WASHINGTON A bill to end "extravagant spending practices of U.S. banks" that receive taxpayer bailouts will be introduced after reports that Northern Trust Corp last week threw lavish parties at a California golf tournament, a senior Democratic lawmaker said on Tuesday.
"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 Senator John Kerry, a Massachusetts Democrat, in a statement released to Reuters.
Kerry plans to introduce legislation this week targeting banks that got taxpayer assistance under the government's $700 billion Troubled Asset Relief Program (TARP). Chicago-based Northern Trust received $1.6 billion under TARP.
The bank last week sponsored a golf tournament, the Northern Trust Open, at the Riviera Country Club in Pacific Palisades. It was won by American golfer Phil Mickelson.
Internet website TMZ reported hundreds of Northern Trust clients and employees were flown in for the event and put up in luxury hotels. Besides golf, the event featured concerts by Sheryl Crow, Chicago, and Earth, Wind & Fire, TMZ reported.
Northern Trust said in a statement that the golf tournament and related events are "part of a business decision regarding an annual event to show appreciation for clients."
"This is the second year Northern Trust is sponsoring the Open as part of a five-year contract. The contract was signed in the fall of 2007 -- a year before the U.S. government's Capital Purchase Program (under the TARP) existed."
The bank said it is healthy and did not seek TARP assistance, but agreed to participate in the program at the request of the U.S. Treasury Department. It said TARP "funds are not allocated to operating expenses, including marketing, advertising, corporate sponsorship or charitable activities. These are funded through our normal cash flow."
The TARP was launched last year by the Bush administration in an effort to stabilize the troubled banking system. The Obama administration is working on a plan for remaining TARP funds amid the worst U.S. financial crisis in generations.
Under Kerry's legislation, which would take effect on March 1, a TARP recipient could not "host, sponsor, pay for conferences and events and pay for holiday or entertainment events for the year in which they receive TARP funds."
A waiver could be sought "for any event which the recipient believes is directly related to the operation of the business or at the discretion of the secretary (of the U.S. Treasury). The secretary has 30 days to respond to a waiver request."
The Treasury Department is administering the TARP.
A violation of the restriction would require the TARP recipient to reimburse the government for the cost of the event and to pay a fine of $100,000 per violation within 30 days, with the fine rising $10,000 a day for each day after 30 days.
Northern Trust in December announced plans to cut 450 jobs in 2009.
"Americans who play by the rules are losing their jobs and struggling to pay their mortgages," Kerry said.
"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."
Insurer American International Group was criticized widely in October for spending $200,000 on hotel rooms and $23,000 on spa services at an event for its executives just days after getting an emergency government loan to avoid bankruptcy.
(Reporting by Kevin Drawbaugh, with John Stempel in New York; Editing by Brian Moss)