Northern Trust received $1.6 billion in bailout funds and announced in December that it was eliminating 450 jobs because “the macroeconomic environment has been extraordinarily difficult.” But as TMZ reports, that hasn’t stopped the bank from spending “a fortune last week in L.A. hosting a series of lavish parties and concerts with famous singers.”
The article references an ABC News item on the subject:
The Chicago-based Northern Trust bank may have received $1.6 billion in federal bailout funds, but that did not dampen the lavish long weekend featuring a golf tournament and headliner music the bank threw in Los Angeles last week, much of which was caught on tape by the celebrity news outlet TMZ. Critics are up in arms over yet another apparent boondoggle hosted by a bank that received federal bailout funds.
TMZ lists the highlights of the event:
- Wednesday, Northern Trust hosted a fancy dinner at the Ritz followed by a performance by the group Chicago.
- Thursday, Northern Trust rented a private hangar at the Santa Monica Airport for dinner, followed by a performance by Earth, Wind & Fire.
- Saturday, Northern Trust had the entire House of Blues in West Hollywood shut down for its private party. We got the menu -- guests dined on seared salmon and petite Angus filet. Dinner was followed by a performance by none other than Sheryl Crow.
There was also a fabulous cocktail party at the Loews. And how's this for a nice touch: Female guests at the Chicago concert all got trinkets from ... TIFFANY AND CO.
Northern Trust is a well-known - and generally highly-respected - financial institution, which caters to the millionaire set and up. I've dealt with them before, and I know several employees there, so I have an idea of the scale of their investments and the nature of their clientele.
The golf tournament is perhaps defensible. In these days of withering funding for all but the most necessary of expenditures, any effort to support the arts, athletics of any kind or any other obviously philanthropic effort deserves at least a little praise.
The parties, on the other hand, may be what NT's clients have become accustomed, but then again they have also been accustomed to regularly increasing wealth and profit, much of it from real estate. With the property market still tumbling, these same people should be feeling at least a little discomfort, and it reflects poorly on those who should be attending to their investments putting on such an extravagant display with their profits. Clearly somebody is getting fleeced. And while I will not say that any business that can make obscene profits off the obscenely wealthy doesn't deserve some applause, those same obscenely wealthy folks ought to start thinking twice about what's being done with their money and at what cost if those they trust with it can put on such displays.
The doubly offensive component of this particular situation is this: at the same time NT was celebrating with the bigwigs, it was at once taking in substantial Federal bank bailout dollars and laying off 450 of its staff as a cost-cutting measure. NT may protest that it never asked for the funds and only agreed to participate in the financial system stabilisation efforts the Treasury advocated, but that hardly excuses the bank from leveraging decreased personnel overhead to engage in spendthrift entertainment for its clients.
As for the Federal funds NT received, that too is cause for concern. NT is, due to its investment practices and preferred clientele, probably among the financial institutions most insulated from the lending crisis. The funds it received were not, however, intended to stabilise the institution: they were intended to promote lending and backstop the risk involved. NT is showing no inclination to increase its lending, and has instead apparently reserved the funds as a safety net so it can go on treating its preferred clients to the same round of glitz they have come to expect.
The layoffs themselves might make for sound business in some world, but again with employment skyrocketing adding to the problem is counterproductive. It's also hard to deny given the current evidence that those employees might still have their jobs if NT valued their ongoing work as much as it did the impact of and evening with Chicago or Sheryl Crow. And again, those with investments in NT might wonder at the wisdom of those they trust if they think a night of music is worth more than the people they're depending on to keep their investments safe and productive.
The thing that bothers me the most is that NT isn't even abashed at the bad publicity from their reaction to date. They took Federal dollars intended to unfreeze the credit markets (dollars they likely did not need) and used them to bolster their reserves. They let go several hundred staff even as unemployment is skyrocketing, which only worsens the employment outlook, and in spite of their new safety cushion. And they spent millions on entertaining their clientele even after similar excess began bringing intense scrutiny to other similar businesses and even after others in their own field cut back on such spending to bolster their bottom line and public image. Yet their public statements on the matter can be boiled down to "We always do this, we didn't use bailout money to do it, and the folks we let go - well, those were just the costs of doing business in a bad market, so there's really nothing here to discuss." Rarely is this sort of fiscal solipsism so clearly or crassly enunciated.
Each step in the Northern Trust progression shows just how removed from the realities of modern US life the upper financial tier and their support institutions have become. Once again, we have an illustration that the moral obligation to do what's best for the market, without the legal requirement to back that up, gets ignored by the same financial professional cadre that created the crisis in the first place. And once again we see that, for some, the drive to behave as if nothing has changed overrides fiscal responsibility and common sense.