Wednesday, January 28, 2009

Will bank bosses never learn?

I guess you have to give up at some point. Citigroup had to be told by the office of Tim Geithner, the new US Treasury secretary, to cancel a pending $50 mn purchase of executive aircraft at a time when it is on government support. Citigroup was apparently adamant about going about the purchase and its people had to have their arms twisted before they saw sense.

This comes after the news of the $3-4 bn bonus payout at Merrill just ahead of the closure of the acquisition by BofA. Merill's CEO, John Thain, had no qualms about blowing up $1.2 mn on renovating his office (including a $30,000 spend on a commode- one does not know whether this particular purchase was warranted by Thain's heightened nervousness over the future of Merrill under BofA management). Thain has just been issued a subpoena by NY's attorney general which is probing the accelerated bonus payout and to what extent BofA bosses knew about it, FT reports.

Just to round off the bad news on financial firms, Nomura is reeling under the purchase of Lehman - it has posted a loss of $3.9 bn for the last quarter, which includes losses on exposure to Iceland and to Madoff.

7 comments:

Anonymous said...

Makes one wonder, why and how can these execs do such things when the organization, they are responsible for, is almost on its death bed. And this does not seem like a one off case. Is it that finance industry attracts the greediest and the most corrupt lot or is it a representative of every industry?

Abhishek Pareek said...

Dear Professor,

request you to please add RSS syndication switch on your blog, this will make it easier for people like us to follow your blog.

Regards

Life is Beautiful said...

Professor,

Is it not right to leave Capitalism to clean its own mess???

Anonymous said...

Give a 3 year old kid a chocolate. Tell him that it is gonna be the last one he will ever have.... What does he do? He will happily take it. Wait couple of hours/days... then ... he will come back for more.

Bankers are like those kids with candies. Only thing is govt gives it (TARP money) to them.

Anonymous said...

Abhishek, the RSS feed for any blogspot is obtained by adding rss.xml at the end. For this blog it would be http://ttrammohan.blogspot.com/rss.xml

Somil Patni said...

Sir ,
Could you please share with us your views on the new stimulus package that Obama is trying to get cleared . Do you think it will get the required results .I have tried to follow the Economist and Economic Times but have been able to arrive at a proper conclusion .

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