WASHINGTON | The U.S. government handed out millions of dollars in bonuses to regulators at agencies that missed or ignored signs that the financial system was on the verge of a meltdown, an Associated Press investigation has found.
The bonuses are the latest evidence of the government’s false sense of security during the go-go days of the financial boom. Just as bank executives got bonuses despite taking on dangerous amounts of risk, regulators got taxpayer-funded bonuses for doing “superior” work.
The bonuses, released in response to a Freedom of Information Act request, were part of a little-known reward program. Some government regulators got tens of thousands of dollars in perks, boosting their salaries almost 25 percent.
Some other rewards seemed appropriate, however, amounting to a few hundred dollars for employees who came up with good ideas.
In the 2003-06 boom, the three agencies that supervise most U.S. banks — the Federal Deposit Insurance Corp., the Office of Thrift Supervision and the Office of the Comptroller of the Currency — gave out at least $19 million in bonuses, records show.
Nearly all that money was spent recognizing “superior” performance. The largest share, more than $8.4 million, went to financial examiners, those employees and managers who scrutinize internal bank documents and sound the first alarms. Analysts, auditors, economists and criminal investigators also got awards.
Because most bank inspection records are not public and the government blacked out many of the employee names before releasing the bonus data, it’s impossible to determine how many auditors got bonuses despite working on major banks that failed. But after the meltdown, the government’s internal investigators surveyed the wreckage of nearly 200 failed banks and repeatedly found that regulators had not done enough. Some examples:
•The Office of Thrift Supervision “did not react in a timely and forceful manner to certain repeated indications of problems” at NetBank, whose $2.5 billion collapse was the first major bank failure of the economic crisis.
•The comptroller’s office “did not issue a formal enforcement action in a timely manner and was not aggressive enough in the supervision” of ANB Financial National Association, which went down in a $2.1 billion collapse.
•Thrift Supervision “examiners did not identify or sufficiently address the core weaknesses that ultimately caused” IndyMac to unravel in 2008, one of the largest bank failures in history.