After Northern Trust "Party," Kerry Introduces Legislation to End Lavish Spending by Bailed Out Banks

Wed. February 25, 2009; Posted: 10:12 AM

Contact: Jodi Seth/Whitney Smith, 202-224-4159

After Northern Trust "Party," Kerry Introduces Legislation to

End Lavish Spending by Bailed Out Banks

WASHINGTON, D.C. - Senator John Kerry (D-Mass.), a senior member of the Finance Committee, today announced plans to introduce legislation to end the extravagant spending practices of U.S. banks that received taxpayer dollars from the Troubled Asset Relief Program (TARP). The TARP legislation was passed by Congress last year to help failing financial institutions and improve our sluggish economy.

Kerry's TARP Taxpayer Protection and Corporate Responsibility Act would prevent any recipient of TARP funds from hosting, sponsoring, or paying for conferences, holiday parties and entertainment events. Any TARP recipient that misused the funds would be fined and required to reimburse the government.

Kerry's announcement follows reports that Northern Trust Bank, which received $1.6 billion in bailout assistance, hosted hundreds of employees and clients at expensive hotels in Beverly Hills and threw a series of extravagant parties in Hollywood last week that consisted of private dinners, cocktail parties, and performances by Chicago and Sheryl Crow. The bank recently laid off almost 450 workers.

"I'm sick and tired of picking up the newspaper and reading about another idiotic abuse of taxpayer money while our country is on the brink," said Kerry. "Americans who play by the rules are losing their jobs and struggling to pay their mortgages. The companies that came to Congress in desperate need of help to stay afloat become their own worst enemies when they pull stunts like this. It's an embarrassment that this legislation is necessary, but some companies clearly need a reality check to get their priorities straight so taxpayer money is used to get their house in order and not to pay for lavish parties. Congress has zero tolerance for this kind of excess."

An outline of the Senator's legislation is below:

TARP Taxpayer Protection and Corporate Responsibility Act

* Any recipient of TARP funds shall not be allowed to host, sponsor, pay for conferences and events and pay for holiday or entertainment events for the year in which they receive TARP funds.

* A recipient may seek a waiver from the Secretary of Treasury for any event which the recipient believes is directly related to the operation of the business. The Secretary has thirty days to respond to a waiver request.

* Any violation will require the federal government to be reimbursed by the company's CEO for the cost of the event and there will a fine of $100,000 per violation. A recipient will have 30 days to reimburse the government and pay the fine. The fine increases $10,000 a day for each day after 30 days.

* The date of enactment is March 1, 2009.

Kerry plans to formally introduce the legislation today. Kerry is also sending a letter today to Treasury Secretary Tim Geithner urging the Obama Administration to support his legislation.

Full text of the letter is below:

The Honorable Timothy F. Geithner

Secretary of the Treasury

Department of the Treasury 1500 Pennsylvania Avenue, NW Washington, D.C. 20220

Dear Secretary Geithner:

I was disturbed by this morning's newest published reports that some Troubled Assets Relief Program (TARP) recipients are using taxpayer dollars to fund lavish and inappropriate events. For this reason, I am introducing the TARP Taxpayer Protection and Corporate Responsibility Act of 2009 to help protect taxpayer funds from being used for parties and other unnecessary reasons. I request that you review this important legislation.

I'd hoped that companies receiving TARP funds would have shown more discretion, certainly by now after months of recriminations. In fact, last October I contacted Treasury Secretary Paulson and Federal Reserve Chairman Bernanke to express my concerns about the expenses of the American International Group (AIG). I was concerned that as a recipient of TARP funds they were using valuable taxpayer dollars to pay for unnecessary events and this type of activity is continuing to occur.

Now it has been reported that Northern Trust Corporation threw lavish events at the Northern Trust Open, which it sponsors, including private concerts and expensive gifts for guests. Last year, Northern Trust Corporation received approximately $1.6 billion in federal funding. This is unacceptable - we must act to insure additional taxpayer funds are not wasted.

I applaud the action the Obama Administration has taken to address executive compensation and the provisions included in the American Recovery and Reinvestment Act of 2009, but I believe we must do more. The American Recovery and Reinvestment Act requires Treasury to publish guidelines on the use of funds. However, I believe we need to do more than providing guidelines for the use of these funds. As we all know, money is fungible and a TARP recipient can always explain that TARP funds were not used for questionable purposes.

The TARP Taxpayer Protection and Corporate Responsibility Act of 2009 would prohibit TARP recipients from sponsoring, hosting, or paying for entertainment or holiday events during the year in which they receive assistance of the following year. The legislation would give the Secretary of the Treasury the authority to issue waivers and would become effective as of March 1, 2009.

During these difficult economic times, we need to send a message to the American people that we are responsible stewards of public funds. We must try to help companies, but only if they operate in an appropriate and responsible manner which values the assistance of the American taxpayer. At a time when banks are not providing enough lending to small businesses and others, they should not be throwing lavish parties at taxpayer expense, and the claim that these "parties" came out of "operating expenses" rather than taxpayer funds doesn't pass the laugh test.

I look forward to working with you to address responsible behavior of TARP recipients.

Sincerely,

John F. Kerry

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Whitney Smith

Press Secretary

Senator John Kerry

(202) 224-4159

http://kerry.senate.gov

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