Wednesday, October 1, 2008

Dear U.S. Banking System - This Is Why You Suck To Most People Right Now!

Dear U.S. Banking System Leaders,

You are really starting to piss people off for a bunch of stuff.

Your greed, excess, and bad business practices have taken money out of my pocket, along with those of most of the American middle class.

According to our government, unless I contribute a fair amount of future tax dollars to what seems to be a not very well thought through bailout plan, our economy will be in endangered for years to come.

And I haven't even mentioned the tax burden my children and their children will be carrying to keep you going.

So, what are you doing to contribute to the bailout? Where is the share that you are putting forth?

What are you doing for your employees?


Your Customers and potential future owner

Wall Street Executive Compensation

I touched on this topic last week when I blogged about Executive Golden Parachutes last week on my Human Race Horses blog. As discussed over there, a number of Wall Street firms are supplying large firms are paying extraordinary amounts to their executives as they leave their failing companies.

Exactly how much a Wall Street Big Shot makes these days?

This question was answered in an article from the Tampa Bay Business Journal by Mike Sunnucks and Chris Casacchia. According to their research, these do earn some good dough. After researching proxy statements, they found the following information:

    • Lehman Brothers CEO Richard Fuld Jr. $34 million in 2007
    • Goldman Sachs CEO, Lloyd Blankfein, $70 million and Co-Chief Operating Officers Gary Cohn and Jon Winkereid $72.5 million and $71 million, respectively
    • American International Group’s chief executive, Martin Sullivan $14 million in 2007
    • Morgan Stanley Chairman John Mack $1.6 million. Chief Financial Officer
      Colin Kelleher got a $21 million paycheck in 2007
    • Merrill Lynch CEO John Thain $17 million in salary, bonuses and stock options in 2007
    • Bank of America Corp. BofA CEO Kenneth Lewis $25 million in 2007
      JP Morgan Chase & Co. Chairman and CEO James Dimon $28 million in 2007
    • Fannie Mae CEO Daniel Mudd received $11.6 million in 2007, with a possible $9 million in severance
    • Freddie Mac, Richard Syron, $18 million, with a possible $14
      million in severance
    • Wachovia Corp. Chairman and CEO G. Kennedy Thompson
      $21 million in 2007; Successor Robert Steel CEO will get a $1 million salary
      with opportunity for a $12 million bonus
    • Washington Mutual new CEO, Alan
      Fishman, a salary and incentives package worth $20 million through 2009

Wachovia Purchase and Executive Golden Parachutes

According to AP reports Citigroup agreed Monday to purchase Wachovia's banking operations for $2.1 billion in a deal arranged by federal regulators, making the Charlotte, N.C.-based bank the latest casualty of the widening global financial crisis.

The deal greatly expands Citigroup's retail franchise - giving it a total of more than 4,300 U.S. branches and $600 billion in deposits - and secures its place among the U.S. banking industry's Big Three, along with Bank of America Corp. and JPMorgan Chase & Co.

Federal Reserve Chairman Ben Bernanke, in a statement Monday, said he supports the "timely actions" taken by the FDIC "which demonstrate our government's unwavering commitment to financial and economic stability."

Treasury Secretary Henry Paulson said in a statement that the sale of Wachovia's banking operations to Citigroup would "mitigate potential market disruptions." Paulson said he agreed with the FDIC and the Fed that a "failure of Wachovia would have posed a systemic risk" to the nation's financial system.

Today, the Atlanta Business Chronicle reports that high level Wachiovia executives are in line to receive significant payoffs if they are asked to leave, or choose to resign, from the company after the acquisition.

Oddly, Wachovia Corp. Chief Executive Bob Steel doesn’t stand to receive a big payout due to Wachovia’s sale of its banking operations to Citigroup Inc. But a few of Wachovia’s other top executives do.

Three of Wachovia’s top executives have change-in-control agreements with the company that could pay them millions if they are terminated or choose to resign following Citi’s acquisition of the company’s banking operations.

  • Ben Jenkins, head of Wachovia’s general bank, would receive $13.3 million in severance payments and a pro-rated bonus of $3.7 million.
  • Steve Cummings, head of the company’s corporate and investment bank, could nab a $14.3 million severance payment and a bonus of $4.25 million.
  • David Carroll, head of Wachovia’s capital-management group, would get a $14 million severance payment and a bonus of $4 million.

All three have employment agreements with the bank that provide golden parachutes that they control if the company should change hands.

The agreements also call for:

  • immediate vesting of stock options and restricted stock awards i
  • medical, dental and life insurance benefits for themselves and their family members for life if they are terminated or resign after the deal closes.

The other side of the coin?

20,000 Wachovia employees based in Charlotte who don't have golden parachutes. After Monday’s deal with Citi, many wondered if the New York bank would consolidate their jobs.

Citi said it plans to base its retail bank operations in Charlotte. Investment banking will be headquartered in New York. Experts’ early guesses suggest up to 3,000 Charlotte jobs may eventually be lost. But no one at Wachovia knows if their job is one of those headed for the chopping block.

They also have no idea what if any severance they might receive, since most of the 20,00 don't have golden parachutes.

No wonder so many people were outraged about the bailout, and actually called their Congressmen to voice their opinions. The Senate votes today.

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