Sunil Jain: Banking on TARP

If you’re wondering why the G20 finance ministers want to curb excessive banker bonuses, there’s a good reason for it. Though bank bonuses came down dramatically in 2008 — average CEO compensation at the top 20 US banks that got aid fell 30 per cent in 2008 — they still got paid a lot more than the CEOs for S&P 500 companies, companies which never got any taxpayer-funded Troubled Asset Relief Program. Average CEO compensation at these banks fell from $19.1 million in 2007 to $13.8 million in 2008 — this last figure compared with $10.1 million for S&P 500 CEOs. While we will have to await details for 2009, don’t feel too bad for the bankers. According to the Institute for Policy Studies, of the 20 financial firms that got the biggest bailout, 10 have reported the stock options given to executives when share prices were rock bottom. Thanks to government bailouts, their stock prices rose and, voila, the top five executives at nine of these banks have gained $90 bn already, and we’re not talking salaries or bonuses yet. American Express CEO Kenneth Chennault got 1.2 million options and the bailout saw Amex shares rise from $16.71 to around $32, giving him nearly $18 million. An earlier study, by New York Attorney General Andrew Cuomo, found 9 US TARP-assisted banks paid $33 bn in bonuses and got $175 bn from TARP. Goldman Sachs earned $77,228 per employee in 2008 but gave out bonuses worth $160,420 per employee, Merrill Lynch lost $467,797 per employee but gave out $61,017 per employee in bonuses. 

 

Bonuses awarded at nine major banks in 2008
Bank	2008 Bonus Pool (in $)	Number of employees	Number of bonus payments in excess of $1 million
Bank of America	3,300,000,000	243,000	172
Bank of New York Mellon	945,000,000	42,900	74
Citigroup	5,330,000,000	322,800	738
Goldman Sachs	4,823,358,763	30,067	953
JP Morgan Chase	8,693,000,000	224,961	1,626
Merrill Lynch	3,600,000,000	59,000	696
Morgan Stanley	4,475,000,000	46,964	428
State Street	469,970,000	28,475	44
Wells Fargo	977,500,000	281,000	62
TOTAL	32,613,828,763	1,279,167	4,793
Source: New York Attorney General’s Office.