MoneyNews.com
5 April 2010
As 2009 came to a close, Fifth Third Bancorp was preparing to report its sixth loss in seven quarters.
The Cincinnati-based regional bank had received $3.4 billion of TARP funds with no immediate plan to repay. And its Midwestern market was still struggling with a shrunken auto sector and high mortgage foreclosure rates.
Nonetheless, the board of Fifth Third, the nation’s 17th-biggest bank, decided to increase the compensation of Chief Executive Kevin Kabat by 56 percent, to $5.2 million — even though the bank was barred from paying him a bonus because of the bailout rules.
Fifth Third wasn’t alone.
PNC Financial Services Group, Regions Financial and KeyCorp — all of which owed billions of dollars to taxpayers at the end of 2009 — also increased their chiefs’ pay. They too were prohibited by rules stemming from the U.S. Treasury’s Troubled Asset Relief Program (TARP) from paying bonuses to their CEOs.
In the aftermath of the financial crisis, Wall Street banks and their pay practices have garnered national attention. Once Goldman Sachs Group Inc., Morgan Stanley and other banking giants repaid their bailouts last year, they quickly returned to setting aside billions of dollars for bonuses — stoking the public’s anger about the bailout.
Yet at the same time, Fifth Third, PNC, Regions, KeyCorp and other large heartland banks have been quietly approving pay increases for their top executives as well. Even banks that had yet to repay TARP money rewarded their bosses handsomely.
While far from Wall Street — and away from the spotlight — the pay practices of the so-called second tier banks are still a concern.
U.S. Rep. Peter Welch, a Democrat from Vermont who has proposed a tax on bonuses, called it a “rip-off” for banks still receiving taxpayer support to reward their CEOs with pay increases.
“Whether they call it a bonus, a stock option, or they inflate their salary, that is wrong and a rip-off,” Welch said.
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