Embezzlement

TMQ Asks Again -- Why Isn't This Considered Embezzlement?

Last week, Louise Story of The New York Times reported that Merrill Lynch top executives awarded themselves between $5 billion and $6 billion in bonuses in 2006, based on claims of spectacular gains in mortgage-based securities. This year, it turned out the claims were false: Merrill declared a $19.2 billion loss on mortgage paper, and the 2006 results were "written down" (declared worthless). Merrill was sold at a distress price to Bank of America, and shareholders were clobbered in the transaction. Yet Merrill executives kept the bonuses. As stock prices have tumbled, many financial companies have admitted to cooked books, declared big losses and taken huge write-downs. Charles Prince, who was recently shown the door as CEO of Citigroup, paid himself $110 million in bonuses for five years as CEO, and upon departure, received an exit package worth $68 million which included such absurd perks as a car and driver for life. Owing to bad management moves by Prince, Citigroup's share price fell 60 percent during his tenure, costing stockholders $64 billion in lost value, yet Prince got to keep the bonuses. Angelo Mozilo, the CEO of Countrywide Financial, which melted down as a result of its sale of gimmick loans, paid himself $410 million over the past eight years, plus many perks such as private jet travel for his wife. In the year before Countrywide was also acquired at a distress price by Bank of America, the company's stock plunged almost 85 percent, costing stockholders about $20 billion in lost value -- yet Mozilo got to keep the bonuses.

Very high pay to Wall Street managers is justified on the grounds that they are financial geniuses with astonishing expertise. Instead it turns out many financial industry managers made basic blunder after basic blunder. The 2008 financial markets crash belies the entire premise of Wall Street -- that the people there deserve huge paychecks for incredible skill in finance. Any fool can make money in a rising market by borrowing! But if the rise stops and you're leveraged, you hit the wall. This is the short version of how many Wall Street and hedge fund managers appeared to be "financial geniuses" from 2003 to 2006, then ended up destroying their investors. The financial manager with true expertise knows to avoid bubbles, especially bubbles based on borrowing. Many Wall Street and big-bank managers during the housing bubble were taking wild risks or performing no due diligence -- and when the risks blew up, they got to keep their bonuses while investors and stockholders got hosed. At this point, it's totally obvious the system is rigged -- lie about returns (or take crazy risks), claim a spectacular year, award yourself a vast bonus. When the scandal hits, so what? You keep the bonuses. TMQ's basic question: Why isn't this considered embezzlement, punishable by law? Financial managers have a fiduciary responsibility to act in their investors' interest. When financial managers instead act against their investors' interest in order to line their own pockets, that isn't just cynical -- that sounds like a crime.

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AP Photo/Diane Bondareff

"Our senior executives are counting their bonuses and can't see you now. Your money can't see you now, either."

Note 1: In case you're wondering, I hold no grudge against Wall Street since I've had no problems -- years ago I took my own advice and kept my money far away from highly paid financial managers claiming to possess incredible insider expertise. Note 2: Here, Robert Chew describes how he lost his life savings by entrusting the money to Bernard Madoff. Why did he do it? Chew had some rich relatives who invested with Madoff, and whispered about how Madoff had a super-secret investing formula. Tuesday Morning Quarterback repeats: There are no secret investing formulas! If there were, Goldman Sachs (which still exists) would immediately buy them.

Obsenities

This is obscene.

Some selections:

"We've lent some of it. We've not lent some of it. We've not given any accounting of, 'Here's how we're doing it,'" said Thomas Kelly, a spokesman for JPMorgan Chase, which received $25 billion in emergency bailout money. "We have not disclosed that to the public. We're declining to."

"We're not providing dollar-in, dollar-out tracking," said Barry Koling, a spokesman for Atlanta, Ga.-based SunTrust Banks Inc., which got $3.5 billion in taxpayer dollars.

"We manage our capital in its aggregate," said Regions Financial Corp. (RF) spokesman Tim Deighton, who said the Birmingham, Ala.-based company is not tracking how it is spending the $3.5 billion it received as part of the financial bailout.

Ummm, how to properly respond? BULLSHIT!!! Complete and total b-o-l-o-g-n-a. These are frickin banks! It is their job to know how they've spent their money! If they aren't competent enough to know, I have every reason in the current climate to suspect they are busy as can be concealing extra bonuses and 'compensation' for those in power. They got the government to buy stock in their own personal Madoff scheme and are playing the American people for fools. They know where the money is going, and they ought to tell. As the reporter puts it:

"If the appropriate restrictions were put on the money to begin with, if the appropriate transparency was in place, then we wouldn't be in a position where you're trying to call every recipient and get the basic information that should already be in public documents," she said.

Amen. I'm sure that much of it is being put towards the intention that was advertised; and also that a repugnant chunk is being used for nefarious purposes. This is unacceptable. I don't know what I can do about it. Vote incumbents out and not do business with any of these banks. Impossible, and for what gain? This world is jacked up. Screw you Gordon Gekko.

snowfun

Well we didn't get a snowman up, but we did make a killer ramp from the Ketah's front porch, down the steps, bank a left turn behind my beater pickup and down the street. My camera is at work or there would be some pictures, but it was killer.

No Snowmen

All this wintry blast, and I have yet to see one snowman in this town. I think I'm going to have to rectify that tomorrow. Rode the MAX back through downtown this evening and the place was a ghost town. The train was certainly full, but when I got off at 4th to transfer to the yellow I walked around a bit in amazement at the peace and quiet around me. I had stopped at saturday market this morning on my way out and there were pretty much no customers. I felt pretty bad for all the folks selling there who probably weren't going to have that great of a christmas this year; between the economy and the weather in Portland I'll bet sales are waaaay down. But seriously, go make a snowman.

East v. West

Portland Sch. Dist. - Schools west of Willamette River CLOSED; Schools east of Willamette River OPEN, buses on snow routes UPDATE (Effective tomorrow - Tue Dec 16th)

This was my brothers reaction to this news: It's because rich people are smarter and more beautiful than us.

It's things like this that contribute to perception of inequity between the east and the west side, and feeds the east side's inferiority complex. Nevermind the legitimate topographical reasons for this decision. (i assume) The perception is that the damn rich kids are getting a day off while the poor schmucks are stuck slaving away in the factories.