Northern Trust bank, "a bank that received $1.6 billion in bailout money," spent gobs of money at a bank-sponsored golf tournament in Los Angeles last week, but the bank says it can afford to party and didn't ask for the bailout money in the first place. The story first appeared in TMZ.com.
According to the TMZ Web site, "Northern Trust flew hundreds of clients and employees to L.A. and put many of them up at some of the fanciest and priciest hotels in the city. We're told more than a hundred people were put up at the Beverly Wilshire in Bev Hills, and another hundred stayed at the Loews Santa Monica Beach Hotel. Still more stayed at the Ritz Carlton in Marina Del Rey and others at Casa Del Mar in Santa Monica."
Additionally, guests of the bank attended a gala dinner at the Ritz one night, followed by a concert by Chicago. Then the following night, event planners rented out an airport hanger for another dinner party and a concert by Earth, Wind and Fire.
Sheryl Crow appeared as the Saturday night entertainment, but not until after a lavish dinner at the House of Blues in West Hollywood. The menu included seared salmon and petite Angus filet.
Female attendees were each given a gift bag from Tiffany's, to boot.
Laid Off and Left Out
If all that makes your blood boil, imagine how the 450 workers who were laid off in December feel. With 4 percent of its workforce now out of work, the bank wouldn't give a bottom-line total for the LA golf junket, but in a written statement it confirmed that it had "participated in" the federal bailout as "a healthy bank."
In an updated report, Congressman Barney Frank, who chairs the House Committee on Financial Services, reportedly told TMZ that he was going to write to Northern Trust and demand that it pay the government back whatever amount it spent on the golf tournament.
You Just Don't Understand
In the end, Northern Trust says, you just don't understand. All that money they spent on the Nothern Trust Open is actually going to benefit taxpayers ... in the long run.
In a statement to NBC news on Tuesday morning, Northern Trust defended the money spent in connection with the golf tournament. The bank said "The Northern Trust Open is an integral part of Northern Trust's global marketing activities, focusing on retaining and growing business with existing clients, and attracting new clients."
Northern Trust said the Open was in the second year of a 5-year sponsorship contract that started a year before the bailout was enacted.
The statement also said it didn't particularly want to participate in the bailout program and that it did not need to do so.
"As a healthy bank, Northern Trust participated in the U.S. Treasury's Capital Purchase Program, issuing approximately $1.6 billion of preferred stock and warrants in November, 2008. Northern Trust did not seek the government’s investment, but agreed to the government’s goal of gaining the participation of all major banks in the United States."
It's Not Like They Spent the Grocery Money...
The bank says it keeps its accounting of bailout money separate from its party money. And in its statement, the bank took umbrage at the use of the term "bailout" as shorthand for "Capital Purchase Program" or "CPP."
"CPP funds are not allocated to operating expenses, including marketing, advertising, corporate sponsorship or charitable activities. These are funded through our normal cash flow. Last year, Northern Trust earned operating net income of $641 million. The TMZ story you reference used the word 'bailout.' Is that the right word for CPP funds?
And, in the end, the bank says taxpayers might even appreciate their excellent partying and the wonderful impact it has on the return on our dollars.
"Unlike common shareholders, U.S. taxpayers are contractually assured a return on their investment. Currently, Northern Trust pays the government $78.8 million on an annual basis as a return on taxpayers' investment -- $19.7 million per quarter."
Well, what do you think? Do you buy the bank's defense?