The New York Times reviews Feinberg's "delicate dance"gett with AIG, Bank of America, Citigroup, Chrysler, and General Motors executives over how to fairly compensate them without their heads winding up on pikes and carried through streets filled with burning trash by enraged unemployed people. The solution was drastic—a 90% cut in cash pay for the top 25 executives and an average of 50% cut overall at each firm—and tough to get to. One reason is that AIG wasn't really sure how many millions in taxpayer dollars its executives were skimming into their own pockets:

A.I.G. refused to cancel some pay contracts that fell outside Mr. Feinberg's purview. At one point, A.I.G. executives expressed frustration with the contracts. A.I.G., they said, was having trouble identifying just who its most highly paid employees were.

Were they actually getting cash from the U.S. Treasury, and people were just carting it home in grocery bags, or something?

The failed executives fought back against the restrictions valiantly, but to no avail. How do you expect to retain your best failures if you don't pay them competitively?

Bank of America was particularly concerned that it might lose employees if Mr. Feinberg restricted pay. The bank was in the midst of integrating its operations with those of Merrill Lynch, which it agreed at the height of the crisis last year to buy.

When Bank of America submitted the names of top executives to Mr. Feinberg, its representatives pointed out that 45 of the top 100 employees at the bank and Merrill had left.

You see how that works, right? The only way to keep people is to pay them millions of dollars. If you stop paying them millions of dollars, they will leave. Bank of America's evidence of this is that 45% of the people to whom it was paying the most millions of dollars left. Q.E.D.

Lewis announced today that, effective December 31st, he will step down as the Bank's CEO, a little over a year after he helped the bank buy Merrill Lynch despite the fact that Lynch was about to post big losses. Were Lewis and his deep-pocketed pals aware of Lynch's mammoth problems?

No one knows, but shareholders were not impressed and the whole mess launched an official Congressional investigation, an investigation Lewis insisted today has nothing to do with his predictable departure:

Some will suggest that I am leaving under pressure or because of questions regarding the Merrill deal. I will simply say that this was my decision, and mine alone.

The time was ripe, he wrote, for a "new leader." That leader has not yet been named, but we definitely don't envy him or her.

Nor do we envy Lewis — except for all his money, we suppose — because New York Attorney General Andrew Cuomo maintained his bulldog attitude today: "Ken Lewis' decision to step down will have no impact on our continuing investigation."

Nor will the Security Exchange Commission, Congress and the American people be allayed. But, look at it this way: at least now Lewis will have plenty of free time to figure out how the hell to clear his name. Or plan a great escape...

The five directors haven't been named, but Cuomo wants to know whether they misled shareholders in the weeks leading up to its merger with Merrill Lynch, especially about the $36 million in extra losses that were posted after the deal was complete. But Cuomo's not stopping there:

Cuomo plans to subpoena most, if not all, of the directors over the next several weeks, said the source, who spoke on the condition of anonymity because the investigation is ongoing. Bank of America chief executive Kenneth D. Lewis has already testified.

These subpoenas, sources say, could be part of a game plan to bring charges against some Bank officials. And, even if that's not true, this will make great campaign fodder should Cuomo run for governor next year.

Both companies are still pleading poverty, and the New York Times notes that absent one-time gains—in BofA's case, the sale of shares in a Chinese bank, and in Citigroup's a joint venture with Smith Barney—both banks "would have lost billions."

They also would have lost billions if they hadn't taken somewhere northward of a combined $438 billion in taxpayer funds via TARP. The federal government has bailed out these banks with billions in taxpayer dollars while the number of Americans on food stamps skyrockets and we thrash about trying to find a way to pay for universal health care, and the banks are still saying they are in dire straits but are some how able to squeak out record profits but just this once.

So who's getting that money? Well, the federal government is getting some of it, because it owns a good chunk of both banks. Also getting it will be Bryan Weadock, the bond salesman that Bank of America recently hired at $6 million a year. Citigroup recently tried to lure one executive with a $2 million offer, according to the Wall Street Journal. And come December, both banks will almost certainly pay out billions in bonuses.

As we noted yesterday, this is nothing short of harvesting the money of poor and middle-class Americans so that banking executives can maintain the lifestyles to which they have become accustomed. We should have nationalized the fuckers.

The long-term weaknesses facing both firms are related to their consumer credit divisions—default rates on credit cards are rising because people are too poor to pay their bills, and both banks are heavily exposed. So the guy who's calling you and hassling you to pay your bills works for a company that is profiting handsomely off the money the federal government forcibly removes from your paycheck. When you stop paying those bills because you can't afford them, and your credit is destroyed, burdening you with limited access to credit and higher interest rates for the next seven years, that company, which is paying some bond salesman $6 million a year, will use that failure as an excuse to ask the federal government for more money from your paycheck, if your lucky enough to get one. Even if you can afford to pay your credit card bill, Citigroup and Bank of American are both aggressively raising interest rates and cutting back on credit limits, tightening your budget. Why? Because they're not making enough fucking money.

The fact that our taxes will be going up to pay for all this crap makes us kind of want to agree with the New York Post, which is an awful, awful feeling.

Instead of charging you a $35 overdraft fee for every time you dip a penny below $0.00, any day that ends with an overdraft of $5 or less will only net you a $10 charge. That being said, whereas you could only incur five $35 overdraft fees in one day, they've now upped their own personal limit to ten. So: miss one note on your checking account, that's $350 your in the hole for after one day's worth of small-ish purchases.

Now, we all know that overdrawing your bank account is irresponsible, and that there should be a consequence for screwing up. Some banks even have a "mercy" program that allows you one of these transgressions every few months. But the wonderful MSNBC article this item's culled from does some interesting math regarding overdraft fees:

Consumers who overdraw by $5.01 will still pay at least $35 for the mistake, the equivalent of a short-term loan at 25,000 percent annual interest (assuming the money is repaid in 10 days)...Last year, the Center for Responsible Lending said that fees generated from overdrafts — $17.5 billion – actually exceeded the total amount of money banks extended to cover overdrafts, which totaled around $16 billion.

Bank Of America's almost comical in how much they hate their customers: they recently went out of their way to secure their right to pull overdraft fees from retirees' social security benefits. So they're robbing people (literally) blind who're (sometimes) too senile to always do the right math. The problem's gotten so bad, congress is leaning towards creating legislation reforming overdraft fees. Until then, banks are still royally screwing you for your punishment in an eye-for-a-pound-of-flesh kind of way. Furthermore, they're letting you overdraft, encouraging you to let them hit you where it hurts. The lesson: don't overdraw, bank with a bank that doesn't allow you to overdraw, and if there's some kind of tragic, extenuating circumstance forcing you to overdraw, borrow the money from anyone but your bank. Because they will absolutely, without reluctance, take every chance they can to totally rob you silly.

A kinder, gentler overdraft policy? [MSNBC]

The $60 million in lawsuits cover a series of botched deals for art, real-estate and other expensive toys. The root cause, however, as PEHub's Connie Loizos writes, is that Minor has been "living like a billionaire." (Coincidentally, $60 million is also what he hoped to spend on a Gulfstream jet — a deal that he claims fell through because of a lender's misdeeds.)

Minor is contesting all of these lawsuits, and has filed some countersuits of his own. But think about what it says that all these institutions devoted to serving the wealthy are suing the entrepreneur. If they thought there was money to be made with Minor down the road, would they be contesting his dealings in court as opposed to quietly working out a settlement?

What Minor doesn't have, according to at least one lawsuit filed against him: cash on hand. He's being sued by Sotheby's and Christie's for nonpayment of artwork he bid on. Merrill Lynch is suing over a $25 million loan it extended. Silverton Bank, the lender for a Charlottesville hotel, is suing for $10.5 million in missed payments.

Sotheby's says Minor told its employees that he couldn't pay because he didn't have the cash, a charge he testily disputes. In his lawsuit with Merrill, he contends that the investment bank's move to freeze his account forced him to sell other investments at a loss — again, a move he wouldn't have had to make if he had the cash on hand. He also claims Merrill's merger with Bank of America scotched the financing for his Gulfstream jet.

His splurges, chronicled in Portfolio last year include:

• A divorce which cost him roughly half of the $100 million fortune he walked away from CNET with, as well as the $300 million he made as an investor in Salesforce.com.
• An estate in Charlottesville, Va.
• A $15.3 million plantation in Williamsburg, Va.
• A $20 million home in Bel Air, which he's been trying to sell without success; it's now listed at $11.4 million.
• 
  
• A $22 million house in San Francisco's Presidio Heights neighborhood, for which he'd hired celebrity designer Michael Smith to oversee a $15 million makeover.
• A $30 million luxury hotel development in downtown Charlottesville, now on hold amidst a lawsuit.
• A $3 million deposit on the $58.5 million Gulfstream G650 jet.
• A modern art collection, including several works by Richard Prince, whose estimated value runs into the tens of millions of dollars.
• A host of startups under the umbrella of his investment firm, Minor Ventures. One of them, 8020 Media, flamed out spectacularly earlier this year.

The picture that these lawsuits paint is one of an angry dotcom mogul with a vanished fortune who's looking for someone else to blame for his woes. As a riches-to-rags story, it makes for great art.

Thain, who resigned last Thursday. He had come under fire for three main sins:

• Not disclosing more quickly Merrill's $15.3 billion in losses for the fourth quarter.
• Asking for a $10 million bonus for himself.
• Paying Merrill Lynch employees $4 billion in bonuses, normally given in January, in December, before Bank of America closed on the acquisition.
• Spending $1.2 million a year ago to renovate his office and three other rooms, including an $87,000 rug and a $35,000 commode.

For each of these, Thain has an excuse.

• The world has changed. Thain told CNBC about the renovation, "It is clear to me in today's world that it was a mistake."
• My predecessor was a jerk. In the same interview, Thain said that former Merrill Lynch CEO Stan O'Neal's office "was very different than the general decor of Merrill's offices. It really would have been very difficult for me to use it in the form that it was in. … It needed to be renovated no matter what." And Thain will pay Bank of America back for the $1.2 million
• I told them everything. In a memo to Merrill employees, Thain said that Bank of America "learned about these losses when we did." On the bonuses: "The timing of the payments for both the cash and stock were all determined together with Bank of America."
• And they were okay with it. Steele Alphin, Bank of America's chief administrative officer, wrote an email, leaked to Dealbreaker, which defended Thain in early December when the question of Thain's bonus first came up:
  

  John was not asking for a $10MM bonus, but simply to be paid fairly and anything paid him paid less than Lewis, if Ken is to receive a bonus. John had already accepted that if Ken was to be at zero, he would be at zero. Or, if Ken was below $10MM, he would be significantly below $10MM. John's reputation has not been damaged with our directors or management team which now includes him.

The important thing: None of these deals with the actual substance of the complaint. Are we to believe that in January 2008, with the mortgage market in meltdown and Merrill having just reported a $9.8 billion loss, everyone would have been thrilled with Thain's renovation? The "different world" excuse, however, focuses people's minds on the terrible state of the economy. The "blame someone else" excuse makes one think about what a jerk that other guy was. And the "transparency" excuse doesn't get into whether an action was good or bad — it's just whether someone else knew about it and failed to complain about it at the time. The key takeaway: Get the people who are criticizing you to think about something else.

Thain is a master at this. He makes other captains of industry look like bumbling fools. Take Citigroup's brouhaha over a new $50 million private jet it had on order. The New York Post had spokeswoman Shannon Bell saying the bank is "exploring its options." Then came a call from a Treasury official last night. A spokesman emailed us Citi's new party line:

We have no intent to take delivery of any new aircraft.

What, not even a token "the world has changed"? Never mind that they can't get their story straight — these are lousy excuses which don't change the topic. If Thain were running Citigroup, I think he'd be brassy enough to point out that Treasury officials knew about Citi's private-jet fleet — and maybe even start asking questions about President Obama's gigantic personal jet. You know, Air Force One?

(Photo by Getty Images)

The $1.2 million Thain spent redecorating his office — with expenses like an $87,000 area rug and a $35,000 "commode with legs" — paled beside the $15 billion in losses Merrill reported for the fourth quarter. The losses were so heavy, and so unexpected, that Bank of America CEO Ken Lewis met secretly with government officials and negotiated a new infusion of cash from the government's bailout fund.

But Lewis had stood beside Thain over the credit losses; every Wall Street firm is seeing heavier losses than expected, and there was no evidence Thain knew this was coming. Why do we think the lavish office redo was what did Thain him? His personal reputation for righteousness, which had him hailed as a hero for previous gigs at the New York Stock Exchange and then Merrill Lynch, was ruined by the revelation. And with that, Thain looked like just another overvalued asset on the balance sheet.

We hope Lewis likes the rug. He paid $28 billion for it.

(Photo by Getty Images)

Thain personally authorized a $1.2 million redecorating spree a year ago, Charlie Gasparino writes in the Daily Beast, even as Merrill prepared to slash jobs and expenses. Merrill's CEO was hailed as a hero for selling the company to Bank of America for $28 billion in September, as Wall Street collapsed around him. It was sold for a bargain price, but the firm met a far better fate than Bear Stearns or Lehman Brothers. Questions about whether Merrill hid the true state of its balance sheet from Bank of America, raised after the brokerage house reported $15 billion in fourth-quarter losses, haven't unseated Thain. But the lavish details of his spending on his Merrill Lynch office could:

The other big ticket items Thain purchased include: $87,000 for an area rug in Thain's conference room and another area rug for $44,000; a "mahogany pedestal table" for $25,000; a "19th Century Credenza" in Thain's office for $68,000; a sofa for $15,000; four pairs curtains for $28,000; a pair of guest chairs for $87,000; a "George IV Desk" for $18,000; 6 wall sconces for $2,700; six chairs in his private dining room for $37,000; a mirror in his private dining room for $5,000; a chandelier in the private dining room for $13,000; fabric for a "Roman Shade" for $11,000; a "custom coffee table" for $16,000; something called a "commode on legs" for $35,000; a "Regency Chairs" for $24,000; "40 yards of farbric for wall panels," for $5,000 and a "parchment waste can" for $1,400.

The documents also show that Thain signed off on the purchases personally. "Labor to relamp the six wall sconces" cost $3,000, and Thain authorized the payment of another $30,000 to pay the expenses Smith incurred in doing the work. Thain has hired Smith—whose celebrity client list includes Steven Spielberg, Michelle Pfeiffer, Cindy Crawford and Sir Evelyn de Rothschild—to design and decorate his private residences. They include a Manhattan apartment at 740 Park Avenue, and his 10-acre mansion in Rye, NY.

The "commode on legs," in particular, is drawing ridicule on the Yahoo Finance message boards. It is the perfect metaphor how Thain has flushed his career down the toilet.

Thain, a technology executive at Goldman Sachs, was tapped to take over the New York Stock Exchange from Dick Grasso, whose $187.5 million retirement package drew outrage. His reputation for personal rectitude is what got him that job — as well as the Merrill one, where he replaced Stan O'Neal, a secretive autocrat. Take away that aura of righteousness, and what is left of Thain? Certainly no Clark Kent. He's just another Wall Street disappointment.

Photoshop via Dealbreaker)

Panic, by its nature, is an unreasonable fear that seizes one suddenly. But it comes after a series of shocks that drain confidence and stoke worries. Such was the Panic of '08: a torrent of news, bad turning to worse, which by its very ceaselessness made the hardiest souls cringe.

One can point fingers, document the bonus-driven greed of bankers, explain the overly complex financial vehicles which spun out of control. But trying to explain it all away misses the point — that sheer chaos overtook the world of money.

March

Bear Stearns reveals massive losses in two in-house hedge funds from securities linked to subprime mortgages. CNBC stock shouter Jim Cramer insists the company is fine. Six days later, JPMorgan Chase agrees to buy it for $2 a share, with the government guaranteeing $30 billion in losses.

July

Treasury Secretary Hank Paulson, in an effort to bolster the stock price of mortgage lenders Fannie Mae and Freddie Mac, gives their debt an explicit guarantee. His move backfired: Shareholders, seeing the prospect of a government takeover which would wipe them out, sell their shares.

September

Paulson announces that the government is taking over Fannie Mae and Freddie Mac. Lehman Brothers, unable to find a merger partner or negotiate a government bailout, files for bankruptcy. As laid-off Lehman employees walk out of the office with their possessions boxed up, two men make out in front of a CNN reporter's live camera.

AIG, which had guaranteed billions of dollars in financial contracts linked to subprime mortgages, teeters on the verge of bankruptcy before getting an $85 billion infusion from the government.

Merrill Lynch sells itself to Bank of America. Goldman Sachs and Morgan Stanley convert themselves into commercial banks. With that shift, there are no more investment banks left on Wall Street.

Banks stop lending to each other. Stocks plunge. Even the price of oil drops below $100 a barrel. Washington Mutual is seized by regulators and sold to JPMorgan Chase.

October

Congress passes a $700 billion rescue plan. Stocks continue to drop as economic figures show the economy was faltering even before Wall Street's collapse. Ferrari-loving ex-Goldman Sachs banker Neel Kashkari is hired to oversee it. The former rocket scientist rapidly proves too geeky for the job. The Dow falls below 10,000, then 9,000. Citigroup tries to buy Wachovia and fails; Wells Fargo buys Wachovia instead.

Layoff fears hit Silicon Valley: Partners at Sequoia Capital, the venture-capital firm which backed Apple, Google, Cisco, and Yahoo, among others, urge their companies to cut costs quickly. Dozens follow suit in pink-slipping employees.

November

The contagion spreads to Detroit: U.S.-based automakers report dreadful third-quarter sales. The chiefs of GM, Ford, and Chrysler fly to Washington to ask for a bailout — in private jets.

Government bailout genius Neel Kashkari appears to be stress eating.

Citigroup stock drops 60 percent in a week, prompting the government to invest $20 billion and guarantee a $306 billion portfolio of securities against losses.

The S&P 500 drops to 1997 levels, wiping out a decade-plus of gains.

On Black Friday, a group of shoppers break into a Wal-Mart before it opens and trample a worker. Holiday sales prove dismal.

December

Post-Thanksgiving layoffs sweep the New York media. Yahoo throws a series of holiday parties, and then lays off 1,500 employees. Bank of America CEO Ken Lewis suggests only idiots actually lend people money. Everyone resolves to pretty much give up until Barack Obama's inauguration.

In September, Lehman reported a $4 billion loss; JPMorgan Chase, its largest trading partner, demanded it put up $5 billion in collateral, and its stock started to tumble. Fuld had sworn to colleagues that he wouldn't sell the company. In a way, he got his wish. Having started sales talks far too late to save Lehman, Fuld found himself shut out of the endgame that saw Lehman file for bankruptcy. The Wall Street Journal has the details:

Desperate to avoid steering his 25,000-person company into bankruptcy proceedings, Mr. Fuld dialed the Charlotte, N.C., home of Bank of America Chairman Kenneth D. Lewis. His calls so far that weekend had gone unreturned. This time, Mr. Lewis's wife, Donna, again picked up, and told the boss of Lehman Brothers: If Mr. Lewis wanted to call back, he would call back.

Mr. Fuld paused, then apologized for bothering her. "I am so sorry," he said.

Ken Lewis never called him back, because he was in the midst of negotiating a $50 billion purchase of Lehman rival Merrill Lynch.

Executives at the British bank Barclays, another potential suitor, were talking about an acquisition with their counterparts at Lehman at the behest of U.S. officials. But Fuld was not welcome:

Lehman's talks with Barclays, meanwhile, were moving forward at the New York Fed, under the eye of government officials. "Shouldn't I be there?" Mr. Fuld said to Lehman President Mr. McDade and to attorney Rodgin Cohen of Sullivan & Cromwell LLP, a longtime adviser.

What Mr. Fuld appeared not to know was that some top government officials had instructed key Lehman representatives at the Fed building to keep Mr. Fuld away that weekend. The federal officials had explained that Mr. Fuld — not only Wall Street's longest-serving boss, but a director of the New York Fed — could be an unnecessary distraction and a lightning rod for criticism.

Late Sunday night, as Lehman's board met to debate whether the company should file for bankruptcy, SEC chairman Christopher Cox called in, but he had no helpful advice for Fuld or his fellow directors:

One of Mr. Fuld's assistants broke in to hand him a note: The SEC chairman wanted to address Lehman's board by speakerphone.

Mr. Cox, criticized for his allegedly minor role in the government's bailout of Bear Stearns, had been reluctant to call Lehman. The SEC chief finally called from the New York Fed, surrounded by several staffers, at the urging of Mr. Paulson, the Treasury secretary.

"This is serious," said Mr. Cox. "The board has a grave matter before it," he said.

John D. McComber, a former president of the Export-Import Bank and a Lehman director for 14 years, asked: "Are you directing us to authorize" a bankruptcy filing?

The SEC chief muted his phone. A minute later, he came back on the line. "You have a grave responsibility and you need to act accordingly," he replied.

As the meeting wrapped up around 10 p.m., Mr. Fuld, his suit jacket now off, leaned back in his chair. "I guess this is goodbye," he said. Lehman would file about four hours later.

(Photo by Karen Bleier/AFP/Getty Images)

Kraus had excellent timing. He signed on as a top executive at Merrill Lynch in May, negotiating a $50 million pay package, with much of that guaranteed if the company was sold. He didn't officially start until September. A couple of days later, Merrill CEO John Thain sold the company to Bank of America for $50 billion, triggering a $25 million payout under Kraus's contract.

Bank of America got a $25 billion capital injection from the government. Kraus resigned and collected his cash, taking a job as CEO of AllianceBernstein, a money-management firm. And then he bought, for an estimated $37 million, an apartment at 720 Park Avenue from Democratic fundraisers Carl Spielvogel and Barbaralee Diamonstein-Spielvogel.

Let's be clear: Kraus got this apartment fair and square: He suckered Merrill Lynch into a pay guarantee, and had the gall to hold Merrill and Bank of America to his contract, even though he only worked a couple of days.

Bankers deserve bonuses — but only when they really earn them. Thain, who arguably saved Merrill Lynch from the disastrous fate of Lehman Brothers and Bear Stearns, declined to seek a bonus this year, but he would have been justified in getting one. Kraus got a bonus, but he didn't earn it. He did nothing illegal. He just did something unseemly.

The 5-bedroom spread technically belongs to Kraus's wife, who was listed as the purchaser. But given the circumstanced of its sale, I like to think it belongs to all of us. Behold the splendor of the People's Palace.

"The availability of money is a function of the stupidity of lenders.”

Your tax dollars at work, ladies and gentlemen!

Since Wired links to Bloomberg News as the source of its information, one possibility is that Bloomberg published a story about the new channel before they were supposed to. That kind of thing seems to happen a lot at Bloomberg these days. Seeing the article, YouTube PR panicked and pushed out a blog post that triggered a Twitter message. Then Bloomberg pulled its story and YouTube PR followed suit. Update: In an updated post, Wired now calls the link to Bloomberg their own "big goof."

Another possibility: Bank of America, named as a channel partner, pulled its support from the project because it either doesn't have cash to throw at experimental sponsorships or would prefer to keep a low brand profile while weathering the current financial crises.

The diminished financing must be a disappointment to Arora. But it also could be a comedown for the crowded ranks of investment bankers working the deal: Allen & Co., Bank of America, Credit Suisse, and Deutsche Bank are all involved, we hear. Split four ways, the commission on the shrunken deal likely won't pay many bonuses. (Note: Glam represents some sites which compete with Jezebel, a women's blog published, like Valleywag, by Gawker Media.)

[Money For The Masses, Forbes, October 2007]