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Who Are The Real Fat Cats?

December 15th, 2009
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12.15.2009 original publish date
03.07.2011 updated broken links

(image credit: lesjones.com)

“Fat Cats:” Who Are The Real Fat Cats?

original article written by Net Advisor

WASHINGTON DC. Once again certain people in government and some, not all, but some media have seemed to leave out a few critical details about Obama’s 60 Minuets slap on Wall Street pay to re-shape (disenfranchise) public opinion of free market verses a government controlled or Socialized market. Let’s try and fill in the gaps shall we?

Shareholders are the owners of companies.
All it takes is shareholder effort (called proxy votes) to pressure a company to eliminate top management if they seem to be failing at their job. According to Article 1, The Legislative Branch, Section 1, of the United States Constitution:

“All legislative Powers herein granted shall be vested in a Congress of the United States, which shall consist of a Senate and House of Representatives.”

— Source: Article 1, The Legislative Branch, Section 1, of the United States Constitution

It is not the job of the Executive/ Administrative Branch of government to exercise their will above the rights of shareholders. This was done with General Motors. It has been questioned whether the US Government had legal authority to force GM into a bankruptcy filing:

Just a few articles citing Obama Administration forced GM into bankruptcy, not determined by management or shareholders.

“Obama Team Said to Explore `Prepack’ Auto Bankruptcy”
(Source: Bloomberg, 11-21-2008)

“Government Forces Out Wagoner at GM”
(Source: Wall Street Journal, 03-30-2009)

“Obama to Detroit: Restructure or else”
(Source: CNN, 03-30-2009)

“Obama Lays Out Plan For Detroit’s Survival
Blames Automakers For Poor Decisions; Says Industry Not Moving In The Right Direction”
(Source: CBS, 03-30-2009)

“Obama’s tough auto stance may include bankruptcy”
(Source: Reuters, 03-30-2009)

“Obama Forces GM Chief Out”
(Source: U.S. News & World Report, 03-30-2009)

“U.S. Threatens Bankruptcy for GM, Chrysler”
(Source: Wall Street Journal, 03-31-2009)

“Obama asserts gov’t control over the auto industry”
(Source: Guardian(UK)/ Associated Press, 03-31-2009)

“US government may elbow GM into bankruptcy”
(Source: China Daily, 04-01-2009)

“Obama Thinks GM Bankruptcy Best Option”
(Source: thestreet.com, 04-01-2009)

“White House Reportedly Prepares GM for Bankruptcy, Plays Down Possible GMAC Takeover”
(Source: Fox News, 05-22-2009)

“U.S. to Steer GM Toward Bankruptcy”
(Source: Washington Post, 05-22-2009)

“President Discusses G.M. Bankruptcy”
(Source: NY Times (Video), 06-01-2009)

You should have sold GM stock no later than November 2008. The game plan was given to you then. Or followed Net Advisor’s 78+ posts on GM from on or about June 2008 to July 2009; then additional aftermath FAQ dated in August 2009. I tried to help as many people as I could about this too.

And of course the Obama Administration said they don’t want to run GM:

“Obama: We Don’t Want To Run GM”
— source: CBS, 06-01-2009

Wasn’t that exactly what they had been doing even before coming to office? (cited above).

Tit for Tat
Next, White House deputy press secretary Jennifer Psaki stated in part, “The financial industry received extraordinary assistance from the government during the height of this crisis. They now have an extraordinary responsibility to help the economy (12-14-2009).”

Let’s examine this for a minute.
Fact: Government decided – Who decided? Government decided to bailout, support, loan, extend stop loss and or other guarantees, and or take over certain financial institutions including but not necessarily limited to AIG, Bank of America (because of Countrywide Mortgage take over), Bear Sterns (from JP Morgan takeover), Capital One Financial Corp, Citigroup, Chrysler, Fannie Mae, Freddie Mac, General Motors, GMAC, Merrill Lynch (from Bank of America takeover), Wells Fargo (in part by Wachovia Bank takeover), and separately allegedly forced TARP money on others, JP Morgan, Goldman Sachs, Morgan Stanley, U.S. Bancorp, and perhaps others.

I have argued that TARP has not done what it intended – to buy toxic mortgages from financial institutions.

TARP was really a confidence restorer to the financial markets. The financial markets needed confidence, and TARP helped that happen. Then TARP took a life of its own when government planned on using this $700 billion credit card for other purposes, not intended by Congress.

“Congressional Oversight Panel…confirmed that the law which created TARP–the Emergency Economic Stabilization Act (EESA)–did not grant the government specific authority to use taxpayers’ funds to rescue the auto industry” (Source: CNS News).

Whats is TARP gain?
Choose Your level of sophistication or ability to resist falling asleep while reading government documents:

1. TARP – FED Speak: Troubled Assets Relief Program
2. TARP – Relatively Plane English: Troubled Asset Relief Program

TARP Controversies (just some)

We did this for you, now you must do this for us.
Now that we have some background on what the government has done or has sought to do, they now seem to say, ‘we did this for you, now you must do this for us.’

As Jennifer Psaki sees to make the argument that because government helped the financial institutions, the financial institutions now must help government and or the people. A “tit for tat argument.”

“Tit-for-tat arguments are intended to throw an accuser off balance by putting them on the defensive.”

— (Source: Alankennington.com)

Here is this in simplistic terms:
Imaging this:

1. You get a loan from a lender that you didn’t ask for.

2. You are required to pay it back when the lender says so with interest, and be subject to whatever other new terms they can think of during the loan.

3. Frustrated by the ever changing loan terms, you manage to pay back 100% of the loan with interest in less than a year and change.

4. Are you now free from the loan? You paid it all back – with interest right? True. So are you now free from the loan? Answer: No. Why? The lender now wants you to become a lender to other people regardless of risk or cost to you, because the lender had lent to you once before.

Thus, the government wants to still control the banks and tell them how to run their business.

“President Barack Obama on Friday (12-04-2009) prodded large U.S. banks to make credit more widely available to Main Street.”

— Source: Reuters

Let’s take a look at the word, “prodded.” According to the Merriam-Webster on-line dictionary, prodded can mean:

“to thrust a pointed instrument into, to incite to action or to poke or stir as if with a prod.”

The fact is that under the Obama Administration there is this $75 billion project that was to ‘help keep American to stay in their homes’ called the Affordable Home Modification Loan Program.

Here is the funny part of the program:

“The plan centers on the belief that struggling borrowers will stay in their homes—even as values decline sharply—as long as they can make their monthly payments.”

— Source: U.S. News & World Report

Um, did anyone tell the Treasury that no, millions and millions of people cannot afford their home loan payments, many of whom should have not received the loan in the first place? And tax payers are to bail them out? Will some of the other non-qualifying fat cats, please stand up.

The Obama Administration said they are going to help some 9 million homeowners who are having difficulty in making their house payments. (Source: CNN) This $75 billion Obama plan funded by borrowed TARP money, and most people don’t even qualify.

“According to the Treasury Department’s most recent report, only 230,000 of the up to 4 million eligible homeowners have new mortgages under the program.” That means 94.25% are not eligible even under the Obama plan.

— Source: CNN

Further, according to a report by report by the Comptroller of the Currency and the Office of Thrift Supervision, even those who did qualify for a Obama home loan modification, more than half of those people re-defaulted on the loan in 6 months.

“The number of loans modified in the first quarter that were 30 or more days delinquent was 37 percent after three months and 55 percent after six months…”

— Source: Wall Street Journal

Here is something that tax payers need to take note of:
“Government will pay mortgage holders if home prices decline” (see chart below)

Chart source: CNN

So if banks modify a home loan under force by the Obama Administration, and if people default on those loans which most people are, who then is on the hook for the bad loan? You guessed it: The tax payer. And these are the same people who want to manage your health care!

And if that Obama loan modification doesn’t work, President Obama has said that he effectively now wants to socialize the bankruptcy laws. The President wants to give judges the power to force creditors to essentially take losses on bank mortgages, amending the terms of mortgage in favor of the borrow who could not afford the loan, reward the borrow by penalizing the bank, and as the lender, the banks has no say in the matter.

“My administration will continue to support reforming our bankruptcy rules so that we allow judges to reduce home mortgages on primary residences to their fair-market value — as long as borrowers pay their debts under a court-ordered plan,” Obama said yesterday (02.19.2009) in Mesa, Arizona.

— Source: Bloomberg

Now, we may not have a ton of love for the banks right now, however Obama’s move to socialize the bankruptcy laws ignore the existing law that the lender has the right to foreclosure if the borrow does not pay as they agreed.

That would be easy. Let’s all run out and buy a $10 million beach house, file bankruptcy, and then tell the court that I can afford to pay $900 a month, so I should be able to stay in my home.

So, how is that Obama loan modification going?

The Obama home loan modification program has been a disaster. As we talked about earlier, of the 9 million the government program was supposed to help, most don’t qualify; and the ones that do most default, so how many did it really help? About 31,000 people.

“Just over 31,000 homeowners have received permanent loan modifications under the Obama administration’s mortgage relief plan.”

— Source: CBS News

Thus, according to CBS, 4 percent of the people got an Obama home loan modification. In other words, 96 percent of application did not get a modification.

Government “Fat Cats?”
As much as the Obama Administration seems to dislike the banking and financial industry (just slightly important to the economy), he sure seemed to love them when their Political Action Committees (PAC), and related supporters were giving him millions to his 2008 Presidential campaign.

Presidential Candidate Obama Top Campaign ContributorsFinancial Companies
#02 Goldman Sachs $994,795
#06 Citigroup $701,290
#07 JP Morgan Chase $695,132
#12 UBS $543,219
#17 Morgan Stanley $514,881
(Source: opensecrets.org)

Presidential Candidate Obama Top Campaign Contributors
by Industry
#1 Lawyers/Law Firms $43 million+
#2 Retired $42 million+
#5 Securities & Investment $14.8 million+
#6 Health Professionals $11.7 million+
(Source: opensecrets.org)

Salaries and Benefits of U.S. Congress Members and the Office of the President
Congress used to earn $6.00 a day while in session from 1789 to 1855.

2009 salary for members of the House and Senate: $174,000/ per year. That’s $4,700 more than 2008’s salary of $169,300. Congressional Leaders in 2009 will earn $193,400, and the House Speaker, currently Nancy Polski earns $223,500/ year. (source: usgovinfo.about.com)

Presidential Pay: $400,000 year plus $50,000 expenses.
Presidential Retirement Pay: $193,400 (at 2009 level), paid for life.

No Pay For Performance. Guaranteed Annual Pay Increase

“In 1989, Congress passed an amendment allowing for the automatic raises, unless lawmakers specifically voted to reject it. Which Congress did, until 2000.”

— Source: usgovinfo.about.com

According to Thomas A. Schatz, President of the non-profit organization Citizens Against Government Waste (CAGW), and its lobbying group Council for Citizens Against Government Waste once stated,

Members of Congress have the only job in the country whose occupants can set their own salary without regard to performance, profit, or economic climate.”

— Source: USGovinfo.About.com, quoting CAGW

According to factcheck.org, on March 11, 2009, Congress pay will freeze in 2010 at 2009 levels.

1. So far we have some government fat cats wanting to control things and be well paid, while the people who put them in office are struggling financially.

2. Then some of the government fat cats try and force the banks to lend to people. The problem is that 96% of the people the government tried to lend to don’t seem to qualify on the government loan standards. So the government wants the banks to lend to these people anyway.

3. Let’s look at those so called fat cats now on Wall Street.

Goldman’s Top Brass Takes No Bonuses in 2008
According to BusinessWeek, seven of Goldman Sachs executives decided to take no bonuses for 2008. Goldman’s CEO Lloyd Blankfein gave up $68.5 million in bonuses in 2008.

What? No bonuses for top Goldman execs in 2008 or a whole host of others? Yup. Hmm, did someone leave that part out?

Now, here are the companies who don’t deserve bonuses or a salary or a job:
1. Anyone that anything to do with General Motors management.

2. Same goes for Chrysler. Just liquidate it and be done. Two bankruptcies, two government bailouts for the same auto company is enough for Chrysler don’t you think?

3. Anyone that anything to do with executive management, loan underwriting, compliance, risk management of the following companies:

— AIG, Bank of America, Countrywide Mortgage, Bear Sterns, Capital One Financial Corp, Citigroup, E*Trade, Fannie Mae, Freddie Mac, GMAC, Lehman Brothers, Merrill Lynch, UBS, Wachovia Bank (why did you buy Golden West Financial at the top of the market (05-07-2006) – hello should have come talked to me back then), and Washington Mutual.

Those who are probably more deserving of bonuses when demonstrated they EARNED it.
JP Morgan, Goldman Sachs, Morgan Stanley, U.S. Bancorp, others to name a few.

They didn’t go bankrupt, and probably did not need a bailout like many of the others.

So when examining the “fat cats,” check to see if they earned their keep.


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Categories: Financial Reform
  1. May 27th, 2011 at 22:22 | #1

    This is prob a question for Apple. Rumor is i5 sometime early next year (2012).

    Yes, if you drop your phone, there is a chance that the screen can break.

    You can buy a Griffin covers to help secure this plus laminated screen protectors from Verizon or AT&T, or check on-line.

  2. release date new iphone
    May 27th, 2011 at 18:47 | #2

    When is actually the actual i phone five ( or successor of the iphone4) supposed to be released? I lost my personal apple iphone 2, 3 weeks ago, and I was thinking if I must obtain the iPhone 4 right now or wait for the apple iphone five… In addition, I been told the iPhone 4’s display shatters very easily if you ever fall it w/o an incident. Is that accurate?

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