AP: 9 in 10 execs at bailout banks remain on job

updated 1:59 p.m. ET Jan. 27, 2009

WASHINGTON - They’ve been bailed out, but not kicked out.

At banks that are receiving federal bailout money nearly nine out of every 10 of the most senior executives from 2006 are still on the job, according to an Associated Press analysis of regulatory and company documents.

The AP’s review reveals one of the ironies of the bank bailout: The same executives who were at the controls as the banking system nearly collapsed are the ones the government is counting on to help save it.

Even top executives whose banks made such risky loans they imperiled the economy have been largely spared any threat to their jobs, as Washington pumped billions in taxpayer money into the companies. Less fortunate are more than 100,000 bank employees laid off during a two-year stretch when industry unemployment nearly tripled, bank stocks plummeted and credit dried up.

“The same people at the top are still there, the same people who made the decisions causing a lot of our financial crisis,” said Rebecca Trevino of Louisville, Ky., a mother of three who was laid off from her job as a Bank of America training coordinator in October. “But that’s what tends to happen in leadership. The people at the top, there’s always some other place to lay blame.”

That workers and managers experience a recession differently is hardly a surprise. What’s new is that taxpayers are now shareholders in the nation’s bailed-out banks, yet they lack the usual shareholder power to question management decisions or demand house-cleaning in the executive suites.

Wells Fargo & Co., for example, once was among the top lenders of subprime mortgages, or loans to buyers with low credit scores. The company received $25 billion in bailout money and plans layoffs in the coming months. But longtime CEO Richard Kovacevich remains the company’s chairman, and the board recently waived its mandatory retirement age for him. John Stumpf, the president since 2005, became chief executive in 2007.

“Our senior leadership team of our CEO and his direct reports have an average tenure of almost a quarter-century with our company,” Wells Fargo spokeswoman Julia Tunis Bernard said in a prepared statement. “Our unchanging vision, values and time-tested business model will continue to guide our leaders and our team into the future, and are now more than ever a competitive advantage as our industry evolves.”

Under the government’s no-strings-attached bailout plan, taxpayers must take it on faith that bank executives will make better decisions this time around, said Jamie Court, president of the California-based group Consumer Watchdog.

“When you deal with the same dogs, you’re going to end up with the same fleas,” said Court, whose group has criticized Congress for rushing to pass the bailout without requiring any oversight.

IMF chief: Global economy still fragile The international economy is still fragile to shocks despite recent improvements in financial markets, the managing director of the International Monetary Fund said Monday. Watchdog: Stimulus job creation data flawed Dutch give ABN Amro billions in new bailout Wells Fargo to repay $1.3 billion to investors Obama warns of 'double-dip recession'

The bailout list includes banks of all sizes — from Wall Street giants to small community banks. Some led the rush into subprime mortgages. Others followed.

Many executives on the list are small-town executives who don’t earn anything close to Wall Street salaries and who suffered alongside their communities when the economy turned sour. The trouble with the bailout is that nobody in government ever stopped to figure out who caused the avalanche and who simply got buried, said University of Maryland business professor Peter Morici.

“If they got involved in questionable loans and contributed to the speculative bubble, they should be out,” Morici said. “These people should be removed and banned from banking, unless we wanted to make them all janitors. But the question then is, ’Can they be trusted wandering around the offices at night?”’

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