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September 26, 2008

WaMu Bailout a Bonus Bonanza for Brooklyn Bigwig

fishman-wamu-0908.jpg
Towards the bottom of the New York Times' account of the seizure of Washington Mutual, the nation's largest savings and loan and a big player in troubled mortgage market, were some interesting details about longtime Brooklyn player and brand-new WaMu CEO Alan Fishman's non-role in the takeover proceedings and the big bucks he stands to reap for his three weeks of service to the company:

But the seizure and the deal with JPMorgan came as a shock to Washington Mutual’s board, which was kept completely in the dark: the company’s new chief executive, Alan H. Fishman, was in midair, flying from New York to Seattle at the time the deal was finally brokered, according to people briefed on the situation. Mr. Fishman, who has been on the job for less than three weeks, is eligible for $11.6 million in cash severance and will get to keep his $7.5 million signing bonus, according to an analysis by James F. Reda and Associates.

Fishman is the former head of Brooklyn-based Independence Community Bank and later Sovereign Bank; he's also served as the chairman of the Brooklyn Academy of Music and the Brooklyn Navy Yard Development Corp. (As a commenter notes, he's also on the board of the Downtown Brooklyn Partnership and used to be the chairman of the Brooklyn Chamber of Commerce.) Nice work if you can get it!
Government Seizes WaMu and Sells Some Assets [NY Times]




Posted by Brownstoner at 9:23 AM | Comments (20)
Categories: Market

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BaRu. Then JPMu.

Posted by: DOW8000SP800 at September 26, 2008 9:27 AM

Guy looks like Marty. A nice sum to us but I don't think $19M were the big bucks he was looking forward to. They're not saying what this means for employees. They need them for transition but what happens long term. One of my best buddies is/was a regional manager for WaMu. I haven't spoken to him yet.

Posted by: DOW8000SP800 at September 26, 2008 9:32 AM

Ok, he seems like a nice enough guy but why oh why must these folks get such high sign on bonuses and why should he be entitled to this ridiculous amount of severance for less than 3 weeks of service? this (the high bonus $ across the board, not this particular gentleman) is part of the reason why we are in such deep doo doo.

Posted by: just me at September 26, 2008 9:45 AM

The one consolation, and a very poor one at that, is that he is going to have to pay significant income tax to the Federal, State and City governments on this little windfall. That is if he is dismissed by JP Morgan Chase. He probably negotiated this package because everyone knew that WaMu was going down the tubes and he was taking a risk leaving his previous job. WaMu's board probably thought that if anyone could save them, it was this guy, hence the bucks.

Posted by: bohuma at September 26, 2008 9:56 AM

This is exactly why the financial industry is in trouble. Executives make rediculus amounts of money for either not doing much (like in 3 weeks) or even if the company does bad (like all the big firms, the CEOs are still getting millions even though the company lost billions). The math just doesn't add up. It's the individual investors that get screwed.

Posted by: Heightster at September 26, 2008 10:01 AM

What really kills me is that the retail bank branch employee always get paid the least amount of money and make the most amount of money for the banks. Retail is saving investment bankers and the retail employees make a tenth of what these guys make that are losing money for these companies.

he got a great deal and should be happy and retire.

Posted by: bkny at September 26, 2008 10:20 AM

Greed and stupidity reigns supreme! Awesome!!! Shock and awe!!!

Posted by: werner at September 26, 2008 10:27 AM

If the goddamn media would stop referring to this as a "bailout" then these congressmen would pull their heads out of their asses and pass a bill that allows the government to purchase these assets. Even the Director of the OMB says that taxpayers are likely to make money off of this deal as the assets they are buying will have extremely high yields being paid. Stupidity reigns.

Posted by: daveinbedstuy at September 26, 2008 10:36 AM

DIBS I work on Wall Street and if the finance guys in NY really thought there was money to be made buying those assets, they would have been bought up already. Private equity and hedge funds are not afraid of risk and are ruthless when they smell blood. If existing money isn't buying them it's for a reason. They are willing to chance that (a) the gov't will overpay for them, or (b) they can get them even cheaper. It's like the old joke that went around when I was in school, how much does it cost the Board of Ed to buy a lightbulb? At that time it was like $25 or something for a 5 cent bulb.

Buying complex financial products is not something I would trust our gov't to do properly, nor would I assume that even if it's done perfectly that it will work. The idea is that the regional banks will start offering more credit to Main Street again once their balance sheets are cleared up. Guess what, you could give all $700B to Chase or Citi or whomever, and do you really think they are going to loosen lending standards again (no 20% down, bad credit?). The lending standards are going to be tight for a while no matter how much money the gov't gives these banks, and that's as it should be, so we don't get into a bigger foreclosure/credit card mess than we already are. Easy money is what caused the problem, and the banks realize this. Clear up their balance sheets and the same problem still exists. The American consumer has spent more than they can afford. That's just going to have to be ridden out.

Posted by: setancre at September 26, 2008 11:09 AM

“If money isn’t loosened up, this sucker could go down,” President Bush declared as he watched the $700 billion bailout package fall apart before his eyes, according to one person in the room.

Stupidity reigning.

Posted by: buttermilk channel at September 26, 2008 11:10 AM

I like Alan Fishman. And he dedicates alot of time and energy to civic causes. In addition to the positions that Brownstoner listed, he was also on the Board of the Downtown Brooklyn Partnership and the Brooklyn Cha,ber of Commerce (and I think the Library too). There is no more civic-minded businessman in all of Brooklyn. But please. How am I supposed to trsut an institution with my money if they keep on makeing lamebrained deals that reward someone for being fired. When are we going to make these golden parachite deals illegal already?

Posted by: Make My Heights the P Heights at September 26, 2008 11:23 AM

If he does have a sense of civic mindedness and any sort of real conscience, he will not take the money.
He should get 3 months worth of salary, no signing bonus, and the rest of that money should go into an account to pay severance for the many who will be out of work because of this.

Posted by: Flatbushrising at September 26, 2008 11:47 AM

DIBS;

I can never understand arguments like yours. You want the taxpayers to cut a $700B blank check for your industry, lest they be called "stupid".

???????

Posted by: benson at September 26, 2008 12:26 PM

setancre - the likely reason that Hedge Funds and Private Equity are not buying - has little to do with a limited prospect to make money. The reason is that the potential return is too small to justify the capital commitment. In the past private $ would increase the potential return through borrowing - but alas that is no longer possible.

Money can be made on these assets but only the Governemtn could possibly have the capital and patience to see it through.

Benson - what is your suggestion - not criticizing but the country does not have alot of choices here, are you prepared to have the credit markets completely shut down and live with the consequences - if not then what?

Posted by: fsrg at September 26, 2008 12:33 PM

Its not cutting a check to the industry. Its a major financial crisis which the equity markets, by their behavior over the past few days actually believe will be resolved.

Unless the bad paper gets cleaned out, there won't be room for ANY new loans. The government will issue Treasuries at 2-3% for the assets, the majority of which are cutrrently yielding over 12%. The price that they pay for the assets will have a big effect on any profit or loss the government will make on them...likely, in the long run, a profit

benson...if you don't understand the details then you don't understand the big picture.

Posted by: daveinbedstuy at September 26, 2008 12:50 PM

DIBS;

Once again, I'll say to you that it is not good politics to be patronizing to people, while you are asking them to cut a check for $700 Billion dollars.

I am well aware of the credit squeeze, but that does not mean that there is only one solution. I do not believe in nationalizing the finance industry, which is what Bernanke and Paulson have been effectively doing, with little to show for it. They've taken over Fannie, Freddy and AIG, and it has done nothing to restore liquidity or confidence in the markets. For the head of the Federal Reserve and the Treasury to suddenly run to the Congress with a "the sky is falling" message makes me wonder about their prudence. I lived through the 1987 correction, in which the DOW dropped over 20% in one day. The sky did not fall, and the US economy proved resilient, as it also did after 9/11, oil price shocks, etc.

More importantly, I believe in the US constitution, and I believe the proposed bail-out flies in the face of it. To hand over $700B to the Treasury and give its secretary discretion to be a market maker is nuts. The potential for corruption and ill-spent taxpayer money is enormous. Question: assuming the Treasury buys these securities, and then can sell them for a profit - let's say $1 Trillion. What happens to the net proceeds? Do you really believe the politicians are going to use it to pay down some of our national debt? If you believe that, then I have a bridge to sell you.

I believe that this problem should be solved by the private sector. There are plenty of vulture investors out there who could take these assets off the banks' books.

Posted by: benson at September 26, 2008 2:34 PM

"I believe that this problem should be solved by the private sector. There are plenty of vulture investors out there who could take these assets off the banks' books."

Thank you, thank you, thank you. There's gotta be smaller banks that were managed prudently throughout this era. With or without merging they can swoop in and buy these hot-patatoe assets at their mark-to-market bottom prices.

What the central bankers are trying to accomplish with this bailout is price-fixing which is supposed to be illegal. No oversight during the upside, no oversight during the downside. That's how it should be. Let the markets correct. So we'll suffer from a lower standard of living. Many of us are already used to it (I have no idea, do I?). It's a means to an end.

Best solution: Do nothing (at least for now - feel the crash out)

2nd Runner-up: Spend the 700B (or less) on drilling and renewable energy.

Posted by: DOW8000SP800 at September 26, 2008 3:41 PM

I guess I agree with Benson and Dow (more or less...not entirely of course) tonight. Sorry DIB, maybe later.

BTW, I found that photo of Fishman hysterical.


Posted by: BrooklynGreene at September 26, 2008 7:45 PM

The big problem here is that for the past 8 years the government has been wasting money and resources on an unneeded war. Gas prices are through the roof. Food prices are double what they were a few years ago in many cases. And the biggest thing the average work-a-day U.S. citizen has gotten in the past few years? A $600 "economic stimulus" package that was intended to help U.S. consumers buy neat/fun stuff and stimulate the economy. Most of those $600 checks went straight into credit or mortgage payments.

So now the government wants us to bail out a bunch of billionaires who became rich off of conning average working people? Screw that.

Realistically is there anyway to prosecute the heads of these companies for fraud and force them to pay back the millions they took from others?

Well, I know that is unrealistic. But still. There has to be a better way.

Is there anyway that $700 billion could be spent on improving real lives and not bailing out the "smartest guys in the room".

I swear, this whole mess angers me more than you can believe. And I can get angry!

Posted by: Jack at September 27, 2008 4:35 AM

"Realistically is there anyway to prosecute the heads of these companies for fraud and force them to pay back the millions they took from others?"

Nobody in the media wants to ask or answer this question. My answer is yes. If the bill gets passed, and it looks like it will, at least go after the management of these firms to credit taxpayers, for whatever money is spent on the bill, with whatever assets can be seized from these individuals. Maybe that's what the Justice Department and Cuomo are doing as you here about all these investigations in the background of bailout talks.

The bailout sucks though. The financial system should fail and the resurrect. We wouldn't be able to borrow for a while but that's probably a good thing (sorry sellers).

Posted by: DOW8000SP800 at September 28, 2008 1:10 PM

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