As Banks Boomed, Watchdogs Got Big Bonuses

[sabra]

Source: CBS News/AP

Report: While Banks Profited Off Risky Mortgages, Government Gave Millions in Rewards for "Superior" Work

(AP) Banks weren't the only ones giving big bonuses in the boom years before the worst financial crisis in generations. The government also was handing out millions of dollars to bank regulators, rewarding "superior" work even as an avalanche of risky mortgages helped create the meltdown.

The payments, detailed in payroll data released to The Associated Press under the Freedom of Information Act, are the latest evidence of the government's false sense of security during the go-go days of the financial boom. Just as bank executives got bonuses despite taking on dangerous amounts of risk, regulators got taxpayer-funded bonuses despite missing or ignoring signs that the system was on the verge of a meltdown.

The bonuses were part of a reward program little known outside the government. Some government regulators got tens of thousands of dollars in perks, boosting their salaries by almost 25 percent. Often, though, rewards amounted to just a few hundred dollars for employees who came up with good ideas.

During the 2003-06 boom, the three agencies that supervise most U.S. banks - the Federal Deposit Insurance Corp., the Office of Thrift Supervision and the Office of the Comptroller of the Currency - gave out at least $19 million in bonuses, records show.

Read more: http://www.cbsnews.com/stories/2010/03/18/national/main6310518.shtml?tag=stack

[WriteDown]

1. Sounds like money well-spent. nt

[Donnachaidh]

8. when regulators play-act at being greedy bastards?

:wow: :wow:

[avaistheone1]

2. I don't think our government should be giving out these kind of outrageous bonuses.

I don't think people should be going into government in order to make themselves wealthy.

[yava]

7. few hundred or even few thousand $ of bonus is NOT outrageous

[denverbill]

3. I think this article is a bit misleading.

It seems to imply that regulators were getting the same sorts of enormous bonuses as bankers, when in fact, the vast majority of the bonuses were minimal and based on employees coming up with good ideas.

If the FDIC has a bonus program that rewards employees for coming up with money-saving ideas, like not printing header pages to save paper costs or replacing MS with Open Source, etc, I have no problem with that whatsoever.

And even people who got 5 figure bonuses may well have deserved them. The FDIC doesn't set the laws, it only does what it's told to do.

Unless the article can point to specific examples, like the head of the FDIC getting a $100,000 bonus but neglecting to do something he was supposed to be doing, that's one thing.

Sounds to me like the article is trying to shift the blame from the bankers who lobbied for and used the risky practices or the lawmakers who approved deregulation to the understaffed, moderately paid, regulators.

[girl gone mad]

4. It says as much right in the article.

The point is that the system was deeply flawed. The regulators failed at their jobs. If we want to avoid another systemic crisis, we need to look at all of these issues with open eyes. What went wrong and what could have been done instead? Clearly, a system of rewards based on good ideas to save the department money is of questionable merit. Perhaps the rewards should instead be going to those who do the best job regulating. Maybe it wasn't the best idea to incentivize the regulators to waste time thinking about office supplies.

[denverbill]

5. I agree that the system was deeply flawed.

The 'office supplies' was my own example though but in any case, what I was saying was that just the fact that bonuses were paid out doesn't necessarily indicate that was part of the flaw.

I completely agree that we need to look at everything and find out exactly what went wrong.

But to compare the bankers who were getting 7-8 (or 9?) figure bonuses with some low level auditor who got $1000 for god-knows-what and saying 'Oh see, the auditors got bonuses too, so that's part of the problem' without even looking at what the bonuses were for or how they actually impacted the crisis isn't fair. Yes, if they paid bonuses to whoever audited the most banks, that would be pretty stupid, since it would encourage speed versus accuracy. But if they paid bonuses based on who uncovered questionable practices or who uncovered fraud, that would be great.

And even if the guy who audited IndyMac got a $1000 bonus specifically for that audit, for all I know, it was deserved. He may have worked 100 hour weeks and analyzed everything perfectly, but relied on his bosses to tell him how to evaluate CDO's. His bosses may not deserve their $50,000 bonuses, but he may deserve his $1000.

[indepat]

9. Hear, hear!

:-)

[MisterP]

6. guess this is why the Bushobama education proposals pimp "performance pay":

make the teachers and admins pump up the NCLB scores so they're not bumped down to $12K/year, thus making NCLB look like a success, thus justifying further "business management" of schools

[indepat]

10. Three Federal agencies bonuses over a four-year period: $19 million. Goldman's one-year

bonuses: $19(?) billion. Sounds about right. :-)