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earnings for the second quarter of 2009 even though many—especially smaller
banks — remain in tight straits, experts say. In the flood of financial
results for the April- June period there was a clear breakwater between the
nation's large financial institutions, sheltered by the demise of rivals
like Lehman Brothers in the financial storm, and regional banks, many of
which are still bleeding red. The four behemoths that emerged from the US
financial system meltdown have raised enormous profits: $2.7 billion for
JPMorgan Chase, $3.2 billion for Bank of America and Wells Fargo, and even
$4.3 billion for the worst-hit of the lot, Citigroup. 'These results come
from the investment bank' side and not from commercial lending, which is
crucial for economic activity, said Cesare de Novellis, an analyst at
Meeschaert New York. These profits came on the back of a powerful rally
in equity markets and a renewed vigour in bond markets, he said.
Investment bank Goldman Sachs, whose general public activities are
limited, saw quarterly profit jump 65 per cent from a year ago, to 3.4
billion dollars. The strong results have revived the debate over bonuses
paid to traders, which seem to be heading for the stratosphere after laying
low in recent months. Citigroup, which was bailed out by the federal
government with 45 billion taxpayer dollars, and Merrill Lynch, which agreed
to a government-secured takeover by Bank of America to escape bankruptcy,
found the means to pay bonuses last year of $5.33 billion and $3. 6 billion,
respectively, according to a recent report by the New York state attorney
general's office. The managing director of the International Monetary
Fund, Dominique Strauss-Kahn, said he was 'appalled' by the return of the
big bonus culture that had promoted the risk taking responsible in part for
the financial system crisis. After a star Citigroup trader pressed the
bank to pay him a 100-million-dollar bonus this year, the US House of
Representatives passed a measure capping executive compensation at the large
companies rescued by the government. 'President Barack Obama's
administration pushed the idea of reforming the financial system, but for
the moment it only has succeeded in mopping up the losses of big banks, ' De
Novellis said. The banks that have fattened their bonuses the most
'already had reimbursed the public funds, so the government can no longer
pressure them to limit' the payouts to their hot-shot traders.
