What's the `worst CEO' worth?

Why did the nation’s largest pension fund take a strong stance against Citibank’s excessive CEO compensation, but then turn around and vote for Bank of America’s lesser, but still outrageous, pay plan?

The California pension fund, CalPERS, was among the 92 percent of shareholders who went along with Bank of America in an advisory vote on CEO compensation earlier this week. In Wednesday’s vote, CalPERs did vote for measures that would have required disclosure on B of A’s lobbying activities as well an independent review of the bank’s foreclosure actions.

While But Bank of America CEO Brian Moynihan faced noisy protests and pointed questions at the bank’s annual meeting in Charlotte, N.C,  both of those initiatives, like say on pay, were defeated.

In their nonbinding “say on pay” vote, Bank of America shareholders approved a $7 million 2011 pay package for Moynihan. Last month, 55 percent of Citibank’s shareholders, including CalPERS, voted against a 15 percent pay hike for their CEO, Vikram Pandit, who had been getting along on $1 a year in 2009 and 2010 while Citibank floundered.

CalPERS’ position this week is strangely at odds with its previous positions.

In the past, CalPERS has been has been particularly tough on Bank of America. In 2010, it cast an unusual vote against all of the bank’s directors, including then-CEO Ken Lewis.

Asked for comment on Wednesday’s Bank of America CalPERS vote, a spokesperson referred me to the pension board’s 79-page governing principles, specifically the provisions covering executive compensation. CalPERS declined to answer any questions about why the pension fund voted for Moynihan’s compensation fund, but against Citibank’s.

True, Moynihan’s pay is less ($7 million) than Pandit’s ($15 million), but that doesn’t make either of them acceptable, much less understandable, by anything but the tortured logic of the too big to fail, government-coddled banks.

To approve Moynihan’s pay, shareholders had to overlook mountains of evidence that the bank is on the wrong track. Back in October, the bank retreated on a scheme to soak its customers for a $5 a month fee on debit cards after President Obama blasted it. The bank, which Bloomberg News estimates received more than $1.5 billion in federal bailout aid, has repeatedly been the target of criticism for underperforming in voluntary government loan modification programs. Earlier this year, B of A was among the big banks that settled foreclosure fraud charges with the feds and states attorney general. Though it was touted as $25 billion settlement, it actually only cost the banks $5 billion. But the bank fraud it highlighted was real.

Richard Eskow of Campaign For America’s Future outlined Moynihan’s dark career trajectory, from B of A general counsel to head of its retail division to CEO, while the bank completed its disastrous $2.5 billion acquisition of slimy subprime lending king Countrywide. When Moynihan joined senior management the bank’s stock traded around $52 a share. Today it trades around $7 or $8 a share.

Tallying the eventual costs of the Countrywide acquisition, Eskow includes a massive $8.4 billion settlement with states over illegal behavior, $600 million to settle a class action suit,  $335 million to settle a discrimination suit and $50 to $55 million for its part of lawsuits against Countrywide’s former CEO.

One bank analyst, Michael Mayo, recently ranked the worst CEOs. Moynihan was at the top of the list (with Citibank’s Pandit not far behind). Mayo cited the stock slide along with the debit card fee debacle and the bank’s failure to stem its foreclosure fraud and mortgage servicing problems.

Eskow hits the nail on the head when he asks: By what standard does Moynihan still have a job, let alone a multimillion-dollar salary?

And by what standard does he merit a vote of confidence by CalPERS, which less than a month earlier had taken a strong stand against excessive pay for another failed bank executive, Pandit?

Especially after the pension fund’s chief investment fund officer, Joe Dear, vowed after the Citibank vote to get even more activist. “Excessive CEO pay is not in the interest of the shareowners and not in the interest of companies,” Dear told CNNMoney.

CalPERS has long been an advocate for improved corporate governance, but its credibility has sagged after it suffered staggering losses in the financial collapse and was caught in its own sleazy “pay to play” scandal.

CalPERS’ Bank of America’s vote leaves unanswered questions about the pension fund’s claims to increased activism. Did CalPERS single out Citibank because that was the only too-big-to-fail bank to fail its latest government stress test, as U.S News and World Report suggested?

Or could the vote have something to do with the confidential settlement last November of a lawsuit CalPERS and 15 other institutional investors filed against Bank of America? Could CalPERS officials have agreed to back off their previous hard line against the Bank of America board as part of a secret deal the public will never see?

Of course, we don’t know details – the settlement is sealed.

Was Citibank a publicity-grabbing one-off, or did the pension fund give Bank of America a bye? We’ll have to wait and see just exactly what CalPERS means by activism when it comes to challenging the pampered, powerful titans of the nation’s too big to fail banks.

For now, all we can do is paraphrase the classic film portraying of the lack of accountability of corrupt power, `Chinatown’:

“Forget it Jake, it’s Wall Street.”

 

 

 

 

Bank of America (BoA) / CalPERS / Citibank / Executive Pay / Martin Column - 05/11/2012

In new Hollywood role, former senator plays the heavy

Thanks to Hollywood lobbyist and former Senate banking chair Chris Dodd for telling it like it is.

Dodd warned that Hollywood’s big-money contributors, who have been very, very good to President Obama and his fellow Democrats, might withhold their cash after the president expressed reservations over a controversial Internet anti-piracy bill.

Who ever would have guessed it would be Dodd, who during his 21-year-long career in Washington collected more than $48 million in campaign contributions, much of it from the financial industry he was supposed to be overseeing, who would cut through all the lies and palaver to deliver the knockout punch to our Citizens United-poisoned political system?

“Candidly, those who count on quote  `Hollywood’ for support need to understand that this industry is watching very carefully who's going to stand up for them when their job is at stake,” Dodd told Fox News. “Don't ask me to write a check for you when you think your job is at risk and then don't pay any attention to me when my job is at stake.”

But who better than Dodd to make clear what contributors expect for their cash.  He knows exactly how the system works, from both sides of the revolving door.

It was Dodd, after all, who made sure that AIG executives got their bonuses in 2009 while taxpayers were bailing out the firm at the heart of the subprime meltdown. It was no coincidence that AIG executives had showered Dodd with  $56,000 in contributions.

Nobody knows this terrain as well as Dodd.

He was a “friend of Angelo,” one of those elected officials who personally got sweet mortgage deals – at below market rates– from Angelo Mozilo, the head of the Countrywide, the mortgage company that nearly sank under the weight of its subprime trash loans until Bank of America rescued it. (His colleagues on the Senate Ethics Committee dismissed a complaint against him.)

While he and his colleague, Rep. Barney Frank (House Financial Services Committee?), oversaw the watering down of financial reform legislation in the wake of the financial crisis, Dodd played the role of beleaguered public servant, wringing his hands in frustration over the army of lobbyists against whom he was claimed he powerless.

But now that’s he moved from Washington to Hollywood, he’s got a new script that calls for tough, public, bare-knuckled threats to the president of the United States.

And whatever he owes the American public for his perfidy as an elected official, we owe him a debt of gratitude for it. Because he has exposed the political system and the money that dominates it for what it is.

As Dodd has illustrated so eloquently, the Supreme Court got it wrong in their infamous Citizens United decision, which allows corporations to dump unlimited, unreported cash into our political system.

Money is not free speech. I don’t know whether Bob Dylan had Congress in mind when he sang nearly 30 years ago, “Money doesn’t talk, it swears,” but he was prophetic.

The impact of money in politics has put a curse on our democracy, and it won’t be lifted until we throw the corporations and the billionaires’ money out.

As Dodd’s remarks demonstrate, big money campaign contributions are a blunt force instrument, which corporate interests and the wealthy can use to control the politicians who depend on them for their livelihoods, as Dodd did when he was playing the part of the distinguished U.S. senator.

Rest assured, the people who gave him $48 million knew his real role was so serve them, whatever lines he was required to utter for the scene he was playing at the time.

 

 

AIG / Citizens United / Congress / Executive Pay / Financial Crisis / Financial Reform Legislation / Martin Column - 02/01/2012

Too Big For Justice

The too big to fail banks are still in cahoots with their regulators. That’s the message coming loud and clear from the Justice Department’s highly touted $315 million deal with Bank of America to settle racial discriminatory lending charges.

The charges stem from the actions of Countrywide, the subprime lending giant, which was bought by Bank of America after the housing collapse.

The Justice Department’s publicity offensive, labeling the deal “historic” can’t hide the stink emanating from it. Shame on the New York Times for swallowing the Justice Department’s propaganda whole.

The Justice Department concluded that Countrywide charged 200,000 minority borrowers across the country higher rates and fees than white borrowers. Countrywide also steered 10,000 minority borrowers into costlier subprime loans when similar white borrowers got traditional loans.

While $315 million sounds big in a headline, for the bankers, it’s just part of the cost of doing business, less a punishment than the latest favor in the bailout that doesn’t end.

Bank of America, which received $45 billion in bailout funds, admits no wrongdoing in the deal. Victims would get between $1,000 and $1,600 apiece under the deal.

The deal also allows Bank of America to hire its own monitor to keep track of whether the bankers live up to their Justice Department agreement.

Regulators typically whine that they just don’t have the resources to take on the banks at trial.

Regulators argue that they could never get their targets to settlements if they had to wring admissions of wrongdoing from their targets, because those admissions would be used against those targets by other litigants in future lawsuits.

Without the settlements, the crack Justice Department lawyers would be forced to, horror of horrors, try their case in court.

The reasonable response from taxpayers should be: So what? Life is hard. Do your job, which is to hold lawbreakers accountable, not make their lives easier.

The Bank of America deal is only the latest to highlight the lower standard of justice prosecutors have applied to banks. Prosecutors have become part of the government’s team whose main goal Is propping up the banks. Meanwhile, the Obama administration has yet to come up with a decent, functioning program to stem the ongoing fraud in foreclosures, or to help the substantial numbers of homeowners facing foreclosure.

According to news reports, the Justice Department has another six discriminatory lending investigations cooking. This agency would be a good target for future actions

The Bank of America deal also highlights why a strong Occupy movement is needed, outside the traditional political system: neither party, nor the president, will fight for one of the most basic notions of democracy: that lawbreakers, especially the most powerful, should not receive favorable treatment from authorities.

You can read a slightly more sympathetic rundown of the Bank of America deal here, a more skeptical take here.

 

 

Bank of America (BoA) / Martin Column / Too Big To Fail - 12/22/2011

The Real "Entitlements"

For most of us, the Wall Street housing bubble popped in 2008, with painful consequences.

But for those at the top of the nation’s too big to fail banks, the party keeps rocking, even though their institutions are still in trouble and wouldn’t even exist without taxpayers’ generosity.

Take for example that wild and crazy region known as Bank of Americaland, where dwells one of the country’s biggest and sickest banks.

It’s basically never recovered from the financial collapse, which, in Bank of America’s case included a nasty hangover induced by swallowing up the king of sleazy subprime lending, Countrywide, as well as fallen investment banking titan Merrill Lynch (labeled in 2009 by the Wall Street Journal the “$50 billion deal from Hell – no link).

Here’s how Bank of America has squandered its share of the bailout: engaging in a pattern of improper foreclosures on military families and spending millions in campaign contributions and lobbying to fight regulation of its business. Most recently, the bank imposed a new $60 annual debit card on its customers.

After all, the bank’s president, Brian Moynihan, insisted, Bank of America “has a right make a profit,” which occasionally will have to be guaranteed by U.S. taxpayers.

The company is doing so poorly that it’s going to have lay off 30,000 of its employees, some of whom will spend their waning days training their lower paid, outsourced replacements. But the company isn't doing so poorly that it didn’t manage to tuck away $11 million to the ease of parting for two of its top executives.

After all, they’re executives of a floundering bank that’s made a series of poor business decisions. So they’re “entitled” to get even more money on top of their fat salaries.

Across the political spectrum, it’s become fashionable to belittle programs like Social Security and Medicaid as “entitlements,” turning that into a dirty word. But like so much about our current, out of touch with reality political debate, it’s completely upside down.

The way the debate has been framed by our political leaders and media, they’re only “entitlements” if they’re claimed by the 99 percent of Americans who have suffered in the collapse of the middle-class and economic meltdown.

We need a crackdown on “entitlements” all right, but on the real  entitlements, the ones claimed by the top 1 percent, like those Bank of America lays claim to, scooping up millions for its executives while gouging its customers and buying our political system through lobbying and campaign contributions.

But Bank of America won’t give up these entitlements without a fight, because the bankers believe that these are the benefits they’ have a right to, along with their profits.

Bank of America (BoA) / Martin Column - 10/13/2011

From Prosecutions to Peanuts

It was only last December that the head of a 50-state attorney general investigation into foreclosure fraud boldly told homeowner advocates, “We will put people in jail.”

That was Tom Miller, Iowa attorney general, who added, “One of the main tools needs to be principal reductions, just like in the farm crisis in the 1980s…there should be some kind of compensation system for people who have been harmed…And the foreclosure process should stop while loan modifications begin.  To have a race between foreclosures and modifications to see which happens first is insane.”

That was then. Now Miller is backing off his tough talk, replacing it with a strategy of negotiating with the big banks and a bunch of federal agencies to come up with a settlement.

The amount of the potential settlement is $20 billion, according to press reports.

Gone is any notion of prosecutions.

There’s been a lot of discussion about whether this amount is too high or too low. The banks contend that they might have been sloppy about their paperwork but they foreclosed on only a few people who hadn’t been making their mortgage payments. No harm, no foul.

But homeowner advocates and critics are outraged, arguing that the banks are guilty of more than slovenliness, they violated laws intended to protect consumers. You can’t pass laws that require banks to follow certain procedures and then allow the banks to flout them. That reinforces one of the most corrosive aspects of the bailout and its aftermath – that the system is rigged so that the banks don’t have to follow the law.

Not to mention that $20 billion is pocket change to the big banks and won’t go far in modifying the mortgages that they refused to touch so far.

In addition, any fund that is controlled by the banks rather than a responsible government agency is a recipe for continued inaction by the banks.  See the disastrous Obama Administration HAMP program, which is somewhere between an abject failure and an actual scam that rips off homeowners.

Miller’s retreat is not the only distressing signal coming from the foreclosure front. Here in California the new state attorney general, Kamala Harris, made the strong protection of homeowners in foreclosure a key plank of her campaign. Yet her office recently signed off on a feeble $6.8 million settlement of a lawsuit against Angelo Mozilo and another top official of Countrywide Financial who presided over that company’s orgy of subprime lending before the financial collapse.

$5.2 million of the money goes into a restitution fund for victims. Mozilo and his president, David Sambol, admitted no wrongdoing. They’re not on the hook for the money- Bank of America, which bought Countrywide will pay it for them.
As David Dayen points out on Firedoglake, the settlement was probably inherited from her predecessor, the present governor, Jerry Brown. But that doesn’t mean she has to tout such a pittance as some great victory for the state.

It’s just a very small drop in a bucket with a very big leak in it.

If you live in California, you can call Harris’ office and suggest she stop caving into predatory lenders and start living up to her campaign promises.

Wherever you live, please contact your attorney general and remind them they are, after all, not the bankers’ buddies, but the people’s prosecutors.

Here are numbers where you can reach your state attorney general.

 

Around the Web / Foreclosures / Martin Column / Outrage - 03/04/2011

SEC TO Mozilo: Fraud Pays

The SEC is at it again. They’re bragging that the agency nailed the largest penalty of its kind in history against the king of the subprime lenders for defrauding his shareholders.

And no doubt, $65 million dollars sounds like a lot of money.

But when you remember how much money Angelo Mozilo raked in during his reign, and when you break down the details of the SEC fine, it doesn’t add up.

It certainly doesn’t add up to much in the way of punishing Mozilo.

As usual when the SEC settles the civil charges it files, Mozilo and his two former colleagues admitted no wrongdoing as part of their settlement.

The SEC accused Mozilo, the butcher’s son who rose to be the president of Countrywide, of keeping from shareholders his fears that his collection of subprime loans was trash while reassuring his stockholders that everything was hunky-dory.

Federal prosecutors are still poking around in the ashes of Countrywide, and maybe they will come up with something.

But so far here’s the scorecard on Mozilo: the SEC said he received $141.7 million as a result of fraud and insider trading. They fined him $22.5 million.

As the Center for Public Integrity points out, that means he has give back just 16 cents of every ill-gotten dollar he got.

In addition, the SEC touts the $45 million that Mozilo will have to turn over to Bank of America shareholders, though that money won’t come out of Mozilo’s very deep pockets. That will come from his insurer and the company that bought Countrywide, Bank of America.

The fines seem even slighter when you contemplate what Mozilo was paid in his days as master of the universe.

In his time as executive chairman of Countrywide between 1999 and 2008, he was paid a total of $410 million in salary, bonuses and stock options.

In 2007, when the company’s stock tanked, dropping from $40 to under $10, Mozilo had an off-year too. He was only paid $10.8 million.

In perspective, this doesn’t seem like much for the SEC to brag about. Sixteen cents on the dollar certainly isn’t going to strike fear into the heart of any business titan.

Martin Column / Securities and Exchange Commission (SEC) - 10/19/2010