Banks Set for Record Pay

Greetings note: I am wondering how quickly the banksters are rushing all of their bonus money to Haiti. That $145 billion could help that country immensely. And I doubt the banksters need it that much.

Top 38 Firms on Pace to Award $145 Billion for '09, Up 18%, WSJ Study Finds

BY STEPHEN GROCER

Major U.S. banks and securities firms are on pace to pay their people about $145 billion for 2009, a record sum that indicates how compensation is climbing despite fury over Wall Street's pay culture.

An analysis by The Wall Street Journal shows that executives, traders, investment bankers, money managers and others at 38 top financial companies can expect to earn nearly 18% more than they did in 2008—and slightly more than in the record year of 2007. The conclusions are based on an examination of securities filings for the first nine months of 2009 and revenue estimates through year-end.

The Wages of Failure:

Note from greetings: A great analysis of from Harvard's Law School on how the Bear Sterns and Lehman Bros. Execs ransacked the bailout money for their own benefit

Executive Compensation at Bear Stearns and Lehman 2000-2008

Lucian A. Bebchuk,∗ Alma Cohen,** and Holger Spamann***

Abstract

The standard narrative of the meltdown of Bear Stearns and Lehman Brothers assumes that the wealth of the top executives of these firms was largely wiped out along with their firms. In the ongoing debate about regulatory responses to the financial crisis, commentators have used this assumed fact as a basis for dismissing both the role of compensation structures in inducing risk-taking and the potential value of reforming such structures. This paper provides a case study of compensation at Bear Stearns and Lehman during 2000-2008 and concludes that this assumed fact is incorrect.

We find that the top-five executive teams of these firms cashed out large amounts of performance-based compensation during the 2000-2008 period. During this period, they were able to cash out large amounts of bonus compensation that was not clawed back when the firms collapsed, as well as to pocket large amounts from selling shares. Overall, we estimate that the top executive teams of Bear Stearns and Lehman Brothers derived cash flows of about $1.4 billion and $1 billion respectively from cash bonuses and equity sales during 2000-2008. These cash flows substantially exceeded the value of the executives’ initial holdings in the beginning of the period, and the executives’ net payoffs for the period were thus decidedly positive. The divergence between how the top executives and their shareholders fared implies that it is not possible to rule out, as standard narratives suggest, that the executives’ pay arrangements provided them with excessive risk-taking incentives. We discuss the implications of our analysis for understanding the possible role that pay arrangements have played in the run-up to the financial crisis and how they should be reformed going forward.

http://www.law.harvard.edu/faculty/bebchuk/pdfs/BCS-Wages-of-Failure-Nov09.pdf for the entire paper

Credit Card Rates: Banks Plan To RAISE Rates, Annual Fees

Note from Greetings:
Greedy.. with help from their friends in the GOP, who blocked Senator Dodd's bill to freeze these same increases. Whose side are they on? Not yours or mine.

by Jeannine Aversa, AP and Huffington Post, November 11, 2009

WASHINGTON — Banks expect to tighten terms on credit cards in response to a new law that aims to protect consumers from sudden rate hikes, the Federal Reserve said Monday.

A quarterly survey by the Fed found that many banks expect to increase rates, reduce credit limits and raise annual fees for both prime borrowers – those with sound credit histories _as well as more risky "non-prime" borrowers, who have tarnished credit. Banks also expected to raise minimum credit scores for non-prime borrowers, the Fed said.

Banks already have been pushing through rate increases in anticipation of the new rules. Because of that, the House recently approved legislation to speed up the law's effective date and have the provisions take effect immediately, although prospects are dim for Senate passage.

Most of the new credit card provisions are slated to take effect on Feb. 22.

Many people and businesses are still having trouble obtaining loans, a force that is likely to restrain the economic recovery.

It's a delicate dance for policymakers in Washington. They want banks to boost lending, but no one wants a return to the lax standards that many blame for contributing to the worst financial crisis since the 1930s.

The Fed's survey also found that nearly 26 percent of banks said they tightened standards over the past three months on home mortgages for prime borrowers. That was up slightly from almost 22 percent in the survey released in August, but is significantly below the peak of about 75 percent that reported tightening standards for such loans in July 2008.

For the third straight quarter, banks reported that demand for such loans grew, the Fed said.

Just over 30 percent of banks reported tightening standards on nontraditional mortgages, such as adjustable-rate loans with multiple-payment options. That's down from nearly 46 percent in the previous survey.

Information about what impact the new credit card law will have on banks came from a special one-time question in the new survey.

Banks, in another special question, said they were extending commercial real-estate loans more often than refinancing them. They cited lower originations and decreased draw on revolving credit lines as main reasons for a decline in commercial and industrial loans this year.

Commercial and industrial loans fell to $1.37 trillion at the end of October, from $1.48 trillion in July, according to a separate Fed report. Commercial real-estate loans dropped to $1.66 trillion, from $1.69 trillion in July. Consumer loans fell to $847 billion, from $852 billion.