Bank Lending Down; Bank Executive Compensation High
Banks continue to hoard money despite receiving billions of dollars in Federal aid. According to recent survey by the Federal Reserve, banks continue to tighten up their lending practices. 60% of the banks that responded to the survey admitted that they have increased lending requirements. The lending cutbacks have affected a wide array of products. Car loans, credit cards and home mortgages have been severely affected by the current credit crisis. The purpose of the taxpayer-funded bailout was supposed to force banks to start lending more money. Unfortunately, this money has not made it to the consumer. Banks continue to cut back on consumer loans, however, they continue to spend lavishly on executive compensation, parties, planes, bonuses and other unnecessary expenditures.
In recent news, Citigroup was about to take possession of a brand new Dassault Falcon business jet worth about $45 billion. Citigroup had apparently ordered the plane about 2 years ago prior to the credit crisis according to the company. The company than decided, after the credit crisis, to sell their two existing older planes and replace it with this new one. Unfortunately for Citigroup and fortunately for taxpayers, the Obama administration said no way to the new plane. The audacity of Wall Street bankers never seems to amaze those of us from Main Street. Citigroup had no business even purchasing the plane two years ago. Foreclosure rates have been on the rise since 2006. How can a bank justify such a purchase when economic indicators are starting to show the economy going south?
Everyone knows the story about the famous CEO from Merrill Lynch, Mr. John Thain. Here is another example of a great financial innovator. The company is going broke, yet he continues to spend lavishly to decorate his office and receive large bonuses. The only financial innovating this guy is doing is for his own pocket book. Merrill Lynch was about to go the way of Lehman Brothers and Bear Stearns. How could Thain not have known that Merrill Lynch was going broke when he took over as CEO, replacing Richard Parsons? These guys do not care if the company they are working for is going to be around or not. They only care about their personal compensation packages and perks that go along with the job.
Bank of America has been recently criticized for spending large amounts of money advertising during the super bowl. Every year during the super bowl, companies spend millions of dollars on advertising. One second of airtime during the super bowl is said to go for something like $100,000. This year Bank of America decided to spend some of our taxpayer dollars beefing up their advertising.
How can Citigroup consider the purchase of brand new private luxury jet after reducing millions of dollars in consumer credit limits? This does not make much sense to me. What type of message is Wall Street sending Main Street? These types of poor management decisions continue to reduce investor confidence. The message that those who are in charge of Wall Street are sending Main Street is that Wall Street executives are basically greedy and incompetent. If taxpayers are going to be lending banks money, then these banks receiving bailout funds must use that money for lending purposes only. The taxpayer should not be lending money to banks that are going to foolishly spend that money. Bank of America does not need to be spending $100,000 a second on super bowl commercial airtime. They have gotten plenty of exposure with everything happening to the banking industry. Perhaps, they would receive free good publicity if they were to start using taxpayer funds properly by lending money to the consumers and businesses that need it the most.
Banks continue to hoard money despite receiving billions of dollars in Federal aid. According to recent survey by the Federal Reserve, banks continue to tighten up their lending practices. 60% of the banks that responded to the survey admitted that they have increased lending requirements. The lending cutbacks have affected a wide array of products. Car loans, credit cards and home mortgages have been severely affected by the current credit crisis. The purpose of the taxpayer-funded bailout was supposed to force banks to start lending more money. Unfortunately, this money has not made it to the consumer. Banks continue to cut back on consumer loans, however, they continue to spend lavishly on executive compensation, parties, planes, bonuses and other unnecessary expenditures.
In recent news, Citigroup was about to take possession of a brand new Dassault Falcon business jet worth about $45 billion. Citigroup had apparently ordered the plane about 2 years ago prior to the credit crisis according to the company. The company than decided, after the credit crisis, to sell their two existing older planes and replace it with this new one. Unfortunately for Citigroup and fortunately for taxpayers, the Obama administration said no way to the new plane. The audacity of Wall Street bankers never seems to amaze those of us from Main Street. Citigroup had no business even purchasing the plane two years ago. Foreclosure rates have been on the rise since 2006. How can a bank justify such a purchase when economic indicators are starting to show the economy going south?
Everyone knows the story about the famous CEO from Merrill Lynch, Mr. John Thain. Here is another example of a great financial innovator. The company is going broke, yet he continues to spend lavishly to decorate his office and receive large bonuses. The only financial innovating this guy is doing is for his own pocket book. Merrill Lynch was about to go the way of Lehman Brothers and Bear Stearns. How could Thain not have known that Merrill Lynch was going broke when he took over as CEO, replacing Richard Parsons? These guys do not care if the company they are working for is going to be around or not. They only care about their personal compensation packages and perks that go along with the job.
Bank of America has been recently criticized for spending large amounts of money advertising during the super bowl. Every year during the super bowl, companies spend millions of dollars on advertising. One second of airtime during the super bowl is said to go for something like $100,000. This year Bank of America decided to spend some of our taxpayer dollars beefing up their advertising.
How can Citigroup consider the purchase of brand new private luxury jet after reducing millions of dollars in consumer credit limits? This does not make much sense to me. What type of message is Wall Street sending Main Street? These types of poor management decisions continue to reduce investor confidence. The message that those who are in charge of Wall Street are sending Main Street is that Wall Street executives are basically greedy and incompetent. If taxpayers are going to be lending banks money, then these banks receiving bailout funds must use that money for lending purposes only. The taxpayer should not be lending money to banks that are going to foolishly spend that money. Bank of America does not need to be spending $100,000 a second on super bowl commercial airtime. They have gotten plenty of exposure with everything happening to the banking industry. Perhaps, they would receive free good publicity if they were to start using taxpayer funds properly by lending money to the consumers and businesses that need it the most.
Labels: bank lending practices, Bank of America, Citigroup, Dassault Falcon Jet, executive compensation, John Thain, Merrill Lynch
Credit Card / Financial news blog post by Todd Holliday at 7:39 PM 