ungulates. Pigs are omnivores and have been known to eat any kind of food, including dead insects, tree bark, garbage, and even other pigs. (They’re also smart and sociable, but that doesn’t fit my current pig model…)

At the beginning of December I wrote about the greedy head of Merrill Lynch, John Thain (and one of John McCain’s major fundraisers…) He wanted a $10 million bonus after ML had just lost $11 billion – (actually twice that much – see below).

Well, Thain’s back in the news.

Merrill Lynch took the unusual step of accelerating bonus payments by a month last year, doling out billions of dollars to employees just three days before the closing of its sale to Bank of America.

[Between $3 and 4 BILLION in bonuses, actually!]

The timing is notable because the money was paid as Merrill’s losses were mounting and Ken Lewis, BofA’s chief executive, was seeking additional funds from the government’s troubled asset recovery programme to help close the deal….

John Thain (Merrill’s chief executive) decided to pay year-end incentives in December as opposed to their normal date in late January.

Thain evidently accelerated the executive payouts before it was revealed that Merrill had suffered a $21.5bn operating loss in the fourth quarter.

After the merger with BofA, Thain joined their staff (for 3 weeks), but now he’s out on his curly little tail:

John A. Thain, the former chief executive of Merrill Lynch, resigned from Bank of America on Thursday after the bank suffered unexpected losses stemming from its acquisition of the giant brokerage.

Mr. Thain tendered his resignation Thursday morning after a 15-minute meeting with Kenneth D. Lewis, the chief executive of Bank of America. …

The relationship between the two men soured over the last month as Mr. Lewis grew increasingly frustrated, believing that Mr. Thain did not have a good grasp of the firm’s operations, according to an individual who is aware of the tensions between the two men but who does not have authorization to speak publicly. Mr. Thain had been put in charge of the bank’s trading, investment banking and brokerage operations after Bank of America acquired Merrill Lynch in January.

The final straw for Mr. Lewis may have been the decision by Mr. Thain to make an earlier-than-usual bonus payout to Merrill employees, just three days before the merger closed on Jan. 1.

And from whence did the funds for the bonuses come? TARP (you and me).


Update:  Fantastic roundup of Thain’s Greatest Hits on TPMMuckraker today. Number 1?

The Great Redecoration

Thain pays $1.2 million last year — well after Merrill’s huge losses on mortgage assets are known — to refurbish his office suite. That includes $800,000 to interior designer Michael S. Smith, who’s also redecorating the White House for the Obama family. (More Smith clients: Steven Spielberg, Michelle Pfieffer, and Cindy Crawford.)

Other expenses from the big redecorating project, all signed off on by Thain personally:

Area Rug: $87,784
Mahogany Pedestal Table: $25,713
19th Century Credenza: $68,179
Pendant Light Furniture: $19,751
4 Pairs of Curtains: $28,091
Pair of Guest Chairs: $87,784
George IV Chair: $18,468
6 Wall Sconces: $2,741
Parchment Waste Can: $1,405
Roman Shade Fabric: $10,967
Roman Shades: $7,315
Coffee Table: $5,852
Commode on Legs: $35,115

At this time, reports CNBC’s Charlie Gasparino on The Daily Beast, Thain is “preaching the virtues of cost control, telling employees to reduce expenses including car services, entertainment and travel”.

Pillage and plunder: the “Free Market” route to economic disaster

Pillage: v.  the act of looting or plundering especially in war
n. something taken as booty

Plunder: v. to take by force or wrongfully, to steal or loot

According to the news, you and I – and every other man, woman and child in America – are going to spend the foreseeable future paying directly and indirectly for corporate transgressions, malfeasance, and overweening greed.

Depending on how you calculate it, the cost to us could be in the trillions of dollars. Not only that, but we’re losing our jobs and our homes, our retirement savings have shriveled, small businesses are forced to close, and our governments – right down to the local level – are unable to fund the basic services we had taken for granted.

We’ve been pillaged and plundered.  And we’re pissed.

Sure, some saw it coming, but those lone voices in the wilderness went unheeded. What could they do when meaningful regulation of big business had disappeared?  Regulation, loathed by Republicans since the Time Of Reagan, and brought to new heights of abhorrence under the Current Occupant, was deemed antithetical to the Sacred Free Market.

I have ZERO pity for CitiGroup, the latest to cry wolf. Those scumbags pushed their credit on folks they KNEW wouldn’t be able to pay.

Case in point: my son. When he was away at college, the kids in his dorm got invitations for free pizza on a certain night a a local pizza joint.  Being a college kid who was always up for free food, he went, only to learn that he’d only get his pizza after he filled out an application for a Citi credit card.

Thinking: “What the hell, I won’t use the card, but I would like some pizza,” he filled out the application, using his home address (my address).  A few days later, I got an envelope containing his new credit card with a $5,000 credit limit. A couple of days after, another one with a different number arrived. $5,000 more credit. This for a student with NO income.

I called to ask him what he wanted me to do with the cards and he said to destroy them (a less prudent  young person would have kept them…), which I did.

Then the pouty letters from Citi started coming.  “Did you get the card? How come you’re not using it?…”

After a few weeks without a response the letters upped the ante: “We’re disappointed that you’re not using your card, so we’re giving you a FREE starter credit of $20 to use towards your first purchase on your new Citi card…”   Now, $20 is a lot of money to a college student. If that offer hadn’t been intercepted by me, he might have bitten at that point.

Eventually the letters stopped.

For some context on the current economic disaster as part of a capitalistic pattern, check out Naomi Klein’s book, The Shock Doctrine: the Rise of  Disaster Capitalism.  It’s about how disasters, like Hurricane Katrina, the World Trade Center attacks, and now the current meltdown in Detroit and Wall Street are perfect opportunities for governments and corporations to screw the little guy in the name of fixing the mess (which they often created).

Sorry. This is a downer post. But I am pissed off.

From Popular to Pitiable: Palin’s pathetic Couric interview

Popular: widely liked or appreciated.

Pitiable: arousing or deserving of compassion, lamentable.

Pathetic: pertaining to, expressing or arousing pity; distressing and inadequate.

Palin’s ratings are plummeting as the public gets to see more of her. Well, we’re not seeing a lot more, since she’s only granted interviews to Charlie Gibson and now Katie Couric (four weeks since her nomination announcement!).

What I’ve seen of the Couric interview(s?) is a disaster. Palin is inarticulate, weasely, and seems incapable of actually answering a question.  My personal response to her vacillates from horror, to amusement, to disbelief, to WTF?, and now even to pity.

WHAT was the McCain campaign thinking (drinking?) when they chose her for VP?  Were they so cynical about the smarts of the American people to think we wouldn’t notice her critical failings?  Did the Republicans just make her a pawn in their political game? If this is the case, I feel sorry for her.

However, Palin has had presidential aspirations since she was elected mayor of Wasilla (wish I could find that cite), so to be offered a crack at the VP slot by an old duffer (with a 30% chance of dying in office) played right into her ambitions. Even so,  if she had even an ounce of self-knowledge, she would have recognized that she was not yet ready and said, “Thanks but no thanks…. ask me again in four years after I’ve done a lot more traveling, reading, governing, learning, thinking.”

But she jumped at the chance, “Didn’t even blink!”  Sarah the Unready.  So I say, “Honey, you chose this bed. Now sleep in it.

Here are a couple of transcript tidbits from the Couric interview. Tell me if you understood what she was saying:

Proximity to Alaska:

COURIC: You’ve cited Alaska’s proximity to Russia as part of your foreign policy experience. What did you mean by that?

PALIN: That Alaska has a very narrow maritime border between a foreign country, Russia, and on our other side, the land– boundary that we have with– Canada. It– it’s funny that a comment like that was– kind of made to– cari– I don’t know, you know? Reporters–


PALIN: Yeah, mocked, I guess that’s the word, yeah.

COURIC: Explain to me why that enhances your foreign policy credentials.

PALIN: Well, it certainly does because our– our next door neighbors are foreign countries. They’re in the state that I am the executive of. And there in Russia–

COURIC: Have you ever been involved with any negotiations, for example, with the Russians?

PALIN: We have trade missions back and forth. We– we do– it’s very important when you consider even national security issues with Russia as Putin rears his head and comes into the air space of the United States of America, where– where do they go? It’s Alaska. It’s just right over the border. It is– from Alaska that we send those out to make sure that an eye is being kept on this very powerful nation, Russia, because they are right there. They are right next to– to our state.

Bailout and Health Care

COURIC: Why isn’t it better, Governor Palin, to spend $700 billion helping middle-class families struggling with health care, housing, gas and groceries? … Instead of helping these big financial institutions that played a role in creating this mess?

PALIN: Ultimately, what the bailout does is help those who are concerned about the health care reform that is needed to help shore up the economy– Oh, it’s got to be about job creation too. So health care reform and reducing taxes and reining in spending has got to accompany tax reductions.

Prevaricate: Paulson edition

Vocabulary review time. We may have to review these words more often than I’d like:

Prevaricate:v. to stray from or evade the truth

Paulson: megalomaniac ex Goldman Sachs CEO, now Chancellor of the Exchequer (known in the US as Secretary of the Treasury).

Henry Paulson wants Congress to rubber stamp his three-page Wall Street bailout plan. It includes this paragraph that couldn’t be clearer:

Sec. 8. Review. Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

In other words: I AM KING.   But when questioned he realizes we don’t really like that kind of language in the US of A. Now he says:

Paulson and the Politics of Fear

Treasury Secretary Henry Paulson has been on the fearpath since Thursday when he warned Congress and the country that the world as we know it would end if Congress didn’t immediately authorize $700 Billion (of taxpayer dollars).

Naomi Klein wrote the book Shock Doctrine last year to describe the way that governments use major disasters to grab power or property from the public while everyone is in the grip of fear, loss or grief. Examples from the New York Times review of the book:

“The Shock Doctrine” is Klein’s ambitious look at the economic history of the last 50 years and the rise of free-market fundamentalism around the world. “Disaster capitalism,” as she calls it, is a violent system that sometimes requires terror to do its job. Like Pol Pot proclaiming that Cambodia under the Khmer Rouge was in Year Zero, extreme capitalism loves a blank slate, often finding its opening after crises or “shocks.” For example, Klein argues, the Asian crisis of 1997 paved the way for the International Monetary Fund to establish programs in the region and for a sell-off of many state-owned enterprises to Western banks and multinationals. The 2004 tsunami enabled the government of Sri Lanka to force the fishermen off beachfront property so it could be sold to hotel developers. The destruction of 9/11 allowed George W. Bush to launch a war aimed at producing a free-market Iraq.

Paulson cautioned lawmakers against letting the plan get bogged down in a debate over unnecessary additions. As one blogger noted “Unnecessary additions” – things like accountability, transparency, making sure that the crisis does not happen again, and making sure that it solves the underlying problem. But many questions arise:

1. Did Paulson pull that $700 billion number from his butt? Exactly where would the money be spent and what would it accomplish there? Is this amount just for starters? Others say the number is more like a TRILLION.  How much is a trillion? Ronald Reagan said:

I’ve been trying … to think of a way to illustrate how big a trillion is. The best that I could come up with is that if you had a stack of $1000 bills in your hand only four inches high you would be a millionaire. A trillion dollars would be a stack of $1000-dollar bills 67 miles high.

Since most of us have never seen a bill larger than $100, that stack would be 670 miles high.

2. Did this three-page Paulson Wall Street bailout plan just materialize out of thin air, or — far far scarier — is it something the Bush administration has been scheming about for months – waiting for the right moment, like they did with attacking Iraq (see Shock Doctrine, above)? From Roll Call:

White House Dispatches Team to Push Economic Bill

The White House today is drumming up extraordinary pressure on Congress to approve its plan to enact a $700 billion mortgage bailout fund, suggesting the markets cannot wait much longer and dispatching Vice President Cheney and other top officials up Pennsylvania Avenue to jawbone lawmakers. ……

[White House Deputy Press Secretary Tony] Fratto said it would be “unthinkable” for Congress not to pass legislation this week, asserting the result would be a “very, very serious situation” for the U.S. economy…….

Fratto insisted that the plan was not slapped together and had been drawn up as a contingency over previous months and weeks by administration officials. He acknowledged lawmakers were getting only days to peruse it, but he said this should be enough.

This afternoon Terry Gross interviewed Gretchen Morgenson, business columnist for the New York Times (a must listen to…) who said that she suspected things have sucked for well over a year, and the Bush administration knew it but kept telling us these problems were “contained to the subprime market”. Her question was, “Why should we believe them now??”

3. Who is Henry Paulson, anyway, and does he have a dog in the fight? Silly you for wondering if a Bush appointee could have a conflict of interest… For starters he was the CEO of Goldman Sachs, and is very much from and of the Wall Street culture – and will no doubt return there when Bush leaves office, so he’s not going to want to bite the hand that feeds.  And how about this juicy tidbit?

Paulson Debt Plan May Benefit Mostly Goldman, Morgan By Jody Shenn

Sept. 22 (Bloomberg) — Goldman Sachs Group Inc. and Morgan Stanley may be among the biggest beneficiaries of the $700 billion U.S. plan to buy assets from financial companies while many banks see limited aid, according to Bank of America Corp.

…Its benefits, in its current form, will be largely limited to investment banks and other banks that have aggressively written down the value of their holdings and have already recognized the attendant capital impairment,” Jeffrey Rosenberg, Bank of America’s head of credit strategy research, wrote in a report dated yesterday, without identifying particular banks.

4. If this is all so horrible and if we’re going to be on the hook for the bailout, why can’t we hear Paulson’s briefing? As Markos said today:

So Treasury gets congressional leaders into a room, and gives them a briefing so horrifying, that they all immediately age 20 years and come out with white hair and immediately get to work pissing away $700 billion to Wall Street.

They’re terrified, we’re told! It was horrible!

So why not slap that presentation online? Why not share this with the American people?

This isn’t Iraq, where you can pretend that the information is “top secret” and must be protected lest disclosure amount to a security breach.

In this case, we’re probably talking financial projections, maybe an excel sheet or two.

So put it online so the rest of the country can see what supposedly has our fearless leaders in a panic.

More tomorrow.

Paulson’s Pinata: Wall Street waits for the candy to drop

Piñata: a decorated vessel (as of papier-mâché) filled with candies, fruits, and gifts and hung up to be broken with sticks by blindfolded persons. When it breaks and the goodies fall out, everyone scrambles to scoop up as much as they can.

Bob Herbert calls for a second opinion before we turn the keys to the kingdom back over to the thieves who stole the gold in the first place.

The sky was falling, [Paulson] seemed to be saying, and if the taxpayers didn’t pony up $700 billion in the next few days, all would be lost. No time to look at the fine print. Hurry, hurry, said the treasury secretary. His eyes, as he hopped from one network camera to another, said, as salesmen have been saying since the dawn of time: “Trust me.”

With all due respect to Mr. Paulson, who is widely regarded as a smart and fine man, we need to slow this process down. We got into this mess by handing out mortgages like lollipops to people who paid too little attention to the fine print, who in many cases didn’t understand it or didn’t care about it.

-snip –

I agree with the economist Dean Baker, co-director of the Center for Economic and Policy Research in Washington, that while the government needs to move with dispatch, there is also a need to make sure that taxpayers’ money is used only where “absolutely necessary.”

Lobbyists, bankers and Wall Street types are already hopping up and down like over-excited children, ready to burst into the government’s $700 billion piñata. This widespread eagerness is itself an indication that there is something too sweet about the Paulson plan.

Yup. “Fool me once, fool me….”