February 8 , 2010

Bankers’ Sleight Of Hand Robbing The Charitable Sector

By Paul Clolery

Perhaps the charitable sector should start promoting itself as an all-purpose scrubbing cleanser or palate-neutralizing sorbet.

Judges have long sentenced those before them to wash their societal sins clean by “volunteering.” The financial industry is now taking its cue from those imposed acts of indentured servitude by working to mandate top executives give more of their record paychecks and bonuses to charity.

There’s nothing wrong with giving to charity -- if it’s your money to give.
Goldman Sachs, the Wall Street financial giant bailed out with federal tax dollars, is the latest to announce it will require as yet undefined “top” executives to give more to charity. Perhaps if all of the taxpayer Troubled Asset Relief Program (TARP) bailout money were given back, charities wouldn’t need the funding. TARP allows the United States Department of the Treasury to purchase or insure up to $700 billion of “troubled assets.”

Banks and financial institutions can’t recoup losses incurred on those packaged troubled assets. The idea is that once trading of the sour assets resumes, prices will stabilize and ultimately increase in value, bringing gains to the financial institutions and taxpayers. Don’t hold your breath.

With unemployment at more than 10 percent and projected to be more than 8 percent through 2012, taxpayers are going to waiting for a long, long time. It’s theatre of the absurd at its finest, just as Samuel Beckett imagined in his Waiting for Godot, when Estragon announces he is hungry and Vladimir produces an unsatisfying carrot.

Goldman Sachs had not yet reported its 2009 earning as this was being written. However, investment bank JP Morgan Chase announced it earned $11.7 billion during 2009, posting a $6.9 billion profit. Its Chase credit division lost $2.23 billion.

So, once the feds bought or backed the bad loans thanks to the largess of the American people, those citizens who never got to vote yea or nay on the bailout are defaulting on their credit cards and need the help of food banks, while the fat cats light cigars with $100 bills and give pocket lint to ravaged communities. There’s nothing wrong with top executives giving to charity, and there can be a debate as to whether forced donations are actually charity. The issue is that the earnings are made on the backs of the people who bailed them out. That money and those loan guarantees need to be repaid. A few million from the $700 billion doesn’t get it done.

But, they can cleanse the bank with a few “investments” in charity.
And as Americans dig deeply in acts of financial selflessness to help the unspeakable disaster in Haiti, the financial institutions are making a windfall, as much as 3 percent per transaction.

It’s a financial shell game being played. It’s as if after your house has been burglarized, you see your stolen watch in a pawnshop window and you have to buy it back.

President Barack Obama announced he wants legislation that would tax banks on their profits based in the TARP loans. It’s a “Nixonesque” approach, rewriting the federal Tax Code and then using the Internal Revenue Service to enforce it. Obama and former President George W. Bush should have better considered the taxpayers’ pockets and repayment of the money when their teams worked to draft the TARP legislation and force it through Congress in the waning days of the Bush administration. You shouldn’t use legislation to punish, even though the targets richly deserve it.

At least Sen. Chris Dodd (D-Conn.), who marshaled the bailout plan through Congress and buried in it language that protects the bonuses and salaries of the failed bankers, had the good sense to announce he’s not running for re-election. Granted, of course, it was clear he probably would not even have won his own party’s nomination for his seat. At least he spoke of the legislative mistakes and took responsibility for them.

Now it’s time for the bankers to do the right thing. It’s time the banks re-established the lines of credit that were pulled even though they were in good standing. It’s time for zero interest bridge loans from Wall Street so nonprofits can deliver services to what’s left of Main Street. Wall Street was bailed out of its self-inflicted mess. It’s time to cleanse itself by volunteering to mop its own bile and repave Main Street.

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This article is from NPT Weekly, a publication of The NonProfit Times.

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