Do you think you'll get a Christmas bonus this year? I know one person who will -- the new chief executive who will take over for Ken Lewis at Bank of America.
The bank, whose board met Monday in search of Lewis's successor, yesterday announced its repayment of $45 billion in TARP money. This decision is good for the Treasury (and might be included in Obama's recent jobs stimulus) but also frees Lewis's successor (and corporate colleagues) from the reigns of pay czar Kenneth Feinberg. Basically, upon its return to public freedom, Bank of America would regain liberty to pay Lewis-like compensation (Lewis received $10 million last year).
Since taxpayers footed the bailout, Bank of America is reassuring us that it's repaying TARP money because cash flow has improved. Its current operations are up for interpretation. The bank is making money, mostly through trading stocks and bonds on Wall Street. But I'm also aware that the bank has recently been lending less and even lost $1 billion in its third quarter.
So how is a TARP payback economically feasible? In short, because the bank is using some available cash along with $19 billion it's raising from "common equivalent securities" (stock). But why pay back bailout money and dilute shareholders' earnings? One reason: executive compensation.
And BofA admits it. Notes from the bank's research analysts stress that giving back its $45 billion allowance eliminates "the competitive disadvantage relative to peers who [have] already repaid TARP," The New York Times reported.
Wait a minute. I thought the whole idea behind the bailout was to loan temporary credit to banks? And I thought banks were then supposed to do the same for us -- bail us out with increased credit lines for taxpayers and readily available lending for small businesses?
This is thanks but no thanks.
Bank of America argues it needs to pay top executives top executive salaries. So basically we bailed out the banks, the banks are now bailing out their executives, and we're left with business as usual. Bank of America now joins JPMorgan Chase & Co., Morgan Stanley, and Goldman Sachs Group as large banks that are public again. Citigroup and Wells Fargo aren't far behind, as they recently sought to repay their TARP money.
But wait -- this isn't only a bank issue. Similarly, General Motors plans to repay its loans by the end of 2010. Mark Reuss, president of North American operations, said he thinks that "everybody in this company wants that desperately." No kidding, because it means higher paychecks.
Reuss said that ultimately, "We want to make people in this country proud of General Motors, its employees and its dealers."
Sorry GM and Bank of America, but the only way to do that is to rediscover your values. It's time to leave behind the maxim that greed is good, because enough is enough.
Sheldon C. Good is the media assistant for Sojourners.
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