Last year a German survey claimed that investment bankers were as “unpopular as convicted criminals and prostitutes”. It is possible however that the world’s oldest professionals are being unfairly slighted in the comparison. Yesterday, the New York State Comptroller stated that despite US banks receiving around US$300 billion dollars in taxpayer handouts, its executives still saw fit to doll out an estimated US$18.4 billion in bonuses — the sixth highest on record.

The New York Times noted that the quantum bonus payments made was similar to those paid in 2004 — when the Dow Jones index was around 10,000 (it is now 8,149). President Obama dubbed the bonus payments as being “shameful” and “the height of irresponsibility”.

But it isn’t only bonus payments which have infuriated Main Street and the White House.

Until recently, Citigroup was the world’s largest financial institution. Not any more. In the past six months, Citi has received US$45 billion in taxpayer funds, which is more than double Citi’s current market capitalisation of US$22 billion. Citi also received a government guarantee on more than US$300 billion of toxic assets stuck on the bank’s books. Notwithstanding the bailout, Citi executives only last Monday saw fit to cancel an order for a Dassault Falcon 7X corporate jet, which was ordered back in 2005 was set to cost the stricken bank US$50 million.

One would have thought that someone at Citi would have cancelled the order last year, around the time that they accepted the taxpayer bailout. Apparently not. Or when the bank announced a fourth quarter loss last year of US$8.3 billion. Nup. Instead, it took a rebuke from President Obama for Citi to finally realize that five corporate jets were probably enough for a morally and (and without government help) financially bankrupt institution.

But while Citi appears to have the market cornered in incompetence, it appears that pure greed has a new name, and its name is John Thain. Thain was the CEO of Merrill Lynch, which was recently acquired by Bank of America. BoA was not what one would describe as a willing suitor, having only completed the acquisition after being prodded by the Government and tempted with another US$20 billion from taxpayers.

The second bailout was needed because in its last three months of existence, Merrill managed to lose US$15 billion. Notwithstanding the red ink, Thain requested that Merrill pay him a bonus of US$10 million for completing the BoA sale (Thain reluctantly withdrew the request when it became public last December). Aside from the fact that the transaction only happened because of a taxpayer bailout, Thain didn’t exactly need the money — he received US$83 million in remuneration last year and is believed to have been paid around US$300 million during his time at Goldman Sachs.

If that wasn’t bad enough, Thain has joined Tyco’s Dennis Kozlowski in setting new standards of Wall Street greed. You may remember Kozlowski as the CEO who accepted loans of more than US$25 million from Tyco to decorate his New York apartment, most notably, spending US$6,000 on the world’s most famous shower curtain. Dennis later spent US$1 million of company funds on his wife’s 40th birthday party in Sardinia, before being jailed for larceny.

While Thain is not believed to have purchased any gold shower curtains, he did see fit to spend US$1,405 on the world’s most famous rubbish bin — a “parchment waste paper basket”. In total, Thain spent more than US$1.22 million office decorations (including a US$87,784 rug and a US$25,713 mahogany pedestal) — that money of course came from Merrill shareholders, or taxpayers.

But perhaps Citi and Thain are merely creations of Wall Street — of a system which is designed to take other people’s money and give it to bankers and brokers, regardless of the value created (or destroyed) by them. The system of entitlement is so engrained that despite the US financial system requiring taxpayer bailouts to survive, “a poll of 900 financial industry employees released on Wednesday by eFinancialCareers.com, a job search Web site, found that while nearly eight out of 10 got bonuses, 46 percent thought they deserved more.”

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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