Obama hints that missteps by Thain will haunt banks
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John Thain may have just made life harder for every banker -- and bank shareholder -- in America.
From Bloomberg News:
President Barack Obama took aim at Wall Street for using taxpayer money on bonuses and office remodeling, vowing to attach more strings to any future bailout money. There’s been a ‘lack of accountability and transparency in how we are managing some of these programs to stabilize the financial system,’ Obama said before a meeting with congressional leaders at the White House. Obama cited ‘the reports that we’ve seen over the last couple of days about companies that have received taxpayer assistance then going out and renovating bathrooms or offices or in other ways not managing those dollars appropriately.’ While Obama didn’t mention any individuals or companies, his comments followed reports that John Thain, the former Merrill Lynch & Co. chief executive officer ousted yesterday, spent $1.2 million redecorating his downtown Manhattan office last year as the company was firing employees.
But Thain’s spending apparently was early in 2008, well before Merrill got government help.
More to Obama’s point, Thain sped up bonus payments to Merrill employees in December, even as the brokerage’s finances deteriorated and the firm’s soon-to-be parent company, Bank of America Corp., was negotiating another capital infusion from the government.
Obama’s top aides, including economic advisor Larry Summers, had previously made clear that the new administration would demand more concessions from banks in return for new federal aid.
The revelations about Thain, however, remind me of the sequence of corporate scandals after the Enron Corp. accounting debacle broke open late in 2001. Each new scandal in 2002 (WorldCom, Tyco, Adelphia, etc.) emboldened those in Congress who wanted to bring the hammer down on corporate executives.
From Bloomberg:
Obama’s press secretary, Robert Gibbs, said the president has directed his economic team to come up with new restrictions on the second half of the $700 billion financial-rescue plan, saying the money won’t go to ‘line the pockets of people’ who’ve gotten financial assistance. ‘The American people need to be greatly assured that their hard-earned money is not going to the bonuses or the remodeling of an office at a bank that’s in trouble,’ Gibbs said at a briefing.
For banks, the handwriting is on the remodeled wall.
-- Tom Petruno
Top photo: President Obama meeting with congressional leaders today. Credit: Charles Dharapak/Associated Press