In October last year, nine banks received a grand total of $125 billion in taxpayer money as part of the much publicised Troubled Asset Relief Program (TARP). The aim of the payout being to aid in the banks' survival as they tried to ride out the pressures of the economic crisis.
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What followed was months of mergers, acquisitions and heated debates, with many arguing that the banks themselves were to blame for the mess they had gotten themselves into and shouldn't be saved.
Banks also came under harsh criticism for the amount of bonuses they were paying to financial executives, with many exectuvies across the globe choosing to forgo their bonuses package for 2008 in an effort to save face and restore consumer confidence.
Nonetheless, recent reports, based on months of investigation into the compensation paid by Wall Street has revealed some shocking statistics. According to the office of New York Attorney General Andrew Cuomo, who wrote the report, some bonuses paid to executives at the nine banks were greater than the banks' net income.
The numbers are mind boggling: Goldman Sachs, for instance earned $US2.3 billion, paid out $US4.8 billion in bonuses and received $US10 billion in TARP funding, while JP Morgan Chase earned $US5.6 billion, paid $8.69 billion in bonuses and received $25 billion in TARP funding.
But perhaps most incredulous is what happened over at Wells Fargo, who, along with its fully-owned subsidiary, Wachovia, not only lost money ($42.93 billion, according to the report) but also managed to pay $US977.5 millon in bonuses.
The issue is this: when the banks do well, their employees are paid well, which is fair enough; but when the banks do poorly, their employees are still paid well. Then, as if to add insult to injury, when the banks do very badly (or in some cases, fail), they are bailed out by taxpayers and their employees are still paid well. Its ludicrous, and, quite simply, singularly defines exactly why consumers have lost faith in the banking system.
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