U.S. must hope executives can save banks — this time

Taxpayers are now bank shareholders but have no power to force changes.

WASHINGTON (AP) — It’s one of the ironies of the U.S. financial bailout: The banking executives now managing billions in taxpayer money are the same ones who oversaw the industry’s near-collapse.

At banks receiving federal bailout money, nearly nine 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.

Even top executives whose banks made such risky loans they imperiled the economy have been largely spared any threat to their jobs. 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.”

It’s hardly a surprise that workers and managers experience a recession differently. 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 for subprime mortgages, 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.

“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 statement that also highlighted the company’s “unchanging vision.”

Under the government’s 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.

Many executives on the list are small-town executives who earn a fraction of Wall Street salaries and who lately have suffered alongside their communities. The trouble with the bailout is that nobody 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?”

The president of the American Bankers Association, Ed Yingling, said he understands people are frustrated. But most banks had nothing to do with the subprime crisis, he said. As for whether taxpayers should demand management changes, he said that was never a condition of the bailout plan the government crafted.