Thursday, July 30, 2009

Citigroup, Bank of America Continue to Rip Off American Taxpayers

The Hamiltonian impulse is alive and well on Wall Street. Months after taking tens of billions of dollars from the federal government (which, needless to say, hasn't been paid back), Citigroup and Bank of America have paid out billions of dollars in bonuses to hundreds of high-level employees, despite their utterly disastrous performances in recent years. Legal or not, this is theft from the pocketbooks of hardworking Americans.

Of the $45 billion in government money received by Citigroup through the Troubled Asset Relief Program (TARP) last year, more than one-seventh went to massive pay bonuses for their high-level employees, with 738 people receiving bonuses of more than $1 million each. Bank of America also got $45 billion in government money, and paid out $3.3 billion in salary bonuses, with 172 employees receiving bonuses of $1 million or more. Even worse, Bank of America spent $20 billion on its TARP money to acquire Merill Lynch, which is a great move for the business but does absolutely nothing to restore stability to financial markets, which was the ostensible purpose of TARP to begin with.

These types of financial abuses are not new in American history. When Alexander Hamilton created the financial structure of the nation in the early days of the Republic, he made sure his cronies were given inside information that allowed them to make immense profits by buying up bonds the government had issued during the war. The Hamiltonians knew it was about to skyrocket in price, while the veterans and widows who owned them had no idea and were willing to part with them for a fraction of their cost. The result was that the corrupt stockjobbers made huge amounts of money, while the veterans and widows were financially ruined.

Thus far, President Obama has not followed through with his promises of a complete overhaul of the laws governing the financial industry. Today's revelations about Citigroup and Bank of America illustrate the urgent need to do so.

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