Northern Trust Corp. got caught smoking in bed.
The Chicago bank, which accepted $1.6 billion in government bailout money, flew hundreds of well-heeled clients and employees to Los Angeles and put them up at the Beverly Wilshire, the Ritz-Carlton Marina Del Rey, the Loews Santa Monica Beach Hotel and the Casa Del Mar in Santa Monica.
Guests enjoyed private performances by Earth, Wind & Fire, Chicago and all-I-want-to-do-is-have- some-fun Sheryl Crow.
Mercedes SUVs shuttled guests. Dinners included seared salmon and petite Angus filet. Female guests received gift bags by Tiffany’s — all part of a professional golf tournament called the Northern Trust Open.
It was all blown out by celebrity news website in detailed reporting, photographs and video.
The bank, which has a Denver branch at 15th and Market streets, responded with an unapologetic statement. It said it didn’t really want the bailout money, that it was giving the government a good return on its investment and that it had $641 million in operating profits last year.
Northern Trust’s stock is down more than 30 percent since September, but that’s excellent performance in an industry that is otherwise collapsing.
Still, Northern Trust laid off 4 percent of its workforce in December, or 450 people who might as well hum that tune by Chicago, “Baby, what a big surprise.”
“We understand this is a time of great anxiety and financial distress,” wrote Northern Trust CEO Frederick Waddell on the company’s website, “and the question of supporting an event such as the Northern Trust Open is legitimate. We came to the conclusion that no public purpose would be served by canceling the Northern Trust Open and related events.”
Barney Frank wanted the money back.
The chairman of the House Financial Services Committee and 17 other Democrats immediately fired off a letter to Waddell: “At a time when millions of homeowners are facing foreclosure, businesses and consumers are in dire need of credit, and the government is trying to keep financial institutions — including yours — alive with billions in taxpayer funds, this behavior demonstrates extraordinary levels of irresponsibility and arrogance,” they wrote.
Sen. John Kerry, D-Mass., piled on with a proposal to require bailed-out banks to not only reimburse the government for such affairs but pay a $100,000 fine.
At this point, the president, Congress, the media and the recession-addled taxpaying public have made themselves abundantly clear on how they feel about extravagant spending at banks receiving bailout funds.
Northern Trust on Friday agreed to pay back its loan from the government as quickly as possible.
Northern Trust’s earlier position was astonishing after financial institutions, including American International Group Inc., Citigroup Inc. and Wells Fargo & Co., have already been dragged to the public square and flogged for similar indiscretions.
The best explanation is that Northern Trust is much like a nicotine addict who insists on smoking in bed.
Last week, Sen. Evan Bayh, D-Ind., was questioning Ben Bernanke in a televised committee hearing. Bayh asked the Federal Reserve chairman what he’d say to taxpayers who see trillions of their dollars being committed to banks that have done little to change their profligate ways.
“What would you say to them when we seem to absolve the people who created the crisis from bearing its full effects?” Bayh asked.
“I hear that all the time, and I fully understand the sentiment,” Bernanke said. “A lot of this goes against American values of self-reliance and responsibility.”
But, Bernanke continued . . .
“If your neighbor smokes in bed and sets his house afire, and you live in a neighborhood of closely packed wooden houses, you could punish him very severely by refusing to send the fire department.
“And then he would probably learn his lesson about smoking in bed. But unfortunately, in the process, you would have the entire neighborhood burning down.
“The smart way to deal with a situation like that,” Bernanke said, “is to put out the fire, save him from the consequences of his own actions but, going forward, enact penalties and make tougher rules about smoking in bed.”
Wish I could have made the party. Bernanke’s a bore. I’d rather listen to Earth, Wind & Fire: “Nobody seems to show they’re learning; That old bush just keeps on burning.”
Al Lewis: 201-938-5266 or al.lewis@dowjones.com
