After Northern Trust "Party," Kerry Introduces Legislation to End Lavish Spending by Bailed Out Bank

[ProSense]

02/24/2009

After Northern Trust "Party," Kerry Introduces Legislation to End Lavish Spending by Bailed Out Banks

WASHINGTON, D.C. – Senator John Kerry (D-Mass.), a senior member of the Finance Committee, today announced plans to introduce legislation to end the extravagant spending practices of U.S. banks that received taxpayer dollars from the Troubled Asset Relief Program (TARP). The TARP legislation was passed by Congress last year to help failing financial institutions and improve our sluggish economy.

Kerry’s TARP Taxpayer Protection and Corporate Responsibility Act would prevent any recipient of TARP funds from hosting, sponsoring, or paying for conferences, holiday parties and entertainment events. Any TARP recipient that misused the funds would be fined and required to reimburse the government.

Kerry’s announcement follows reports that Northern Trust Bank, which received $1.6 billion in bailout assistance, hosted hundreds of employees and clients at expensive hotels in Beverly Hills and threw a series of extravagant parties in Hollywood last week that consisted of private dinners, cocktail parties, and performances by Chicago and Sheryl Crow. The bank recently laid off almost 450 workers.

“I’m sick and tired of picking up the newspaper and reading about another idiotic abuse of taxpayer money while our country is on the brink,” said Kerry. “Americans who play by the rules are losing their jobs and struggling to pay their mortgages. The companies that came to Congress in desperate need of help to stay afloat become their own worst enemies when they pull stunts like this. It’s an embarrassment that this legislation is necessary, but some companies clearly need a reality check to get their priorities straight so taxpayer money is used to get their house in order and not to pay for lavish parties. Congress has zero tolerance for this kind of excess.”

An outline of the Senator’s legislation is below:

TARP Taxpayer Protection and Corporate Responsibility Act

• Any recipient of TARP funds shall not be allowed to host, sponsor, pay for conferences and events and pay for holiday or entertainment events for the year in which they receive TARP funds.
  
  
• A recipient may seek a waiver from the Secretary of Treasury for any event which the recipient believes is directly related to the operation of the business. The Secretary has thirty days to respond to a waiver request.
  
  
• Any violation will require the federal government to be reimbursed by the company’s CEO for the cost of the event and there will a fine of $100,000 per violation. A recipient will have 30 days to reimburse the government and pay the fine. The fine increases $10,000 a day for each day after 30 days.
  
  
• The date of enactment is March 1, 2009.

Kerry plans to formally introduce the legislation today. Kerry is also sending a letter today to Treasury Secretary Tim Geithner urging the Obama Administration to support his legislation.

Full text of the letter is below:

The Honorable Timothy F. Geithner

Secretary of the Treasury

Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220

Dear Secretary Geithner:

I was disturbed by this morning’s newest published reports that some Troubled Assets Relief Program (TARP) recipients are using taxpayer dollars to fund lavish and inappropriate events. For this reason, I am introducing the TARP Taxpayer Protection and Corporate Responsibility Act of 2009 to help protect taxpayer funds from being used for parties and other unnecessary reasons. I request that you review this important legislation.

I’d hoped that companies receiving TARP funds would have shown more discretion, certainly by now after months of recriminations. In fact, last October I contacted Treasury Secretary Paulson and Federal Reserve Chairman Bernanke to express my concerns about the expenses of the American International Group (AIG). I was concerned that as a recipient of TARP funds they were using valuable taxpayer dollars to pay for unnecessary events and this type of activity is continuing to occur.

Now it has been reported that Northern Trust Corporation threw lavish events at the Northern Trust Open, which it sponsors, including private concerts and expensive gifts for guests. Last year, Northern Trust Corporation received approximately $1.6 billion in federal funding. This is unacceptable – we must act to insure additional taxpayer funds are not wasted.

I applaud the action the Obama Administration has taken to address executive compensation and the provisions included in the American Recovery and Reinvestment Act of 2009, but I believe we must do more. The American Recovery and Reinvestment Act requires Treasury to publish guidelines on the use of funds. However, I believe we need to do more than providing guidelines for the use of these funds. As we all know, money is fungible and a TARP recipient can always explain that TARP funds were not used for questionable purposes.

The TARP Taxpayer Protection and Corporate Responsibility Act of 2009 would prohibit TARP recipients from sponsoring, hosting, or paying for entertainment or holiday events during the year in which they receive assistance of the following year. The legislation would give the Secretary of the Treasury the authority to issue waivers and would become effective as of March 1, 2009.

During these difficult economic times, we need to send a message to the American people that we are responsible stewards of public funds. We must try to help companies, but only if they operate in an appropriate and responsible manner which values the assistance of the American taxpayer. At a time when banks are not providing enough lending to small businesses and others, they should not be throwing lavish parties at taxpayer expense, and the claim that these “parties” came out of “operating expenses” rather than taxpayer funds doesn’t pass the laugh test.

I look forward to working with you to address responsible behavior of TARP recipients.

Sincerely,


John F. Kerry

Edited to add:

Kerry: Block bailout abuses

Sen. John Kerry, D-Mass., says he plans to introduce legislation to prevent banks that receive government money from abusing it.

February 24, 2009: 2:31 PM ET

WASHINGTON (Reuters) -- A senior Democratic senator said Tuesday he will introduce a bill to end "the extravagant spending practices of U.S. banks" after reports that Northern Trust Corp., which got taxpayer bailout money, last week threw lavish parties around a California golf tournament.

"I'm sick and tired of picking up the newspaper and reading about another idiotic abuse of taxpayer money, while our country is on the brink," Sen. John Kerry, D- Mass., said in a statement released to Reuters.

Kerry plans to introduce legislation targeting banks that received taxpayer assistance under the government's $700 billion Troubled Asset Relief Program (TARP).

Northern Trust (NTRS, Fortune 500) received $1.6 billion under TARP, according to the Kerry statement. A spokesman for the bank did not immediately return telephone calls seeking comment.

Senator Kerry targets bailout bank over golf

[babylonsister]

1. Sanity! Thank you, Senator Kerry! nt

[livefreest]

2. maybe they should host their parties in local restaurants and bars

are those banks junkets that bad? Isn't spending good at this point? maybe they shouldn't continue going to big glitzy hotels but rather go to local small restaurants, and not all of them at one place but rather maybe a party of 10 in different restaurants.

[karynnj]

6. The point is that they do not have enough money to start lending

and they are using money to do this. The fact is that some profitable companies cut out bonuses and parties to stay profitable - the grown up responsible thing to do.

[blm]

8. The point is that they are STILL being LAVISH - if they had spent modestly and wisely befitting the

circumstances, this wouldn't have become an issue.

Ever see attacks on banks for spending modestly? No. Only their excesses. So....why defend them?

[Merlot]

3. "It’s an embarrassment that this legislation is necessary"

Indeed it is.

[karynnj]

7. I love that comment - in its quiet way - it is incredibly strong

[blm]

9. yes - he expressed similar feelings when he drafted the Duke Cunningham bill.

Amazing that ethical behavior has to be forced.

[fedupinBushcountry]

4. Thank you Senator Kerry

for stopping the ridiculousness of the corporate thugs.

:kick:

[karynnj]

5. He is really good when angry - almost becoming more focused

It is amazing that they have continued this even as each time it is exposed the company is attacked. It is sad this legislation is needed - but it looks like it is. This seems well though out too, as it allows a waiver if they can show it is good for the business.

[politicasista]

10. Kick

:kick:

[uponit7771]

11. They're making sure we eat cake...

[ProSense]

12. Morgan Stanley cancels events at golf tournament

Morgan Stanley cancels events at golf tournament

By STEPHEN BERNARD, AP Business Writer Stephen Bernard, Ap Business Writer – Wed Feb 25, 5:04 pm ET

NEW YORK – Morgan Stanley said Wednesday it would eliminate events for entertaining clients that had been scheduled to run in conjunction with a professional golf tournament it sponsors in June.

Morgan Stanley's announcement comes a day after protests erupted in Congress over parties and concerts hosted by Northern Trust Corp. at a golf tournament it sponsored last week. Other banks that received bailout funds from the government have also come under fire recently for spending money on lavish events.

Morgan Stanley, which received $10 billion in bailout funds, will still be the main sponsor for the Memorial Tournament but will have little other presence at the tournament. It is the ninth year the bank has sponsored the tournament, which takes places in Dublin, Ohio in June.

<...>

Democratic lawmakers on Tuesday pressed Northern Trust to return the money spent on the events, and Sen. John Kerry, D-Mass., proposed legislation restricting banks that received government funds from hosting, sponsoring or paying for conferences or entertainment events. The legislation would require a company's chief executive to reimburse the government for the cost of any events hosted and pay a $100,000 fine.

Two other banks that received government funds are title sponsors of PGA tournaments later in the year — Wachovia Corp., which is now owned by Wells Fargo & Co., and U.S. Bancorp. Wells Fargo received $25 billion as part of the program, while U.S. Bancorp received about $6.6 billion.

The Wachovia Championship is scheduled to begin April 30 and run through May 3 in Charlotte, N.C., while the U.S. Bank Championship will be played in Milwaukee from July 16 through July 19.

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