by Brian Brady
Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL
Rod Blagojevich tried to sell the Illinois Senate seat, recently vacated by President-Elect Obama. Blago is to public service what Bernard Madoff is to investment advisory; a modern day pirate, raping and plundering. Their sociopathic behavior is exacerbated by their belief that position implies entitlement. If you’re a believer, there is a special place in hell for them. You’ll hear Blago take the stand and offer this defense, in a classic Midwestern dialect,
“I didn’t do nuttin’ wrong. Daat’s how things get done in Chi-caago. ”
He’ll walk and that will be that. How do I know this? He wants to fight the charges:
“I’m not going to quit my job. I’m not going to do what my accusers and political enemies have done and that is talk about this case in 30 second sound bites. I am dying to show you how innocent I am. I intend to answer every allegation that comes my way.”
I think Blago’s DYING to speak out because he’s got the dirt on the whole Illinois political machine. It’s a festering wound, oozing pus from a century of infection and I believe it’s reach extends from the freshest of aldermen to the highest office in our land. You shouldn’t care about this because “Daat’s the Chi-caago Way”. Illinois voters price corruption into the market when they vote because they have no choice.
Here’s why you should be pissed off; Banks are refusing to disclose the uses of TARP funds:
Goldman: When pressed for what the TARP money was being used for, Goldman Sachs replied that it is spent to “facilitate client activity in the capital markets.”
Morgan: Of the 16 banks that were contacted by ABC News and asked how they were spending the hundreds of billions of taxpayer dollars, only one bank pointed to a specific loan that it made with the cash. That was a $17 billion loan that Morgan Stanley made to Verizon Wireless.
Keep in mind that both Goldman and Morgan relinquished their status as securities firms and applied for Federal bank charters. The brokers became bankers; members of the 3-6-3 club. Did you expect this to be dusk on the Wall Street Era? Michael Lewis was wrong. The pirates found new booty and their looting under the protective veil of a Federal charter.
WELLS FARGO: Wells Fargo said that of the $25 billion it received, it “cannot provide any foward-looking (sic) guidance on lending for this quarter [and] Intend[s] to use the Capital Purchase Program funds to make more loans to credit-worthy customers.”
BONY: More typical was the generic response by the Bank of New York Mellon, which said of the fortune it had banked in public moneys: “Using the $3 billion to provide liquidity to the credit markets.”
Bank of America, one of Hank and Ben’s anointed children, assured us that they’re doing the right thing with your money:
Bank of America, which got $15 billion from TARP, said only, “Have reduced the incentive targets by more than half. Final awards have not been determined.”
State Street seemed offended that they were queried:
“Will not use any of the proceeds from the TARP Capital Purchase Program to fund our bonus pool or executive compensation,” the bank insisted.
Finally, in the ultimate thumbed nose to the public, insurance giant, AIG, is paying out an average of $600,000 for “retention” of key employees, after the boondoggle in Scottsdale:
Last week Congress was angered to learn that giant insurance company American Insurance Group, which received $150 billion in TARP cash to stay afloat, was paying more than $100 million in “retention bonuses” to 168 employees.
What ever happened to the concept of “Noblesee Oblige“? Bankers are supposed to be the frogs, helping you navigate tumultuous waters to get to the other bank of the river. There used to be a “higher calling” in the banking vocation; a pride of helping a family, small business, or corporation advance the ladder while protecting the principal of those who climbed it before. Chalk it up to my Jesuit education but I actually believed that a banker was a stolid icon, dedicated to a cause greater than himself.
Don’t be mad at Blago, folks; he’s just doing what scorpions do. The frogs are the bad guys today.
Joe Strummer says:
“Will not use any of the proceeds from the TARP Capital Purchase Program to fund our bonus pool or executive compensation,” the bank insisted.
I guess they won’t be offering any executive compensation or bonuses this year, since if they took TARP whether the dollars are designated “bonus pool” or “executive compensation” is immaterial to whether they are actually used that way
December 23, 2008 — 10:54 am
Brian Brady says:
I know, Joe. The bank executives implicitly accepted the social contract of public servants when they applied for semi-nationalization. GS-18 employees are not afforded bonuses.
December 23, 2008 — 12:03 pm
Gary Frimann says:
“…since if they took TARP whether the dollars are designated “bonus pool” or “executive compensation” is immaterial to whether they are actually used that way”
I’ve heard that they are giving bonuses, only calling them “retention fees.” Like these guys have another job to go to! Thenn again, losing baseball managers and losing football coaches tend to land on their feet.
When they get admitted to that elite club, these MBA grads seem to lose all sense, and make more money in a day sitting in front of a House of Representatives Committee panel than the person actually working “on the line”. I am not a Socialist, as I am sure they are not, but why do they go begging? I also believe the “bailout” or “rescue” or whatever name one gives it is because of these pirates. Shareholders should be revolting en masse.
I heard today on the news that these companies don’t want to lose their top people because they feel that they “sell” to their best customers. I bet these people could not sell a hooker in a lumber camp on payday…
Shareholders–Start screaming!
December 23, 2008 — 12:16 pm
Brian Brady says:
“I am not a Socialist, as I am sure they are not, but why do they go begging?”
Neither am I but these “beggars” made a deal with the devil. In my mind, they made themselves subject to the GS pay scale when they accepted public funding.
There should be a lesson here. That lesson should be “don’t come whining to the Treasury Dept”
December 23, 2008 — 12:21 pm
Teri L says:
>Last week Congress was angered
Oh please.
December 23, 2008 — 4:06 pm
Tom Hall says:
While it is easy to blame the executives, I sense the boards of these banks may be faced in the near future with shareholder law suits. My gut tells me that the lack of disclosure may be due to attempts to stave off future litigation.
At some point one of these boards will grow a set of balls.
December 23, 2008 — 4:10 pm
Missy Caulk says:
There is to be a higher calling in everything, Brian. Not just banks but every profession. A person’s word was golden. No more…God help us!!
December 23, 2008 — 4:47 pm
Don Reedy says:
Want a little nostalgia with your story, Brian? From my favorite movie, “It’s a Wonderful Life.”
George Bailey: Just a minute – just a minute. Now, hold on, Mr. Potter. You’re right when you say my father was no businessman. I know that. Why he ever started this cheap, penny-ante Building and Loan, I’ll never know. But neither you nor anyone else can say anything against his character, because his whole life was – why, in the twenty-five years since he and Uncle Billy started this thing, he never once thought of himself. Isn’t that right, Uncle Billy? He didn’t save enough money to send Harry to school, let alone me. But he did help a few people get out of your slums, Mr. Potter, and what’s wrong with that? Why – here, you’re all businessmen here. Doesn’t it make them better citizens? Doesn’t it make them better customers? You – you said – what’d you say a minute ago? They had to wait and save their money before they even ought to think of a decent home. Wait? Wait for what? Until their children grow up and leave them? Until they’re so old and broken down that they… Do you know how long it takes a working man to save five thousand dollars? Just remember this, Mr. Potter, that this rabble you’re talking about… they do most of the working and paying and living and dying in this community. Well, is it too much to have them work and pay and live and die in a couple of decent rooms and a bath? Anyway, my father didn’t think so. People were human beings to him. But to you, a warped, frustrated old man, they’re cattle. Well, in my book he died a much richer man than you’ll ever be.
December 23, 2008 — 7:50 pm
Brian Brady says:
Thanks, Don- my all time favorite movie.
Read that monologue everyone- it’s an upwardly mobile dream that improves society
December 23, 2008 — 10:03 pm
James Wheelock says:
Well it worked I am pissed. I think that Paulson is a crook. I was hoping that this was not the case in the begining but now I can see it always was the situation. There is no excuse for the way the money has been used. It should have been used to reestablish the market for mortgage backed securities. There were several great ideas on how to go about this and none of them were used. One being to set up an auction where the government would make 80% loans to investors that would use their own cash for the other 20%. Then the investor would be on the hook for the 20% before the government lost a dime. This would allow for a market price to be determined for the securities allowing for the banks to turn over their portfolios. That would get lending moving again because the banks would be forced to do so to stay afloat. The government has squandered tax dollars once again.
December 23, 2008 — 10:04 pm
Michael Cook says:
If it makes you all feel any better, Wachovia is paying no bonuses or 3-5% of last years bonuses to its people. No retention bonuses either if we go to Wells.
It certainly does not make me feel any better because I worked harder than you can imagine. The trouble with the high profile guys getting called to the carpet for their bonus compensation is that it often means that the little guys, who really should be getting bonuses get nothing. This year, I will probably make $10/hr if I am lucky based on the number of hours that I worked. Perhaps I should have taken a job as a GM factory worker and skipped the undergrad and MBA. Seems like I got screw on the ROI.
December 23, 2008 — 10:31 pm
Brian Brady says:
“This year, I will probably make $10/hr if I am lucky based on the number of hours that I worked.”
Welcome to lending, 2008.
“Perhaps I should have taken a job as a GM factory worker and skipped the undergrad and MBA”
…but, it turns for the better as quickly as it did for the worse. After 20 years in financial services, I know there is demand for bright, industrious people, MC.
December 24, 2008 — 12:29 am
Michael Cook says:
Brian,
I agree. I have learned a tremendous amount about commercial real estate this year.
It does burn me a bid that the Big 3 workers get such great perks, plus a bailout when so many other harder workers are at the mercy of what they or their company produce. The later is the way it should be, dont get me wrong, but the position of the Big 3 and their unions seems extremely contra to that.
December 24, 2008 — 8:21 am
Bob says:
“I sense the boards of these banks may be faced in the near future with shareholder law suits.”
There would have been some big ones by now, but the attorney most likely to be filing them is
taking some time offdoing time for illegal kickbacks.December 24, 2008 — 10:43 am
Jeff Brown says:
The untold story is the monumental looting going on. We’ll be reading about it 10 years from now.
December 24, 2008 — 1:30 pm
Thomas Hall says:
>“I sense the boards of these banks may be faced in the near future with shareholder law suits.”
There would have been some big ones by now, but the attorney most likely to be filing them is taking some time off doing time for illegal kickbacks.<
Bob – I think when Congress attempts to put restrictions in place on the remaining $350B, stockholders may smarten up. Who knows.
December 24, 2008 — 5:54 pm