Results tagged “bailout”

Yesterday a 50-cent surcharge was tacked on to taxi fares as part of the state's MTA bailout, starting a cab ride with a $3 base fee... and no one is happy about it.

The Obama administration is set to ask that executive compensation be dramatically lowered at seven companies which received the most government help. While the plan hasn't been made public yet, it's expected that pay will fall an average of 50% for the top 25 paid executives at Citigroup, Bank of America, American International Group, General Motors, Chrysler, GMAC and Chrysler Financial.

Goldman Sachs, a recipient of billions of dollars in government bailout money, has built up $16 billion in its bonus pool so far this year, according to the Post. This is on track to be the largest year for bonuses ever. In unrelated news, the national unemployment rate is still above 10%.

Some good news about the billion dollar bailouts the federal government made last year. The NY Times reports, "The profits, collected from eight of the biggest banks that have fully repaid their obligations to the government, come to about $4 billion, or the equivalent of about 15 percent annually, according to calculations compiled for The New York Times." Still, the Times adds, "These early returns are by no means a full accounting of the huge financial rescue undertaken by the federal government last year to stabilize teetering banks and other companies. The government still faces potentially huge long-term losses from its bailouts of the insurance giant American International Group, the mortgage finance companies Fannie Mae and Freddie Mac, and the automakers General Motors and Chrysler. The Treasury Department could also take a hit from its guarantees on billions of dollars of toxic mortgages."

The NY Times has an interesting article wondering about Henry Paulson's many calls to his former company, Goldman Sachs, while he was Treasury Secretary and overseeing bailouts. Sure, Paulson had sold his shares and obtained ethics waivers, but the Times reports, "During the week of the A.I.G. bailout alone, Mr. Paulson and Mr. Blankfein spoke two dozen times, the calendars show, far more frequently than Mr. Paulson did with other Wall Street executives. On Sept. 17, the day Mr. Paulson secured his waivers, he and Mr. Blankfein spoke five times. Two of the calls occurred before Mr. Paulson’s [ethics] waivers were granted." Lawyer and former executive director of the NY State Commission on Government integrity Peter Bienstock said, "If it can happen on a phone call and can happen without public scrutiny, it destroys the standard because then anything can happen in that fashion and any waiver can happen." Paulson's apparently busy writing a memoir, so he didn't comment.

Duane Reade may be a soulless corporate chain, but its our corporate chain, forged right here in 1960 at a warehouse between its eponymous Tribeca streets. But despite (or because of?) its ubiquity—253 locations in NYC and counting—Duane Reade is deeply in debt, and last week its corporate parent, private-equity firm Oak Hill Capital Partners, shelled out $125 million to save Duane Reade from defaulting on its debt.

Remember when the financial crisis waterboarded the American economy to within an inch of its life, and then taxpayers threw all their money at Wall Street to stop the drowning? That's all behind us now, and those of you reading this in the basement of your parents' tent under the bridge can take comfort in knowing that everything's coming up Goldman. Though CEO Lloyd Blankfein recently urged employees not too buy anything flashy in the wake of record profits, everything else at Goldman is back to normal and no lessons have been learned, just like the end of a Seinfeld episode."Our risk appetite continues to grow year on year, quarter on quarter, as our balance sheet and liquidity continue to grow," crows Goldman president Gary Cohn to the Times. What could go wrong?

Congress voted yesterday to pass a bill curbing executive bonus pay, attempting to prevent what they call "perverse incentives" for execs in the face of a public outcry that came with news about big bonuses being handed out to bigwigs at some of the Bailout Babies of '08. The bill's passage came on the same day as a well-timed new report from Andrew Cuomo documenting how rampant big bonuses were at places like Citigroup and Goldman Sachs; AIG originally set off the bonus backlash earlier this year. The vote in Congress was primarily down party lines; Democrats tried to emphasize that shareholders would get a say in dictating just how much companies are warranted to dole out. It was also reported yesterday that CEOs have also lost out on another bonus—free lunch at the White House. In order to prevent any conflict of interest, the Obama administration has been billing executives who share a meal inside executive offices with the president. The News says there hasn't been a case of presidential penury since Jimmy Carter started charging Congressmen for coffee and danishes when they came to visit.

Attorney General Andrew Cuomo released a report on bank bonuses, which he had previously sent to House Oversight and Government Reform Committee Chair Eldophus Towns, yesterday, and in it, Cuomo continued to criticize Wall Street's compensation methods. The Wall Street Journal says the report gives a "rare window into the pay culture" of Wall Street:

Nine banks that received government aid money paid out bonuses of nearly $33 billion last year -- including more than $1 million apiece to nearly 5,000 employees -- despite huge losses that plunged the U.S. into economic turmoil...

Continue reading "AG Cuomo's Report Blasts Wall Street Bonuses"

The government has approved 10 banks to repay TARP bailout funds, which would total about $68 billion. While the Treasury Department has not indicated which banks are included, the NY Times reports they are American Express, Bank of New York Mellon, the BB&T Corporation, Capital One Financial, JPMorgan Chase, the State Street Corporation, US Bancorp, Morgan Stanley, Northern Trust, and Goldman Sachs. Many of the banks passed the stress test (Northern Trust is a holding company and did not have to undergo the stress test. Bloomberg News notes this will "reduc[e]officials’ authority to intervene in everything from lending and hiring strategies to compensation policies." Treasury Secretary Timothy Geithner said, "These repayments are an encouraging sign of financial repair, but we still have work to do."

Embattled insurance giant AIG may be near a deal to sell two buildings—70 Pine Street and 72 Wall Street which are connected by skywalk—for $100 million to an overseas buyer, according to the Post. The deal is rumored to be for $100 million: "The buyers expect to create a mixed-use development that could include residential and retail. But because of anti-terror legislation, the Dept. of State will have to approve any overseas buyer." Well, $100 million is still way less than AIG's executive compensation payouts (AIG has received $182.5 billion in government aid). The company plans to move its employees in 2010.

Governor Paterson wants the State Legislature to vote on the State Senate's MTA bailout plan tomorrow and have it passed by Wednesday. This in spite of the fact that the Senate plan (which includes a payroll tax, taxi dropoff surcharges and Paterson's addition of reimbursing school districts for the payroll tax with state money) might not have the 32 votes it needs in the Senate—and some skepticism from Assembly Leader Sheldon Silver. Paterson told the NY Times, "What I’m saying is, this is not a plan that I think is going to get a blue ribbon. But what it does is it solves the huge immediate problem of the anxiety and fear that commuters have over the shocking increase in fares and the prospect of widespread service cuts." The Senate plan would include an 8% fare hike, vs. the proposed 25% hike in the doomsday plan. He also said he would, if the plan passed, look for ways to fund the MTA's capital program over the summer, but of course, there's also the additional deficit the MTA faces...

With news of another $621 million shortfall beyond an expected $1.2 billion deficit, the MTA is considering ways to deal with its troubled financial situation since the State Legislature (really, the State Senate) has been slow to agree on any sort of rescue plan. There may very well be another fare hike after the doomsday fare hike and service cuts that go into effect on May 31. It's so bad that MTA CEO and Executive Director Elliot Sander said he might even consider shutting down overnight subway service to save money: "I would not take anything off the table. [However] There have been reasons historically why that was not done and it may be that those reasons still exist."

Yesterday the MTA revealed that its finances are in even worse shape than originally believed, with declining property tax revenue resulting in an additional $621 million budget gap—even after planned fare and toll increases of up to 30% and service cuts go into effect. With those dreaded changes just weeks away, the authority is still hoping the state will pass some sort of bailout package to help avoid the worst of the cuts. Sadly, the MTA's hopes rest on the Albany legislature, where hopes go to die.

Feel better, American taxpayers: Citigroup, which received $45 billion in bailout money, has reported a first quarter profit of $1.6 billion. However, Dealbook reports, "The earnings were helped by an accounting change that allowed the bank to post a one-time gain of $2.5 billion... Under the rule, companies are allowed to record any declines in the market value of their debt as an unrealized gain." ( You may remember that besides a $20 billion infusion from the government in November, it was only in February when the U.S. increased its stake in Citi to about 36%.) Some analysts are still worried about the financial firm's ability to retain top executives as well as their credit-default swaps. Citi's stock is up in pre-market trading.

With the fate of the MTA up in the air—sure, the agency did pass the "doomsday" fare hikes and service cuts, but the State Legislature still has the opportunity to provide a bailout—there's another try for a rescue plan that will appeal to enough State Senators to break the stalemate. According to the Post, "Gov. Paterson is again on board with a plan that would toll 13 now-free East and Harlem River bridges at the cost of a subway ride for all drivers -- but the latest twist would exempt those crossing the spans for business or medical purposes.... [There would also] be 5 to 10 percent tax increase on all non-city residents who use long-term garage parking spaces in Manhattan and a 50-cent "dropoff" surcharge on every taxi ride." Richard Ravitch, author of the first plan that included bridge tolls, supports this revision, telling the Daily News, "The modification is intended to deal with what many people thought were the most legitimate objections to tolls." However, Senators are kinda to outraged about the amended fees—Sen. Pedro Espada (D-Bronx) said, "It just fundamentally wrong. It is anti business. It is anti small business." So, do we get ready for fare hike number 2?

      

Yesterday afternoon, hundreds of people from different activist groups marched in the Financial District to protest the multi-billion dollar bailouts financial firms have received from the government as well as demand jobs for Americans who aren't financial executives. Bail Out The People organized the event, and spokesman Dustin Langley told Reuters, "This crisis is growing more dire everyday with so many people being kicked out of their home and jobs." Langley also told the Daily News, "An economic crisis isn't an AIG executive not having enough money to pay for his house on the Riviera. An economic crisis is all the American families that can't afford to put food on their tables."

There are a few hundred protesters at Wall and William Streets in the Financial District. They are protesting the Wall Street financial firms and their huge government bailouts; according to Bail Out the People, they are marching "through the narrow streets of the New York Financial District - Major financial institutions are all along Broadway and within one block of Rally - Chase, Fidelity, American Express, the New York Stock Exchange, the Federal Reserve, and more... We will march east on Pine to the AIG Buildings at 70 Pine and 80 Pine and then to the AIG Building on Water St." Another march is planned for tomorrow.

WCBS 2 thinks Governor Paterson has made a "dramatic promise to worried straphangers" today by saying, "I promise you we are not going to put that kind of fare increase on commuters, on people who come in and out of the city of New York to work and to live." "That kind of face increase" refers to the (average) 25% fare hike approved by the MTA last week, which could be prevented by a bailout from Albany. Unfortunately, the State Legislature doesn't agree—mostly the State Senate—so Paterson added in his remarks, "If I don't see it working then I'll just make [lawmakers] stay right there [in Albany] until we get a deal"—which is why the Daily News Photoshopped him into a subway train, we think. But he will give the lawmakers some time to "cool off" and won't make them stay in Albany during Passover and Easter vacation, so it's unclear how potent the threat is.

In a move that "caught Detroit and Washington by surprise," the Obama administration asked GM CEO Rick Wagoner to resign. Edmunds.com CEO Jeremy Anwyl tells Bloomberg News, "The bailout loans aren’t hugely popular and that’s creating an issue for Obama. One way to make the loans more palatable is to be able to say the person responsible is no longer with GM." GM, which had losses of nearly $31 billion last year, received $13.4 billion last year and wants another $16.6 billion. Chrysler, which hopes for another $5 billion of aid, was told it must complete an alliance with Italian automaker Fiat in the next 30 days. The Wall Street Journal explains, "After over a month of analysis, the administration's auto task force determined that neither company had put forward viable plans to restructure and survive." With this news, stock futures have fallen over worries about auto industry bankruptcies.

Attorney General Andrew Cuomo revealed that most AIG executives who received big bonuses returned them. Nine of the top 10 recipients may return their money; casting a slightly wider net, 15 of 20 executives returned their bonuses, which accounts for $30 million of the controversial $165 million bonuses that the extremely bailed out insurer doled out. The NY Times reports, "Mr. Cuomo acknowledged that some bonus recipients declined to give back bonuses, especially those overseas who are outside the jurisdiction of New York State. He said he did not think it would be in the public interest to release the names of those who gave back their bonuses." About $80 million in bonuses were given to American employees, and Cuomo expects to get that money back.

Everyone is mad as hell at AIG and they're not going to take it anymore! From President Obama and NY Attorney General Andrew Cuomo railing against AIG and its executive compensation to the House passing a bill to tax 90% of all bonuses from financial firms receiving bailout funds, the anger has also spread to the Connecticut suburbs where many AIG executives live.

After a memo from Citigroup CEO Vikram Pandit saying that the company was profitable in 2009 (thus far), the bank's stock is up 27% to...$1.34! But that news is enough to help other bank stocks rally and the Dow is up by about 250 points. Pandit said of Citigroup, which did receive $45 billion in TARP bailout money, "We are profitable through the first two months of 2009 and are having our best quarter-to-date performance since the third quarter of 2007." But he did add he was disappointed in the company's low stock price. Additionally, the Wall Street Journal reports, "U.S. officials are examining what fresh steps they might need to take to stabilize the [Citigroup] if its problems mount."

With news that the State Legislature is working on a MTA bailout plan that involves combining the duties of the chairman and CEO, the Daily News reports that Mayor Bloomberg appears to support it. The mayor said, "If Dick Ravitch thinks that the management should be streamlined, it's probably a good idea," referring to Ravitch's suggestions for MTA revenue creation. Currently the MTA has an unpaid, part-time chairman—currently Dale Hemmerdinger— and a full-time CEO/executive director—now Elliot Sander; if the jobs were combined, it's unclear which would be the last man standing—or if someone totally new would be appointed. Bloomberg didn't voice his support one way or the other, but did say, "Lee Sander has done a great job. He's worked very hard, but first let's see what the law is. If it's changed I would certainly be happy to give my opinion to the governor... In terms of who should run it, if he were to pick Lee or not, I just don't know."

Treasury Secretary Timothy Geithner didn't get the reception he was probably hoping for after revealing the new bank bailout plan that may involve $2 trillion: The Dow Jones Industrial Average has fallen over 300 points/almost 4% (at this point), and the S&P 500 has dropped over 4% and the Nasdaq is off by 3.54%. The main complaint: The lack of details. Asset manager Joseph Keating told Bloomberg News, "The lack of clarity [on the public-private investment fund] has the market upset. Nationalization could have been a better outcome for some banks.” Another investment strategist said, “Everybody is disappointed in the lack of details. They came out and said, ‘We want you to believe that we’re still working on this.’ Well, we knew that last night.”

After the NY Post's outraged article on how CitiGroup was buying a $50 million corporate jet, politicians joined the chorus over how the banking giant is not really thinking straight. President Obama's press secretary Robert Gibbs said the president "doesn't believe [business jets are the] best use of money." Especially when CitiGroup is getting $45 billion in TARP funds, right?

Fired Merrill Lynch CEO John Thain is going on the offensive, claiming that Bank of America knew that he and other ML execs were giving out $15 billion in bonuses, not to mention BoA knew Merrill was losing $15 billion during the 4th quarter. But did BoA, which announced it was taking over Merrill in September, know about his $1 million office decorating account? Oh, Thain claims that was a mistake. Clusterstock has the leaked memo Thain sent to ML employees—"We were completely transparent with Bank of America. They learned about these losses when we did."—and CNBC will broadcast an interview with Thain at 4:15 p.m. BoA, which is getting $45 billion in TARP money, tells CNBC that Thain and Merrill's "compensation committee made the decision on the amount and timing of year-end compensation. We had no legal right to challenge it."

Citigroup, which was bailed out by the government last fall to the tune of $45 billion, is continuing on with its purchase of a new, $50 million corporate jet, according to the Post, which calls it "JUST PLANE DESPICABLE." Sure, the banking giant announced it would cut up to 50,000 jobs and posted a staggering $8.29 billion loss last quarter, but executives need to get places faster, you know? But only up to 12 executives, because that's all the Dassault Falcon 7X seats. A source tells the Post that "It's not uncommon for large companies to pay a deposit on a new plane then cancel the order before delivery," so when the Post asked the head of CitiFlight about the 7X, he said, "Why should I help you when what you write will be used to the detriment of our company?" Citi trying to sell its older Dassault jets.

After what had been a scandal-plagued year for House Ways and Means Chairman Charles Rangel, the local congressman must have been looking to turn over a new leaf in 2009. But it only took three days into the new year to find his name making headlines for murky dealings—this time with a potential conflict of interest in soliciting charitable donations from the recently bailed out insurance giant AIG. And this time it's not even the Post breathing down Rangel's neck as usual, but an investigative cover story in today's New York Times.