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Northern Trust doesn't know score on golf event

Bank has our money, and it should put those funds to good use

David Greising

February 27, 2009

Like the rest of the world, I am shocked—shocked!—that Northern Trust Corp. would spend millions of dollars sponsoring a golf tournament while it had more than 1 billion taxpayer dollars in its vaults.

In a matter of days last fall, Congress threw together the $700 billion Troubled Asset Relief Program. It took just hours for the Treasury Department to push billions of dollars onto banks, such as Northern, that said they did not need the money.

Neither branch of government ever bothered to demand that the banks use that money wisely. And the bankers, being bankers, have wasted or sat on much of what they got.

How can bankers squander money? Good luck trying to count the ways.

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Bankers will spend a working person's annual salary on a rug for their corner office, as former Merrill Lynch Chief Executive John Thain did. They will host lavish Super Bowl soirees in Florida, even while their future is flushing down the tubes, as Bank of America did.

They will pay big-time bonuses, send employees to costly resorts and buy up rivals, all with government money bulging their coffers.

It should come as no surprise, then, that bankers at Northern Trust would fly in hundreds of clients to the Los Angeles golf tournament that bears its name, wine them, dine them, house them and serenade them with the likes of Sheryl Crow, no less.

Blaming bankers for acting that way is like blaming a dog for chasing a cat. What's new here, though, is the taxpayer money they have received.

Northern argues that we should not get so exercised because, after all, it took that money mainly out of a sense of civic duty. Northern, JPMorgan Chase and a few others accepted the funds to diminish the taint on their needier peers. Northern pointed out that it was contractually obligated to continue that golf sponsorship and paid for the events with normal operating funds, not government money.

All of which matters not a whit. So long as the bank has our money, for whatever reason, it should put those funds to good use. It should lend that money and get the economy moving again.

On that count, Northern is coming up short.

Compare how Northern is doing against JPMorgan Chase, the other reluctant borrower, in the months since Northern took in $1.6 billion in TARP money.

From October to December, JPMorgan Chase slashed the value of its mortgage originations by 19 percent. Northern cut more steeply, down 26 percent, according to government filings. JPMorgan Chase reduced consumer loan originations 1.5 percent. Northern cut its consumer loans 24 percent.

There were some areas where Northern outperformed JPMorgan Chase. Its home-equity originations rose 13 percent, while JPMorgan Chase's fell. And Northern cut new commercial real estate commitments a mere 27 percent, compared with the 72 percent slide at JPMorgan Chase.

At a time when appearances matter, though, JPMorgan Chase showed a flamboyance, while Northern stood pat. The big, New York-based bank bought up an entire $1.4 billion bond offering by the State of Illinois that previously had failed to sell. Northern's flashiest move: purchasing $600 million of auction-rate securities in an effort to help its customers.

Northern is an institutional bank and does not have the consumer business JPMorgan Chase does. It believes it is justified sitting on government money in order to maintain the pristine balance sheet its institutional customers demand.

But that's not where taxpayers' top interest sits. Taxpayers want their money to go toward new lending, because only a flow of credit will get the economy moving again.

Unable to explain away the shame of its ill-timed golf extravaganza, Northern wants taxpayers to know their $1.6 billion is going to good use. Too bad that song is hitting a flat note too.