BROWSE

TARP Bonuses

What is 'TARP Bonuses'

A buzzword coined by the financial media during the financial crisis of 2008/09 to describe bonuses paid to employees and executives of banks and other financial firms that received Troubled Asset Relief Program (TARP) funds. TARP bonuses were controversial because employees were receiving additional pay even as their companies required bailout funds.

Explaining 'TARP Bonuses'

Companies argue that they have to pay bonuses to retain talent. But critics contend that because the companies led by the executives in question were being rescued with taxpayer money, the bonuses were not well-deserved and the recipients should not be considered "talent".

On March 19, 2009, the House approved a bill to create legislation that would put a 90% tax on bonuses earned during the 2008 year. This tax would apply to banks receiving TARP bailout funds of more than $5 billion. This legislation was created in response to the public anger surrounding $165 million in bonuses that was paid to traders in the AIG Financial Products (A.I.G.F.P.) division, the division responsible for the majority of losses surrounding the fall of A.I.G.


Further Reading


The credit crisis and corporate governance: excessive bonuses of TARP banks
www.inderscienceonline.com [PDF]
… control', Journal of Law and Economics XXVI, http://papers.ssrn.com/abstarct=94034 Farrell, G. (2009) 'TARP banks award billions in bonuses', The Financial … b8ee-00144feabdc0.html Farrell, G. and Guerrera, F. (2009) 'BofA to pay $33 m over Merrill bonus claims', The …

Executive compensation restrictions: do they restrict firms' willingness to participate in TARP?Executive compensation restrictions: do they restrict firms' willingness to participate in TARP?
onlinelibrary.wiley.com [PDF]
… control', Journal of Law and Economics XXVI, http://papers.ssrn.com/abstarct=94034 Farrell, G. (2009) 'TARP banks award billions in bonuses', The Financial … b8ee-00144feabdc0.html Farrell, G. and Guerrera, F. (2009) 'BofA to pay $33 m over Merrill bonus claims', The …

Executive compensation at banks receiving Federal assistance under the troubled asset relief program (TARP)Executive compensation at banks receiving Federal assistance under the troubled asset relief program (TARP)
search.proquest.com [PDF]
… control', Journal of Law and Economics XXVI, http://papers.ssrn.com/abstarct=94034 Farrell, G. (2009) 'TARP banks award billions in bonuses', The Financial … b8ee-00144feabdc0.html Farrell, G. and Guerrera, F. (2009) 'BofA to pay $33 m over Merrill bonus claims', The …

The bonus-driven" rainmaker" financial firm: How these firms enrich top employees, destroy shareholder value and create system financial instabilityThe bonus-driven" rainmaker" financial firm: How these firms enrich top employees, destroy shareholder value and create system financial instability
www.econstor.eu [PDF]
… control', Journal of Law and Economics XXVI, http://papers.ssrn.com/abstarct=94034 Farrell, G. (2009) 'TARP banks award billions in bonuses', The Financial … b8ee-00144feabdc0.html Farrell, G. and Guerrera, F. (2009) 'BofA to pay $33 m over Merrill bonus claims', The …

The effect of TARP on bank risk-takingThe effect of TARP on bank risk-taking
www.sciencedirect.com [PDF]
… control', Journal of Law and Economics XXVI, http://papers.ssrn.com/abstarct=94034 Farrell, G. (2009) 'TARP banks award billions in bonuses', The Financial … b8ee-00144feabdc0.html Farrell, G. and Guerrera, F. (2009) 'BofA to pay $33 m over Merrill bonus claims', The …

Regulating banking bonuses in the European Union: a case study in unintended consequencesRegulating banking bonuses in the European Union: a case study in unintended consequences
onlinelibrary.wiley.com [PDF]
… control', Journal of Law and Economics XXVI, http://papers.ssrn.com/abstarct=94034 Farrell, G. (2009) 'TARP banks award billions in bonuses', The Financial … b8ee-00144feabdc0.html Farrell, G. and Guerrera, F. (2009) 'BofA to pay $33 m over Merrill bonus claims', The …

Lawless Policy: TARP as Congressional FailureLawless Policy: TARP as Congressional Failure
papers.ssrn.com [PDF]
… control', Journal of Law and Economics XXVI, http://papers.ssrn.com/abstarct=94034 Farrell, G. (2009) 'TARP banks award billions in bonuses', The Financial … b8ee-00144feabdc0.html Farrell, G. and Guerrera, F. (2009) 'BofA to pay $33 m over Merrill bonus claims', The …



Q&A About TARP Bonuses


Why do you think this money was repaid early ?

I believe this money was repaid early because Congress wanted to show they could manage taxpayer dollars effectively after being criticized for not doing so with previous bailouts .

Where are these funds going ?

These funds are going to repay taxpayers for bailing out banks during the Great Recession .

Who argued that bonuses should not be considered talent?

Critics contended that because the companies led by executives in question were being rescued with taxpayer money, bonuses were not well-deserved and recipients should not be considered "talent".

What is the Troubled Asset Relief Program?

The Troubled Asset Relief Program (TARP) was a program of the United States government to purchase toxic assets and equity from financial institutions to strengthen its financial sector.

Who was responsible for the majority of losses surrounding the fall of AIG?

The AIG Financial Products (A.I.G.F.P.) division was responsible for the majority of losses surrounding the fall of AIG.

Who sold their remaining shares in December 21, 214 ?

The U.S Treasury sold its remaining shares in December 21, 214 .

What were these shares worth at the time of sale ?

These shares were worth $3B at the time of sale .

When did CBO estimate that total disbursements would be made?

By October 11, 2012.

How much did TARP reduce authorized spending by?

To 475 billion.

Why were bonuses controversial?

Bonuses were controversial because employees were receiving additional pay even as their companies required bailout funds from taxpayers.

What is a TARP bonus?

A TARP bonus is a bonus paid to employees and executives of banks and other financial firms that received Troubled Asset Relief Program (TARP) funds.

What does this mean for the cost of TARP?

This means that it will cost 24 billion more than previously estimated.

How much did TARP originally authorize?

7 billion.