On October 3, 2008, Congress passed the Emergency Stabilization Act of 2008 (http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=110_cong_bills&docid=f:h1424enr.txt.pdf ) (aka, the bailout) and several other acts which gave the U.S. Department of Treasury the authority to establish and manage a Troubled Assets Relief Program (TARP) though the newly created Office of Financial Stability. The value of this bailout package is $700,000,000,000.
The Emergency Stabilization Act contains weak limitations on executive compensation. In Section 111, companies whose bad debt is acquired within an auction process and for which the government gets an equity portion, and only for such companies, executive compensation is to exclude provisions that might encourage the executive to take unnecessary risks and prohibits golden parachutes. Nevertheless, this still does not stop them from making multimillion dollar in salaries, bonuses, and limited stock options.
On December 21, 2008, an Associated Press (AP) (http://www.qconline.com/archives/qco/display.php?id=418700) article stated, “Banks that are getting taxpayer bailouts awarded their top executives nearly $1.6 billion in salaries, bonuses and other benefits, last year (2007) … Benefits included cash bonuses, stock options, personal use of company jets and chauffeurs, home security, country club memberships, and personal money management, the AP review of federal securities documents found.”
On the following day, December 22nd, another AP article (http://news.yahoo.com/s/ap/20081222/ap_on_bi_ge/meltdown_secrets) said that they contacted 21 banks that received at least $1 billion in government money. AP asked them four questions. “How much has been spent? What was it spent on? How much is being held in savings, and what's the plan for the rest? None of the banks provided specific answers... Some banks said they simply didn't know where the money was going." In response, “none of the banks provided specific answers and some banks said they simply didn’t know where the money was going.”
To apply for the big bailout bucks, these financial institutions had to fill out all but a short-form application – only two pages. Keep in mind; it takes a lot more paper work for the common average citizen and small business owner to apply for a small business loan, credit card, a home loan, student loan, or even an automobile purchase. Banks and lending institutions want to know where every penny is going. With the U.S. Treasury, not so! It’s merely a free-for-all -- and a credit check and background isn’t even required! Just answer some simple questions on the two pages, sign it, and the billions are yours -- obviously, without any accountability or oversight. Have you ever seen the internet commercials advertising “free government money?” Here it is at your fingertips!” So, the next time you decide to go into business for yourself, apply to be a bank or a financial institution in need.
Meanwhile, on the same day, CNN interviewed an average citizen fighting to avoid foreclosure. According to him, banks have refused to negotiate terms of resettlement of his mortgage by a bank that had been taken over by the Federal Deposit Insurance Corporation (FDIC). The program was designed to assist those facing foreclosure. CNN news reported that there were no incentives for banks to lend money after receiving bailout money from the government and then were either doing very little lending, or not lending at all.
Yet, people continue to lose their jobs, their homes, and their livelihoods, while corporate executives feast on a taxpayer bailout. Exactly who is the government bailing out? Has the government betrayed the people and sold out to executives of Corporate America?