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During the 2003 -- 06 boom years, three agencies, The Federal Deposit Insurance Corp., the Office of Thrift Supervision, and the Office of the Comptroller of the Currency gave out millions of dollars in bonuses to regulators of these agencies.
The bonuses were supposedly given out for "superior" performance. Records show that at least $19 million in bonuses was awarded.
Let's look at this record of "superior" performance. First we had the failure of NetBank to the tune of $2.5 billion dollars. Then came the demise of ANB Financial National Association for $2.1 billion. It that's not enough we had the failure of New Frontier Bank for $1.8 billion. And don't forget Omni National Bank for $956 million.
These failures took place before the financial meltdown. Don't you think that with these banks collapsing, regulators would have gotten a heads up that something was happening to the banking sector? Don't you think that regulators would have been alerted to the potential for bigger failures? Not on your life. The government kept giving out bonuses.
In 2008, the year of the meltdown, OTS gave 96 financial examiners bonuses of up to $3,000.00 for "exceptional" work.
What this shows is the how the culture of the financial industry simply just ignored any danger warnings and went merrily on down into the black hole of a major collapse.
The questions that comes to mind is whether anyone should be held accountable to this debacle. Should these agencies be investigated for wrongdoing? Is this bonus program still in effect in these agencies?
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Reader Comments (Page 1 of 1)
3-19-2010 @ 6:41PM
neo.lyte131 said...
Big Bonuses? Consider $19 million divided by 4 years (2003-2006) divided by the number of employees in the agencies yields $731. If the bonuses were concentrated in the top 25% of the employees, that’s $2714. Please. With what these federal employees have to deal with, traveling around the country, supervising 8,500 banks, if you add a 0 to that it’s still a paltry sum. Consider that all the bonus given to all the regulators over 4 years was about half that given to one top investment banker at Merrill Lynch in 2009 alone. Again, please.
3-19-2010 @ 7:28PM
mindspringnow said...
I concur with Ms. Madon. Serving on the board of directors of a billion dollar community bank, I saw first hand the OTS and FDIC regulators become complacent in 2001 and 2002 and it only got worse as time wore on, even in 2007. Then in 2008 they woke up and over reacted coming down hard on everything and everyone deserving or not.
The demise of the OTS is imminent as legislation writing an end to that agency is currently in the House. So it will be a little late to investigate the OTS.
I take exception, however, with your comment, Ms. Madon, that this reflects the "culture of the financial industry." The financial industry as defined by your inclusion of the FDIC, OCC and OTS, means "real" banks not the Wall Street crowd. The "real" banks for the most part (exception being the "too big to fail" institutions) do not support that culture. Those bonuses to the regulators reflect the wasteful spending attitude of the Federal Government.
Lastly, neo.lyte131, you have missed the entire point of Ms. Madon's article, i.e., NO bonuses should have been paid period, given the lack of professionalism of the regulatory agencies.