Archive for the ‘Money-Money-Money’ Category

Alan Fishman could be eligible for a multi-million paycheck after only three weeks on the job … if he decides to keep it.

NEW YORK (CNNMoney.com) — Washington Mutual Chief Executive Alan Fishman could walk away with more than $18 million in salary, bonuses and severance after less than three weeks on the job, according to the terms of his employment agreement.

But will Fishman follow the lead of another troubled financial firm and turn his severance package down?

JPMorgan Chase grabbed up the banking assets of WaMu on Thursday after federal regulators seized the company, making it the largest bank failure in history.

JPMorgan Chase CEO Jamie Dimon said in a conference call with reporters Friday that no decisions have been made about the fates of WaMu senior executives.

Still, the demise of WaMu is likely to be the end of Fishman’s brief tenure at the helm.

Fishman was hired on Sept. 7, replacing former long-time CEO Kerry Killinger, who was ousted as a result of the company’s many financial woes.

WaMu did not reply to requests for comment about Fishman’s severance package. But some details were outlined in his employment agreement, filed with the Securities and Exchange Commission on Sept. 11.

Fishman had a base annual salary of $1 million, which translates to $19,230 per week. So during his three weeks on the job, he would receive a base pay of about $60,000 before taxes.

His target annual bonus was 365% of his salary, or $3.65 million. In the agreement, it was unclear how much of the annual bonus he would be eligible for, if any.

The agreement said that Fishman could be eligible in 2009 for a long-term incentive award, which would be worth at least $8 million. But the agreement also said this is based on the assumption that would serve as CEO for the “full year” of 2009.

Also, if Fishman has to pay taxes because of any severance he receives as a result of the takeover, then the company would cover those taxes. That would potentially give Fishman millions of dollars more.

Fishman also got a multi-million dollar sign-on bonus. But he may have to pay it back, depending on certain conditions outlined in the agreement.

Fishman’s sign-on cash bonus was $7.5 million as well as 612,500 shares of WaMu, which are now virtually worthless. Shares of WaMu plunged more than 90% to 16 cents a share on Friday.

The agreement says that Fishman would have to pay back part or all of his bonus if he ends his employment for any reason other than “constructive termination,” or if the company terminates his employment with “cause.”

If Fishman is terminated without “cause” – which could mean the loss of a job due to a takeover of the firm – or if he resigns because of “constructive termination,” than he would receive a lump severance payment of $6.15 million. This figure is 2.5 times his base salary of $1 million plus the maximum bonus of $3.65 million.

The agreement did not specify constructive termination, but it is generally characterized as an employee voluntarily quitting because of intolerable working conditions.

When you add up his salary, the possible bonuses and the lump sum payment, Fishman could walk away with more than $18 million.

But the CEO of another prominent financial firm in a similar situation recently decided to turn down his severance package after the firm essentially collapsed.

Robert Willumstad, former chief executive officer of insurance giant AIG, which the government took an approximately 80% stake in after giving it an emergency $85 billion loan, was dismissed last week after only about three months on the job.

Willumstad has reportedly told his successor that he has decided not to accept his $22 million severance package since AIG shareholders and employees had lost so much money as a result of its meltdown.

Matt McCormick, portfolio manager with Bahl & Gaynor Investment Counsel, said he thinks that Fishman will not be rewarded extravagantly given that the bank failed.

“I will give WaMu the benefit of the doubt that they hired this person to make WaMu work, not to get foreclosed,” he said.

But McCormick added that the WaMu failure wasn’t necessarily Fishman’s fault, because “their goose was cooked long ago.”

In the future, employment agreements for CEOs might include more details on restricting multi-million dollar bailouts after brief tenures, McCormick said

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You won’t @#$#&$%-ing believe this!

“It’s not based on any particular data point,” a Treasury spokeswoman told Forbes.com Tuesday. “We just wanted to choose a really large number.

From Forbes

CONTACT YOUR SENATOR AND CONGRESS-PERSON NOW! THEY ARE NOT SAVING THE MARKETS – THEY ARE COVERING THEIR CRIMINAL ACTIVITIES AND YOU WILL PAY FOR IT! TELL THEM NOT TO VOTE FOR THE BAIL-OUT.

AND BY THE WAY – WHY CAN THEY FIND $700,000,000,000 TO BAIL OUT CROOKS, BUT CAN’T “FIX” NEW ORLEANS?!

The are taking YOUR money and giving it to wealthy, unscrupulous, greedy people who have proven that they cannot manage money. They have made bad investments, taken HUGE salaries, purchased multi-million dollar homes – and are being bailed out by the very people they have cheated. What about that seems like a good idea to you?

What U.S. could learn from China

It’s been called ‘financial socialism’, ‘socialism for the rich’, and ‘lemon socialism’. But whatever it’s called, the Bush administration ‘bailout’ for financial institutions is the greatest transfer of wealth from ordinary working people to the rich in world history.

The proposed program to buy a mountain of non-performing housing loans and other worthless assets from banks and finance companies will cost an estimated $700 billion to $1 trillion U.S. dollars.

This money will come from U.S. taxpayers, most of whom are ordinary workers. It amounts to taking around $2500 U.S. dollars, or 17,000 RMB, from every U.S. citizen – and giving it to the banks and finance companies.

The cost for each family of four is around $10,000 or 68,000 RMB. This money could have been used for health care, for improved education, for scientific research, for social welfare program; for environmental protect; or a myriad of other socially useful purposes.

Alternatively, it could have been used to cut taxes for ordinary people, or even to help them buy their houses. Instead it is being donated to banks and financial companies whose managements and owners are among the richest in the world. These measures represent a massive redistribution of socially -produced wealth from working and poor people to the rich.

Learning from China

The argument of the Bush administration – echoed faithfully by the U.S. media – is that there is ‘no other way’. The claim is that the U.S. system, and the jobs of U.S. workers within it, can only be safeguarded by this transfer of wealth to the banks.

In fact, this argument is incorrect.

Obviously the government must act to protect banking and finance in an economic crisis of this magnitude. But if banks are bankrupt or insolvent, a fair solution would be to buy or nationalize the banks themselves, *not* their bad debts. Then the taxpayers would receive something of value – a stabilized and accountable banking system belonging to the people instead of worthless debts.

In China, such a solution would seem almost common sense. With its socialist market economy growing at about 10% per year, Chinas’ government banks play a key role in providing a stable foundation for the financing of Chinese economic development,

But the possibility of taking over or nationalizing U.S. banks has not even been mentioned by any mainstream U.S. political figures or mainstream media.

Instead, up to a trillion dollars or taxpayer money is being donated to institutions whose managements have shown themselves incompetent to manage their own funds.

Perhaps the economic interests of the powerful wall street companies, one of whose former CEO’s is U.S. Treasury Secretary Henry Paulson, has something to do with this ‘blind spot’.`

Over the years China has resisted intense pressure from Paulson and other U.S. officials to radically deregulate its financial markets. They have lectured China repeatedly on how deregulation of financial markets, and letting foreign financial capital operate freely in China – as in the U.S. – was in Chinas best interests.
“An open, competitive and liberalized financial market can effectively allocate scarcer resources in a manner that promotes stability and prosperity far better than government intervention,” Paulson said in Shanghai in March last year. “Time is of the essence.”

Now even the U.S. has been compelled to abandon this ‘open financial markets’ approach. With the sub-prime crisis now expanded into a full-blown crisis in the western financial sector, knowledgeable Chinese experts are thankful that China never accepted this laisez fair prescription for financial regulation.

“The U.S. crisis reflects regulatory problems in the U.S. and innovative financial products that ignored basic economic rules,” former Chinese central bank deputy governor Wu Xiaoling told a financial conference in Beijing recently.”

“The U.S. crisis today would be China’s tomorrow if financial products such as securitization are introduced without proper risk-control measures.”

Chinas’ cautious attitude, government banks, and regulatory framework have helped China to restrict its losses and write-downs from the credit-market crisis to less than 1 percent of the massive global total.

The feasibility of bank nationalizations, closer regulation, and banning certain types of transactions, such as derivatives, which carry excessive risk are all lessons which can be learned from China.

Banks, financial companies, and the wealthy should not be allowed to unload their bad debts onto ordinary workers and taxpayers. It’s sheer madness to allow them to transfer a trillion dollars from workers and taxpayers to themselves.

By Eric Sommer
China
Beijing

By Nell Minow
Special to CNN

Nell Minow is editor and chair of The Corporate Library, an independent research company specializing in corporate governance. Minow was named one of the 20 most influential people in corporate governance by Directorship magazine in 2007 and “the queen of good corporate governance” by BusinessWeek Online in 2003. She has written more than 200 articles and co-written three books. Since 1995, Minow has also written “Movie Mom,” an online parents’ guide to “media, culture and values.”

As big Wall Street firms topple like dominoes, there is plenty of blame to go around.

Failure this broad and deep takes a village, and regulators, lawyers, compensation consultants, auditors, executives, shareholders, and the press all played a part. But the people who are most responsible for the massive meltdowns of these institutions are the boards of directors.

Their sole responsibility is to act as fiduciaries for the shareholders in managing risk. They not only failed to perform this task but indeed, in their approval of outrageous pay plans with perverse incentives, they all but guaranteed the current disaster.

I am a capitalist. I love it when executives earn boatloads of money. But it infuriates me when they get it without earning it.

If the executives’ compensation is tied to the volume of business rather than the quality of business, we should expect dealmakers to be more attentive to the number of transactions than the value they create. This is the basis for much of the sub-prime mess, whose collateral damage is taking down the biggest firms on Wall Street.

At Merrill Lynch, former CEO Stanley O’Neal received total compensation of more than $91 million for 2006, according to The Corporate Library’s calculations. He was given that package based on performance numbers that came out before nearly $23 billion in write-downs by the company.

O’Neal received more than $160 million in stock and retirement benefits while shareholders lost more than 41 percent of their investment value over the year. Three executives brought in to Merrill less than a year ago will share a $200 million payment as they turn over the company to Bank of America in a last-minute deal to help it survive.

American International Group (AIG) replaced CEO Martin Sullivan after the company posted losses for two consecutive quarters totaling $13 billion. Sullivan’s contract entitled him to about $68 million. His replacement, a board member who served as CEO for three months before the company was taken over by the government, will get as much as $7 million.

The boards of directors approved pay that was completely disconnected to performance. This, after all, is the world of the ultimate oxymoron: the “guaranteed bonus.” So we should not be surprised that executives took the money and ran.

Fewer than 13 percent of public companies have claw-back policies requiring executives to return bonuses based on inflated numbers. All of the incentives are for them to inflate the numbers, take the money, and run.

And that is why companies whose names used to be synonymous with stability and trustworthiness will live on through history and business school case studies as discredited, greedy and corrupt.

The people who insisted that government regulation interfered with the perfect efficiency of the markets are now getting bailed out by taxpayers with some walloping welfare checks.

I just hope that this time the government does a better job of protecting itself than it did with its bail-out of Chrysler almost 30 years ago and this time insists on a piece of the upside rather than a fixed repayment. If the government is going to run a business, it has to act like a business and make sure its interests are aligned with the executives.

Despite the post-Enron adoption of the most extensive protections since the New Deal, a survey released this week by Kroll and the Economist Intelligence Unit found that corporate fraud rose 22 percent since last year.

The option back-dating and sub-prime messes show that even the post-Enron Sarbanes-Oxley reform law and expanded enforcement and oversight cannot eliminate the severest threats to our markets and our economy.

This proves that there are limits to structural solutions. Ultimately, markets are smarter and more efficient than regulation. What the government needs to do now is insist on removing obstacles to the efficient operation of market oversight.

Shareholders must be able to replace directors who make bad decisions and they should have a non-binding “say on pay” vote on executive compensation as they do in the UK and several other countries.

Our current system of executive compensation does not tie pay to performance, it does not provide an effective incentive to create long-term shareholder value, and it does not meet any possible market test.

Executive compensation must be looked at as any other asset allocation. The return on investment for the expenditures on CEO pay is by any measure inadequate.

Some have argued that the amounts at issue are so small in proportion to the assets being managed that they do not have any material impact. On the contrary, the CEO compensation in America’s public companies is a leading indicator of serious problems — and one reason my firm has consistently given most financial services companies “high-risk” ratings.

And it is more than a symptom of the pervasive problem that is toppling our most respected financial services companies. It is a perversion of the market that imposes enormous and growing costs on America’s working families — as shareholders, customers, employees, and members of the community.

These outrageous pay packages juxtaposed with losses in share value and jobs diminishes our credibility and increases our cost of capital. In today’s global economy this is an expense we clearly can no longer afford.

The opinions expressed in this commentary are solely those of the writer.

Rep. Charles Rangel (D-NY) Lobbied IRS for Tax Breaks on Behalf of Yankees

The city and the Yankees secretly crafted a letter Rep. Charles Rangel used to lobby the IRS for tax changes that would save the team $66 million, the Daily News has learned.

They did this at the same time Yankees owner George Steinbrenner and the team’s law firm, Akin Gump Strauss Hauer & Feld, raised almost $25,000 for Rangel, records show.

The law firm’s political action committee also donated an additional $30,000 to the Democratic Congressional Campaign Committee in this election cycle. Rangel is chairman of the DCCC’s board of directors and a key fund-raiser for House Democrats. Yankees President Randy Levine is senior counsel at Akin Gump.

Read the rest of the artilce.

London Police Seize Eight Bankers in Dawn Raid in Biggest Ever Insider Trading Crackdown

From the Daily Mail – July 29, 2008

Eight people have been arrested in the biggest crackdown on insider trading the City has seen, it was revealed this afternoon.

City of London police and 40 officials from the Financial Services Authority raided addresses in London and the South-East.

It was described as part of  ‘a major ongoing investigation into insider dealing rings’. Most of the arrests were at homes rather than businesses. The unnamed men, aged between 27 and 48, are waiting to see if they will be charged.

The FSA has long believed that insider trading is rife in the City but has not managed to get any convictions so far.

City sources say computers and paperwork were seized as part of an investigation that has been going on for months.

Insider trading, where investors with knowledge of events place bets on share price movements ahead of formal announcements, is regarded as deeply unfair to honest investors. In 2006, the FSA said it believed that insider dealing had taken place ahead of a third of large takeover deals.

Bankers and stockbrokers involved in such deals would be foolish to invest personally in the shares of the companies concerned, but they could tip off friends or relatives.

With stock markets in turmoil and the economy rocked by the credit crunch, the FSA and the Government believe that clamping down on City fraud is more vital than ever.

The amount of money involved in the suspected insider trading ring under investigation is not known, but is likely to run into millions of pounds.

This latest move comes days after the FSA charged Malcolm Calvert, a former partner at the Queen’s stockbroker Cazenove, with 12 counts of insider dealing between 2003 and 2005. If found guilty, he can expect a prison sentence of up to seven years.

Lawyers say that if the FSA, led by former banker Hector Sants, gets a major scalp it would prove a huge deterrent to others. Its powers are being extended, including the introduction of US-style plea-bargaining to encourage people to give evidence.

We have been vocal about our dislike for the current Administration – but, folks, the corruption runs thick and deep. Is this a case of “trickle down” – or are the leaders that we choose a reflection of a bigger issue? This story is from CNN.

BILOXI, Mississippi (CNN) — Prisons in Mississippi got coffee makers, pillowcases and dinnerware — all intended for victims of Hurricane Katrina.

The state’s Department of Wildlife, Fisheries and Parks took more coffee makers, cleaning supplies and other items.

Plastic containers ended up with the Mississippi Department of Finance and Administration.

Colleges, volunteer fire departments and other agencies received even more.

But the Mississippi hurricane victims who originally were intended to receive the supplies got nothing, a CNN investigation has found. 

“It’s scary to know that there are supplies that they are harboring and people [are] in need right now as we speak today,” said Sharon Hanshaw, director of Coastal Women for Change, a nonprofit group helping storm victims.

Last month, CNN revealed that the Federal Emergency Management Agency had stored $85 million worth of household items in warehouses for two years. Instead of giving the supplies to victims of the 2005 hurricane, FEMA declared them surplus and gave them all away to federal agencies and 16 states in February.

The state of Louisiana — the most hard-hit by the storm — had not asked for any of the supplies, prompting outrage in the community after the original CNN report.

CNN’s investigation showed that Mississippi was one of the 16 states that took the FEMA supplies, but it did not distribute them to Katrina victims.

Jim Marler, director of Mississippi’s surplus agency, failed to return repeated phone calls over several months to explain what happened.

Agency spokeswoman Kym Wiggins said, “There may be a need, but we were not notified that there was a great need for this particular property.”

That doesn’t sit well with most aid groups in Mississippi. “You would have to be living under a rock not to know there is still a need,” said Cass Woods, the project coordinator of Coastal Women for Change.

Wiggins said that nonprofit organizations must meet federal guidelines and register with the state and that no such groups helping the needy or homeless were registered with Mississippi’s surplus agency.

“There is no specific designation outside of a disaster period that says we have to have sustained properties going to the disaster area,” Wiggins said.

CNN interviewed the leaders of eight nonprofits helping Katrina victims at a Biloxi, Mississippi, church used as a staging area for community groups. All said they had no idea these items were available, and most had no idea the surplus agency existed.

“We work so hard to help people in our community when the government is holding back stuff that we can use to give people,” said Glenda Perryman, director of United Hearts Community Action Agency.

Roberta Avila, director of the Mississippi Coast Interfaith Disaster Task Force, said, “It’s needed even more now than right after the storm.”

Records show Mississippi’s surplus agency received household supplies, including dinnerware sets, towels, shirts, pants, shoes and cleaning items.

Those are the kind of household items that Howard and Gloria Griffith said they could have used since the storm and still need. The Griffiths said they spent every penny to rebuild their home. But they can’t afford to finish it, so they’re still living in a FEMA trailer on their property in Biloxi with their teenage son.

“I’ve never seen none of it,” said Gloria Griffith after CNN showed her photos of some of the supplies that FEMA had kept in storage.

FEMA said it was costing more than $1 million a year to store the supplies, but officials have not been able to answer why the agency didn’t get the supplies to Katrina victims. Both FEMA and the General Services Administration said the items originally were purchased or donated for victims of hurricanes Katrina and Rita.

In the wake of the CNN investigation, a FEMA official said the agency was launching an internal probe into the storage of the household supplies.

Bill Stallworth, executive director of the Hope Coordination Center in Biloxi that helps rehouse Katrina victims, said he’s astounded that the supplies were given away.

Stallworth and other community leaders said if they had known the FEMA items were available, they would have begged for them.

“And when I hear people stand up and just beat their chest and say we’ve got everything under control, that’s when I just want to slap them upside the head and say, ‘Get a grip, get a life,’ ” said Stallworth, who is also a Biloxi city councilman.

BEN STEIN: I was just in a room with a whole bunch of speculators who are former Enron traders that are now trading natural gas and oil. And they’re laughing their heads off about how much they’re manipulating the price of oil. They couldn’t care less.

Keith Olbermann and the “Enron Loophole”

“Our society is run by insane people for insane objectives. I think we’re being run by maniacs for maniacal ends and I think I’m liable to be put away as insane for expressing that. That’s what’s insane about it.” – John Lennon, before his murder by Mark David Chapman.

Please take the time to watch these videos – it’s what’s necessary for all of this to change.

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