The Chicago-based Northern Trust bank may have received $1.6 billion in federal bailout funds, but that did not dampen the lavish long weekend featuring a golf tournament and headliner music the bank threw in Los Angeles last week, much of which was caught on tape by the celebrity news outlet TMZ. Critics are up in arms over yet another apparent boondoggle hosted by a bank that received federal bailout funds.
Members of Congress are now asking Northern Trust for their money back, saying the bank should "immediately return to the federal government the equivalent of what Northern Trust frittered away on these lavish events", according to a letter sent by Rep. Barney Frank (D-Mass.), the chairman of the House Financial Services Committee, along with 17 Democrats on the committee, to Northern Trust's CEO.
"At a time when millions of homeowners are facing foreclosure, businesses and consumers are in dire need of credit, and the government is trying to keep financial institutions – including yours – alive with billions in taxpayer funds, this behavior demonstrates extraordinary levels of irresponsibility and arrogance," the letter states.
"They didn't get the message," said Tom Schatz, President of the watchdog group Citizens Against Government Waste. "Somewhere along the line they have to be more accountable."
This is the second year in a row that the bank has hosted the Northern Trust Open, a golf tournament held at the Riviera Country Club in Pacific Palisades. The bank described it as "an integral part of Northern Trust's global marketing activities". But according to TMZ, the parties surrounding the event featured multiple rock concerts, gift bags from Tiffany's, and private dinner parties at luxury hotels.
TMZ's cameras were rolling when Sheryl Crow took the stage at the House of Blues in West Hollywood for a small private party. (Click here to see TMZ's video of the Sheryl Crow concert)
They also took video of the band Chicago performing at the Ritz-Carlton after a dinner hosted by Northern Trust. (Click here to see TMZ's video of the Chicago concert)
Northern Trust says it did not approach the federal government for bailout funds, but rather "agreed to the government's goal of gaining the participation of all major banks in the United States."
"The key point is Northern Trust is a business that earned an operating net income of $641 million last year," said senior vice-president Douglas Holt. "We paid for these events ourselves. They were paid for as part of a business decision regarding an annual event to show appreciation for clients. Northern Trust is not a bank that was or is losing money and therefore had to go to the government for assistance."
But the bank took a strikingly different tone in December when it announced it would eliminate 450 jobs.
"The macroeconomic environment has been extraordinarily difficult and has impacted all segments of the global economy," said the bank's CEO Frederick Waddell.
"Our decisions, while difficult, will further enhance Northern Trust's position amid challenging conditions, while maintaining our focus on clients and those activities in which we have significant competitive advantage and continue to see opportunities for growth," said Waddell.
Some in Congress say whether or not the bank sought the funding, once they accepted it they have a responsibility to the taxpayer.