In the first half of 2009, these six big banks set aside $74.4 billion in bonuses and compensation for their employees.37 At this rate, total 2009 compensation at these banks could top $148 billion, almost as much as the $160 billion in direct TARP infusions that these six banks took last fall. This would be even higher than the banks paid out any year during the subprime boom.38
Even more outrageous, the two most heavily bailed-out banks, Bank of America and Citigroup, are increasing employees' base salaries to get around limits on bonuses for TARP recipients.39 Citigroup will hike salaries by as much as 50%, so that most employees' compensation will not come down from last year's levels.40 Bank of America is also offering signing packages to its new Merrill Lynch hires that are even richer than what Merrill paid out at the peak of the economic boom in 2006 and 2007.41
Billions in Profits
The same banks that were on life support a year ago posted billions in profits just months later. In the first half of 2009, the top six big banks alone brought in $29.6 billion in profits.42 Goldman Sachs posted the biggest quarterly profit in its 140-year history this past June, bringing in an average of $50 million a day.43
The banks did it by resorting to the same old tricks as before--increasing risk, hiking up bank fees and credit card interest rates, cutting small business lending, and by refusing to modify mortgages to prevent foreclosures, so that they can collect the more lucrative fees instead, as already mentioned.
Increasing Risk
The banks are once again embracing the same kind of excessive risk-taking that caused the crisis in the first place:
Goldman Sachs turned a record profit in the second quarter by making even riskier bets than it was making before the crisis hit. The bank actually increased its risk profile after getting taxpayer bailout funds, making its record profits by gambling with our money.44
Bank of America, Chase, and Citigroup are all linking corporate credit lines to credit default swaps, the same complex derivatives that caused AIG to collapse.45
Morgan Stanley, Smith Barney, and UBS are now selling "structured notes", which are essentially highly risky and complex derivatives for small businesses.46
In recent months, investment banks have once again started repackaging old mortgage-backed securities and selling them, again, as new products. These were the same toxic securities that helped cause the crisis in the first place, and banks are now repackaging and marketing them as super-safe AAA-rated investments.47 Why should they worry when they have the US taxpayer to bail them out should things go awry? All they have to do is threaten us with the possibility of system-wide collapse of our economy and they will get the bailout they need. It's called "too big to fail." It should be called "too big to avoid the Sherman Anti-trust Act." In other words, such gigantic firms should be broken up into smaller companies just like Standard Oil was broken up into 34 separate companies by the US Supreme Court in 1911, and just like AT&T's local operations were split into seven independent Regional Holding Companies, also known as Regional Bell Operating Companies, or "Baby Bells" in 1984.
Banks like Wells Fargo, US Bank, and Fifth Third are starting up or expanding usurious payday loan programs that charge interest rates as high as 400% to low-income, high-risk consumers who typically cannot afford to pay back the loans.48
Hiking Bank Account Fees
Banks are also boosting their bottom lines by raising fees on consumers to offset their losses on risky loans and toxic securities.49 American consumers will pay more than $38 billion in overdraft fees this year,50 more than the annual revenues of most Fortune 500 firms including Apple, Google, and Nike.51 That is $125 for every man, woman, and child in the United States.52 The national median overdraft fee rose to $26, the first time the fee has gone up during a recession.53 Earlier this year, Bank of America more than doubled its daily overdraft fee limit from $160 to $350.54
But the fee increases are not limited to overdrafts. Bank of America also increased its monthly maintenance fee for its MyAccess Checking Accounts by 50% this year.55 Meanwhile, Wells Fargo, JPMorgan Chase, and US Bank are passing increased costs for deposit insurance onto customers.56 As the New York Times put it, the result is that "Americans are paying more to save and spend their money."57
Raising Credit Card Rates
