Big Pay at Banks, but Money From Taxpayers?

Oct. 30, 2009 — -- ABC News reached out to six banks that were initial participants in the TARP Capital Purchase program and asked them if the large salaries and bonuses at their firms would have been possible without taxpayer and federal government help.

No bank would say that taxpayer and government help made 2009 compensation levels possible. Instead, all responding banks except one claimed that they didn't use TARP to pay for compensation.

Wells Fargo, which still owes taxpayers $25 billion, told ABC News that it does not need TARP to pay for "routine operating expenses" -- including bonuses -- that it says it pays for "out of what we earn."

Banks pointed out that compensation for 2009 has not been finalized. The Wall Street Journal, however, reported recently that compensation on Wall Street is expected to be higher than ever before. Financial firms are on their way to handing out a combined $140 billion in compensation, more than the annual budgets of the Department of Education, the Centers for Disease Control and Prevention, and the National Institutes of Health combined.

None of the banks contacted by ABC News addressed whether government actions besides TARP, like the bailout of AIG and debt-guarantees, contributed to this year's compensation levels. These banks don't fall under the authority of Obama administration's pay czar Ken Feinberg.

After failing to get a response from banks on big payouts, ABC News turned to the Treasury Department, asking for comment on the banks' lack of comment. The Treasury Department, too, ignored the question.

So what has the government's trillion-dollar bailout done for the banks, if it didn't contribute to compensation and bonuses? The banks say TARP and other government actions helped stabilize the financial system as a whole and that they "appreciate" it. But the banks would not say that, but for these actions, compensation would be any different.

A former Morgan Stanley managing director who asked not to be identified said that "the profits these companies are distributing now as compensation are largely based on actions that the government took to stabilize and bailout the financial system. To argue that their profitability is due to their own hard work is simply not true."

ABC News also asked banks how much they have spent on lobbying Capitol Hill, regulatory agencies and state capitals since receiving TARP money on Oct. 28, 2008. The five responding banks have spent nearly $11 million on their lobbying efforts since autumn of 2008. These banks received a combined $50 billion in TARP cash.

Sheila Krumholz, executive director of the Center for Responsive Politics, said, "These banks are spending tens of thousands of dollars every day that Congress has been in session, essentially using the taxpayer bailout to turn it around and lobby taxpayers, in part to fight regulatory reform."

When asked about the banks' lobbying practices, the Treasury Department pointed to an old statement by President Obama that says big financial firms and their lobbyists, "are doing what they always do -- descending on Congress, using every bit of influence they have to maintain the status quo that has maximized their profits at the expense of American consumers, despite the fact that recently those same American consumers bailed them out as a consequence of the bad decisions that they made."