Bank CEOs Paid More Than S&P 500 Chiefs, Study Shows (Update1)
Sept. 2 (Bloomberg) -- Chief executive officers at 20 banks that got U.S. aid received compensation 37 percent higher than the average for leaders at Standard & Poor’s 500 companies and may be poised for gains as stock values rise, a study showed.
Lenders including Bank of America Corp. and Wells Fargo & Co. paid CEOs an average of $13.8 million last year, topping the $10.1 million for S&P 500 leaders, according a report released today by the Institute for Policy Studies. Average CEO pay was 430 times larger than for typical workers, and at nine of 20 banks the value of stock options soared $90 million in a year, the Washington-based group said, citing proxy statements.
“We need to look at the overall level of pay,” Sarah Anderson, report author, said in a Bloomberg Television interview. “As long as people can continue to be able to make tens of million of dollars in bonuses it is going to encourage outrageous behavior that can endanger our whole economy.”
Compensation at U.S. financial companies is being scrutinized after Congress adopted a rescue plan and pumped $300 billion into the 20 troubled lenders. Leaders of England, France and Germany are urging a limit on banker bonuses. The Obama administration has named Kenneth Feinberg as a pay master for seven U.S. companies, including Citigroup Inc. and General Motors Corp. that got more than one bailout.
The Institute, whose Web site bills it as “Washington’s first progressive multi-issue ‘think tank,’” has released its “Executive Excess” report annually since 1993.
Stock Options
Executives may be “poised for spectacularly rapid recovery” as rising share prices for nine of 20 banks getting Troubled Asset Relief Program aid led to a $90 million gain in stock-option values, the report said. JPMorgan Chase & Co. led with a $20.6 million gain for five executives, followed by $17.9 million each for American Express Co. and PNC Financial Services Group Inc., the study showed, based on calculations using proxy statements.
The top five executives at the 20 banks had a three-year pay total of $3.2 billion, with $1.2 billion in 2006 and 2007, and $800 million last year, the study showed, citing corporate proxy statements.
The institute said government efforts to rein in pay focus on companies that got aid from the Troubled Asset Relief Program, and said results may be modest as firms such as Goldman Sachs Group Inc. and JPMorgan repay aid to avoid pay limits.
“The federal government has, to this point, not moved forward into law or regulation any measure that would actually deflate the executive pay bubble that has expanded so hugely over the last three decades,” the study said.
Compensation Restrictions
The institute’s report showed 15 proposals for direct pay restrictions, revisions to tax policy for deducting compensation, setting governance standards or requiring disclosure that have failed to be enacted into law.
“The report’s central flaw is that it ignores the fact that congressional attempts to limit executive pay have typically backfired,” Timothy Bartl, senior vice president of the Center on Executive Compensation, said today in a statement. The Washington-based center was created by the HR Policy Association, representing corporate human resources executives.
German Chancellor Angela Merkel and French President Nicolas Sarkozy this week said they will urge Group of 20 leaders to regulate banker bonuses. U.K. Prime Minister Gordon Brown wants pay subject to clawback should performance suffer, the Financial Times reported, citing an interview.
To contact the reporters on this story: Steve Geimann in Washington at sgeimann@bloomberg.net.
Last Updated: September 2, 2009 11:07 EDTHas Obama's Handling of the Bank Bailout Undermined Health Care Reform?
Arianna Huffington
Given the media's ADD, I imagine the discussion on health care will quickly revert to where it was before Ted Kennedy's death -- filled with chatter about the Gang of Six's latest pronouncements, and whether there are or aren't death panels in the House bill.
But before we move on to the minutiae and the moronic, let's do some big picture stocktaking, using the valuable perspective last week's look back at Kennedy's career and speeches provided.
This weekend, Sam Tanenhaus, the senior editor at the New York Times Book Review, wrote that Kennedy's passing brought to an end a vision of liberalism that "holds that the forces of government should be marshaled to improve conditions for the greatest possible number of Americans, with particular emphasis on the excluded and disadvantaged."
But shouldn't the vision of marshaling forces to improve conditions for the greatest possible number of Americans be the appropriate goal for any civilized society? We can argue about what precisely should be the proper balance between government, the private sector, and philanthropy. But is there any doubt that this goal is what our political discourse should revolve around?
After all, the vision of improving conditions for the greatest possible number of Americans is not the exclusive province of liberalism. And because it is the ultimate goal of society, it is about right versus wrong, rather than right versus left.
Looking at the last nine months through this perspective, it's hard to understand many of the decisions the Obama administration has made. Has improving conditions for the greatest possible number of Americans really been its goal? If not, why not? And if yes, what a funny way to go about it!
Take the bank bailouts. The dust is finally beginning to settle on that front, and what we are seeing doesn't bode well for the ongoing health care fight.
Two days after Senator Kennedy's death, and thus not given much attention, there was a shocking piece in the Washington Post about how America's "too-big-to-fail" banks have gotten even bigger since the meltdown. Four banks (Chase, Bank of America, Wells Fargo and Citi) now issue 50 percent of America's mortgages and control two-thirds of the nation's credit cards. According to FDIC chair Sheila Blair, this kind of consolidation of power "fed the crisis, and it has gotten worse because of the crisis."
And the consolidation isn't over. As WaPo's David Cho points out, these mega-banks now get even more favorable treatment from creditors because the creditors know the banks will be bailed out by taxpayers if they take on too much risk. This favorable treatment includes lower borrowing costs than other banks are able to get. This, in turn, will put even more of these smaller banks out of business, furthering the concentration of wealth and power. And Democrats are ceding the populist field of trust busting to Republicans.
Though the big four banks have all recently announced multi-billion dollar profits (with a bottom line handsomely padded by all of us), three dozen smaller banks have gone under in the last two months.
As Mark Zandi, chief economist of Moody's Economy.com puts it: "the oligopoly has tightened." Which is what oligopolies tend to do when left untended.
And what of those who are supposed to be tending the oligopoly? Here's Tim Geithner's rose-colored take:
Our system is not going to be significantly more concentrated than it is today. And it's important to remember that even now, our system remains much less concentrated and will continue to provide more choice for consumers and businesses than any other major economy in the world.
Is it me, or is Geithner starting to sound more and more like "Baghdad Bob," the absurdist Iraqi Information Minister who predicted that U.S. forces were going to surrender even as American tanks were rolling down the street outside his press conference?
So what can the bank bailout teach us about health care? Quite a bit. Unfortunately.
With the August recess ending, and Sen. Kennedy's funeral over, we resume a health care battle in which the administration has been surprised by the declining fortunes of its health care plan (to the extent that there is, in fact, an administration health care plan).
I am surprised by their surprise.
They are too smart not to know that actions have consequences. And one of the main consequences of the one-sided bailout of Wall Street is the way it has undermined public trust in government.
Rob Johnson, Director of the Economic Policy Initiative of the Roosevelt Institute, and former Chief Economist of the Senate Banking Committee, blogging on HuffPost, nailed it:
By refusing to stand up to the oligarchs and set proper boundaries in defense of society, they fed the cynics and dissipated the magic that Obama had created for real change. The administration seemed closer to Jamie (Dimon) and Goldman Sachs than to us. The lesson: if you fail to defend society once, people lose faith. The loss of faith carries a high price, and we're paying that price now in the arena of health care reform.
And yet the administration is shocked -- shocked that Americans aren't rallying behind its vague health care plan. They can try to blame it on Fox News or town hall crazies, but I hope they know that much of the health care anger is a proxy for bailout anger.
Americans feel it in their gut that the White House is treating the big business health care establishment the same way it handled the big business Wall Street establishment. The president seems to believe that what's good for Goldman Sachs and PhRMA is, ipso facto, good for the country. We keep hearing from the administration how its health care plan is good for "choice and competition." But we see how well "choice and competition" have fared in the financial sector.
I asked Elizabeth Warren, the Harvard Law professor tasked with chairing the Congressional Oversight Panel in charge of TARP, what worries her the most.
"My biggest concern is what's happening to the middle class," she told me. "The middle class has been the foundation of America in every way. It has been the key not just to economic prosperity but to political stability as well. But, brick by brick, the foundation that supports the middle class is being removed. At a certain point, it's going to collapse. And when it does, when the middle class crumbles, we are going to end up with such disparity between the haves and the have nots, that America will come to resemble Mexico or Colombia -- with the wealthy living behind walls, unsafe in their own country and protected by armed security guards while everyone else struggles on the outside."
Looking over the horizon, she warns: "If we don't learn from this crisis, we will be doomed to repeat it."
And if we don't learn from the very recent history of the bank bailout, we are in danger of getting the same patchwork, reform-in-name-only outcome on health care.
Using the litmus test of improving conditions for the greatest number of Americans, the bailout was a bust.
There is still a chance to save health care. But only if Obama takes control of the debate. Maybe spending the last few days surrounded by the impassioned spirit of Ted Kennedy will prod the president to push the reset button.
Follow Arianna Huffington on Twitter: www.twitter.com/ariannahuff
 Pfizer has said it wants to put the "trust issues" behind it |
US drugmaker Pfizer has agreed to pay $2.3bn (£1.4bn) in the largest healthcare fraud settlement in the history of the Department of Justice.
A subsidiary pleaded guilty to misbranding drugs "with the intent to defraud or mislead".
Pfizer illegally promoted four drugs and caused false claims to be submitted to government healthcare programmes for uses that were not medically accepted.
US officials said Pfizer would have to enter a corporate integrity agreement.
It will be subject to additional public scrutiny by requiring it to make "detailed disclosures" on its website.
Pfizer's general counsel said: "We regret certain actions taken in the past, but are proud of the action we've taken to strengthen our internal controls."
"The size and seriousness of this resolution, including the huge criminal fine, reflect the seriousness and scope of Pfizer's crimes," said Mike Loucks, acting US attorney for the District of Massachusetts.
The company faces a criminal fine of $1.195bn and a subsidiary company of Pfizer - Pharmacia & Upjohn - will forfeit $105m, totalling a criminal resolution of $1.3bn.
The remaining $1bn fine was levied to resolve the allegations under the civil False Claims Act.
Four drugs
The civil settlement also relates to allegations that Pfizer paid bribes to healthcare providers to induce them to prescribe four named drugs. These are Bextra, an anti-inflammatory drug, Geodon, an anti-psychotic drug, Zyvox, an antibiotic and Lyrica, an epilepsy treatment.
The investigation was trigged by allegations made by six whistleblowers. They will receive $102m of the civil fines paid by Pfizer.
"Although these types of investigations are often long and complicated and require many resources to achieve positive results, the FBI will not be deterred from continuing to ensure that pharmaceutical companies conduct business in a lawful manner," said Kevin Perkins, FBI assistant director, Criminal Investigative Division.
The pharmaceutical firm said earlier this year that it would pay the fine "to put issues that diminish trust behind us".
Pfizer reported a 90% drop in profit to $268m in the fourth quarter of 2008, because of the $2.3bn legal settlement, indicating that the company was aware they would be paying this sum before the terms of the deal with the Department of Justice were announced.
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