So much for those two new jets and a "state-of-the-art" airplane hanger in Westchester—for the time being, at least. A spokesman for JPMorgan Chase now says the bank has no plans to move forward with the deal as long as it is holding on to taxpayer money: "We will not purchase any replacement plane or make any related expenditure until after we have repaid TARP funds in full." [NYT/Dealbook]
Just days before Bernie Madoff was arrested, a Bronx businessman named Martin Rosenman handed over $10 million of his family's money to the now-imprisoned financier's investment firm. Terrible timing, no doubt, but Rosenman quickly argued that he hadn't actually intended to have Madoff invest the cash until the following month, so he was entitled to get his money back pronto, and shouldn't be treated like the thousands of shlubs who'd fallen victim to Madoff months or years earlier. A federal judge ruled against Rosenman in February and instructed him to take his place in line with everyone else, thank you very much. But it seems Rosenman isn't taking no for an answer. Today he filed notice that he intends to appeal the ruling. Best of luck with that, Marty—you'll need it. The court papers are below.
As is our custom on Friday afternoons, we gave a quick call over to Steve Schwarzman to check in and see how he was holding up, especially after this bit of news a couple of weeks ago, which had us as alarmed out as anyone. Alas, we didn't get an answer over at 740 Park, so we thought we'd try him down at the Palm Beach manse. Because if you're not getting paid, might as well head off for a three-day weekend, right? Well, you can imagine how relieved we were when this guy answered. (Click on the video above.) We can't be sure, of course, but it sure sounded like a French guy to us. Steve's famous French chef, perhaps? Quite possibly! Regardless, after a week like this, we're taking this as an encouraging sign that Steve's $3,000 food budgets remain intact and the spending goes on. Which it most certainly has to if we're ever going to get out from this mess.
When it was revealed in late January that John Thain spent $1.2 million renovating his office at Merrill Lynch in early 2008—back before the global financial meltdown was truly upon us—people were up in arms. Such a stupid move! So tone deaf! When it was reported yesterday that Citigroup CEO Vikram Pandit was getting his office redecorated, like, now? Well, it's good thing the news broke when everyone was consumed with the mess over at AIG, huh?
• Yesterday the House approved a 90% tax on bonuses paid to execs at certain firms that received government aid. Now some lawmakers are talking about banning all bonus payments at bailed-out firms. [Reuters]
• It's unclear if the 90% tax will hold up in court. It's also possible it will do more harm than good and ultimately "wreck what's left of our economy." [BI]
• Andrew Cuomo says AIG has provided him with a list of employees who earned bonuses, but he won't release the names until the security situation has been sorted out, which is good news since it's getting a little rough out there what with all the death threats and protests. [AP, NYT, Reuters]
• Just who knew about the AIG bonuses—and when they knew it—is being closely scrutinized, although Treasury Secretary Tim Geithner says he is prepared to accept full responsibility. [NYT, CNN]
Getting crushed by Jon Stewart last week wasn't the end of the bad news for Jim Cramer. Last week, TheStreet.com, the financial news site that Cramer co-founded and continues to oversee as chairman, lost its longtime CEO, Thomas Clarke. Today the company laid off 18 staffers as part of a plan to slash $2.4 million in costs. We'd hate to second-guess Cramer given his rep as all-knowing financial guru, but if the company was really looking to reduce overhead in a hurry, wouldn't it have been easier to have started with Cramer's seven-figure salary? Just a thought! [PaidContent]
And you thought Washington was constitutionally unable to get anything done in a hurry. The House passed legislation this afternoon to recoup most of the $165 million in bonuses paid out to employees of AIG. The bill applies a 90 percent tax on bonuses given to executives who earn more than $250,000 and who work for companies that have received at least $5 billion in government aid.
Did you hear about that little scandal over at AIG? Yea, well, someone's been stealing Vikram Pandit's copy of the Journal from his doorstep the past few mornings because Bloomberg just dropped the bombshell that Citigroup plans to spend "about $10 million" building out new offices for Pandit and his top lieutenants. According to affidavits filed with New York's Department of Buildings, the bank that has collected $45 billion from the U.S. government will spend at least $3.2 million constructing 17 offices. But when you account for the architect's fees—and add in the cost of furniture—"the tally for the offices at the bank's Park Avenue headquarters will be at least three times as high." But it sure sounds like it will be lovely: The plans "specify the installation of at least one Sub-Zero refrigerator and icemaker in the renovated space, along with 'premium grade' millwork and Madico Inc. 'Safety Shield 800' blast-proof window film." Too bad by the time construction work is done, Pandit will be out of a job.
• Andrew Cuomo has won the battle to force Bank of America to turn over the names of the 200 Merrill employees who earned the largest bonuses right before the firm was acquired. He says he'll release the info today. [CNN, NYT]
• As you can probably imagine, it's been "the worst week in a string of bad weeks" for Treasury Secretary Tim Geithner. [NYT]
• Of course, it's also been a pretty lousy few days for AIG chief Ed Liddy, who walked into this big mess when he took the top job last September. [NYT]
• A record number of hedge funds were forced to close up shop last year: About 1,471 hedge funds were liquidated in 2008. [NYP, DB]
• The Fed plans to buy $300 billion of long-term Treasuries and hundreds of billions of dollars more in mortgage-backed securities. [BN, WSJ]
• JPMorgan reports the bank's CEO, Jamie Dimon, earned about $19.7 million in total compensation for 2008. And how did you do last year? [Reuters]
• Citigroup has canceled its order to buy three new jets. [Dealbreaker]
A little progress has been made in Washington, believe it or not! In case you haven't spent the last four hours watching testimony in front of the Congressional committee looking into the AIG mess, you may be happy to hear that the insurance company's CEO, Ed Liddy, says he's asked the AIG employees who collected big bonuses to give half the money back. Okay, so it means we're only 50 percent of the way closer to a solution to this saga. But Liddy says that some employees have already agreed to the arrangement. And some really generous ones have even offered to give up all the cash!
• The AIG mess rolls on. Lawmakers are up in arms. Voters are pissed. Tim Geithner is on the defensive. President Obama's agenda has been disrupted. And AIG chief Ed Liddy will get to see some of the emotion first hand when he turns up on Capitol Hill later today to face the music. [NYT, WSJ, BN]
• Billions used to bail out AIG may end up benefiting the hedge funds that made big bets that the housing market was going to crumble. [WSJ]
• As the pressure mounts on Tim Geithner, here's a roundup of all the things he's gotten wrong, just in case you need a little refresher. [BI]
• The State of New Jersey has filed suit against Lehman for fraud. [CNN]
• Citigroup's chief economist is leaving the bank to take a senior position at the Treasury Department. Somehow this is entirely fitting. [DBK]
• The fact that Citi has four new board members may not bode well for Vikram Pandit and his chances of remaining in charge of the bank. [NYP]
• Warren Buffett owns 20% of Moody's, so when he talks about the broken financial system, you won't hear him talk much about rating agencies. [NYT]
• In the FT, Hank Paulson says it's time to reform the financial system. Thanks for sharing. And thanks for coming to that conclusion just now. [FT]
AIG has sparked quite the scandal in recent days for paying out $165 million in bonuses even after accepting more than $150 billion in assistance from the U.S. government. Execs at the insurance giant maintain the company is legally bound to follow through with the payments since the bonuses were incorporated into contracts it signed last year. But that's not the only legal agreement that has AIG wasting its cash: The company continues to pay for the privilege of stamping its logo on the jerseys worn by Manchester United players, too.
• The epic fallout from AIG's decision to pay out bonuses enters a second day: Andrew Cuomo says he plans to subpoena company execs, the Obama administration is scrambling to cool emotions, but clearly his influence is limited. Sen. Chuck Grassley of Iowa has suggested that AIG execs follow a "Japanese model" and choose between "apology or suicide." [NYT, ABC, WSJ]
• Given the new restrictions on Wall Street bonuses, banks are now looking for loopholes and planning to boost base salaries to offset lower bonuses. [WSJ]
• Goldman Sachs is bailing out its own employees: It's offering to lend money to more than 1,000 employees who've been squeezed by the crisis. [NYT]
• Mortgage fraud is at an all-time high, but you probably figured that. [CNN]
• Unsurprisingly, banks are raising interest rates and cutting credit lines. [BN]
• Housing starts surged in February from a record low the month before. [BN]
Andrew Cuomo is demanding answers. President Obama said today that he "choked up with anger" when he heard the news. The news media is up in arms. And now the Treasury Department says it plans to do whatever it can to block as much as $30 billion in government aid if AIG doesn't revert course and cancel the $165 million in bonus payments that it says it is compelled to hand out to company execs. Why in the world is AIG going ahead with the plan when doing so pretty much guarantees its reputation will end up ranking up there with Enron and Bernard L. Madoff Investment Securities?
You didn't expect Andrew Cuomo to remain on the sidelines after AIG dropped the bomb this weekend that it plans to go ahead with $165 million in bonus payments, did you? Of course not. Cuomo sent a letter to AIG CEO Ed Liddy earlier today demanding more info on the compensation plan. He set a 4pm deadline and said if he doesn't receive the info by then, he'll issue subpoenas and "potentially seek court enforcement." The letter he sent the company is below.
• Is AIG officially the most despised company in America? Following the disclosure over the weekend that execs planned to go ahead with $165 million in bonuses to top execs comes word that a good deal of the billions in bailout money it received went to banks like Goldman Sachs ($12.9 billion), Merrill Lynch ($6.8 billion), and Bank of America ($5.2 billion). [BN, NYT, WSJ]
• Larry Summers: "There are a lot of terrible things that have happened in the last 18 months, but what's happened at AIG is the most outrageous." [BN]
• UBS plans to cut another 5,000 jobs. [Reuters]
Jim Cramer is a buffoon and dispenses terrible advice; by all accounts, he was a mediocre hedge fund manager before he even became a media celebrity. But he has a long track record for legally questionable behavior, too, as numerous people have pointed out over the years. Gawker has a good roundup of the charges that have been lobbed Cramer's way over the years. [Gawker]
