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."

$50 Billion in TARP Money Received

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."

Did Taxpayers Fund Executive Pay at Bailed-Out Banks?

Five banks, Goldman Sachs, Morgan Stanley, Bank of New York Mellon, Wells Fargo and State Street responded to ABC News' questions. J.P. Morgan Chase had no response. J.P. Morgan Chase received $25 billion in TARP funds in fall 2008.

Full text of questions and bank responses below:

1: Would the levels of compensation at your firm for 2009 have been possible without taxpayer and federal government help? (including but not limited to efforts such as TARP, the bailout of AIG and debt- guarantees.)

GOLDMAN SACHS: Goldman Sachs has not yet set full-year compensation levels for 2009 and won't do so until the end of the year. As we have said in the past, no taxpayer dollars nor federal government funds have been or will be used for compensation. Without question, the TARP program as well as the collective actions of governments around the world have played important roles in helping to stabilize the financial system and world economy. Without a functioning financial system, economic conditions almost certainly would have been considerably worse

MORGAN STANLEY: Morgan Stanley appreciates the help of the U.S. government and taxpayers during the financial crisis. The various government programs provided liquidity at a critical time and ultimately stabilized the entire financial system. Our final 2009 compensation levels will not be determined until year end, but it is worth noting that in 2008, Morgan Stanley was the first large U.S. bank to implement a claw back feature into our compensation scheme. Our compensation practices focus on rewarding long-term performance and better aligning risk with pay.

WELLS FARGO: In Q3 2009, Wells Fargo reported net income of $9.5 billion year to date. As a result, we do not need CPP capital to pay for the routine operating expenses of our company and our businesses. We pay those expenses, like bonuses, out of what we earn.

STATE STREET: State Street has repeatedly said that we did not use proceeds from the U.S. Treasury's Capital Purchase program to fund its bonus pool or executive compensation.

BANK OF NEW YORK MELLON: TARP funds were not used for compensation of any kind. At the time he announced the TARP investments, Secretary Paulson said that the Treasury wanted to make capital available to banks "so they can provide credit to our economy" and "increase their funding to U.S. consumers and businesses." That's how we used the funds before we paid them back -- to improve liquidity in the financial markets in a way that was consistent with our business model, which as you know is quite different from most of the other banks.

Lobbying Money

2: Since Oct. 28, 2008, how much money has your firm spent on lobbying on Capitol Hill, regulatory agencies and state capitals?

GOLDMAN SACHS: Goldman Sachs has stated in our quarterly federal regulatory filings that we have spent $2.67 million dollars over the last four quarters on lobbying.

MORGAN STANLEY: Our lobbying costs are publicly disclosed and available on a quarterly basis. For the 3rd quarter of 2009, our lobbying costs were $720,000 -- which is in line with our peers.''

WELLS FARGO: $3,418,148.

STATE STREET: We disclose lobbying expenses through quarterly lobbying disclosures. For Q4 08 through Q3 '09, we reported $850,000 in lobbying expenses.

BANK OF NEW YORK MELLON: We reported lobbying expenses of approximately $1.1 million during the timeframe you cited.

ABC News' Matt Jaffe and Dan Arnall contributed to this report.