Originally posted on WalletPop…
Several banks are getting their fair share of negative publicity for engaging in questionable spending after accepting bailout money (compliments of the taxpayers). The bailout money was theoretically meant to help financial institutions stay in business and to help loosen up tight credit markets. But time and again, we’re seeing the banks doing “business as usual” in spite of the welfare dollars they’ve received.
First it was AIG being caught throwing not one, but two fancy resort events. There were the Merrill Lynch bonuses paid out even after dismal financial results and the need for taxpayer funds. This week we heard about Citibank paying $400 million to get the naming rights for the New York Mets stadium.
The latest bank caught spending questionably is Wells Fargo. The bank got $25 billion of taxpayer funds, and is celebrating with a 12 night bash at the Wynn Las Vegas and Encore Las Vegas. This high-end event is being hosted for the top mortgage officers, and Wells Fargo says it’s a tradition to spend big on its best producers. The insurance division of Wells Fargo is holding a party of their own at Mandalay Bay in February.
There are, of course, excuses for this spending. In the past we’ve heard that the divisions throwing parties are not the same ones that technically received bailout funds. We’ve also heard that incentive programs for employees in sales positions are an industry norm and are required if a company expects to keep its best producers. No matter what excuse is offered up, it’s a little hard to swallow a vacation at a swanky resort when the average Joe is essentially financing it with bailout funds.
There’s something that doesn’t sit right with me when corporate welfare is needed but expensive parties and retreats are being thrown. Either Wells Fargo (and all the other financial institutions guilty of similar behavior) needs taxpayer money or they don’t. And if they need taxpayer money, they better trim everything down to the bone and be good stewards of the gift we the taxpayers have given them.
UPDATE: Wells Fargo announced this evening that the Vegas vacation is being canceled. Yes, it’s the right thing to do. But make no mistake that they wouldn’t have made that move if the vacation hadn’t been exposed in the media.
This whole bailout mindset makes me sick. All we’ve done the past 8 years is spend and spend, and look where we are. Why do we think spending even more will make things better? Also, do we really want to reward companies for failing? Because that is basically what it is. People are learning that if your company fails, then the government will be there to pick it up. It is the same mentality as welfare was in the 90’s. And we all know that went too far and had to be ended. Are we going to have to face an economic collapse in order for people to realize welfare for companies is not what we need?
Read why Wells Fargo / Wachovia shouldn’t have received any tax payer bail out money.
A SAD TALE THAT NEVER SEEMS TO END
Analysts predict that the number of nationwide foreclosures for the year 2008 alone will reach one million. Meanwhile, Credit Suisse predicted that there will be 8.1 million foreclosed properties within the four-year period from 2009 to 2012.
I owned and operated a small business in Palm Beach County, Fl for 13 years. In our best years, we employed 15 people. Things started getting slower at the company a few years ago and the economic downturn finished the job. My company is out of business and the building I purchased approximately 5 years ago (for my business) is in foreclosure. The current principal mortgage balance is $499,000. The building has been on the market for over 2 years and the only offers ever received are listed below.
I have received three cash offers to purchase the building from October 2008 to present. My bank had rejected the first two offers and the third offer has been submitted and is pending. In October 2008, we received a cash offer of $350,000. The bank rejected this offer after having the building appraised. The bank claimed to have two appraisals, one at $460,000 and the other for $480,000. I informed my real estate broker that the offer was rejected and about the appraisals. The broker found another buyer in December 2008. The buyer was made aware of the banks appraisal and made a cash offer of $460,000. During the buyers due diligence period, the buyer requested the banks appraisal for $460,000.I requested the appraisal and the bank denied my request. My attorney requested the appraisal and the bank denied that request. The bank would not release the appraisal and said it was an internal document for the banks use only. The request for the appraisal continued until the buyer cancelled the contract. A new cash offer from the same buyer in March 2009 for $370,000 was received and is pending at the bank. If the bank accepts this offer, they will have caused themselves to needlessly lose $90,000. They will certainly sue me and my wife for the shortage. If the bank rejects this offer, they will foreclose on the property and sue my wife and I for the full amount owed. Since my house is cross collateralized, they will also foreclose on my home. It isn’t acceptable for any financial institution or company to make decisions like this. They’re turning down money but still asking for tax payer money (bail out). I believe this is common practice as these financial institutions have company policies that aren’t changing with our new economy. If there are 1,000,000 foreclosures and banks turned down $90,000 each (my scenario $460,000-$370,000), that would equal $90,000,000,000.
How can we provide tax payer bail out money to companies that are so mismanaged?
They’ll be back for more money unless the economy turns around fast or they change their internal practice of loan resolution. As the man who needed a heart was heard to say to his doctor, “Get me the heart of a banker, i.e., one that has never been used.”
“Either Wells Fargo (and all the other financial institutions guilty of similar behavior) needs taxpayer money or they don’t.”
Huh?!? The banks are hurting badly right now, make no mistake about it, but since when did it become “acceptable” to make others pay for your bad business decisions? I don’t really care how they’re spending my money, they shouldn’t have it in the first place!
Consider this: A thief steals your car in order to repay gambling debts. But first he buys a new suit and takes his wife out to the most expensive restaurant in town. Do you get upset that he bought some clothes and went to dinner? Who gives a crap, he stole your car!
It’s no different when the thieves happen to be elected officials (that supposedly represent us) acting on behalf of gamblers who made unreasonable bets on risky loans.