Andrew Ross Sorkin has a good column in the Times today looking at how bankers are making money off their government bailouts.

Basically, the banks are issuing new shares to get money to pay off the federales. But they’re paying themselves underwriting fees for doing so. How does that work? Sorkin is good to explain:

After all, paying yourself a fee just means the cost of the offering is lower than if you had used an outside bank to do the work. It’s not real revenue.

But when bonus time comes, and when employees tally up the work they did for the year, they will be compensated for their work on these offerings as if they had worked for an outside client.

Of course! For Bank of America, the “fees” came to $482 million. Citigroup “raked in” $425 million. There ought to be some fat bonuses off those numbers. As Sorkin, reports, exiting TARP has played havoc with the league tables that rank investment banks by the business they take in:

Banks that were in such bad shape that they needed the government’s aid are now, perversely, getting extra bragging rights from raising money to replace the capital they have returned to the government.

This good kicker gets at what the story really is about:

While many on Wall Street may hold a dim view of the Treasury, one banker I spoke with said he had a message for Timothy F. Geithner: “Thank you.”

This isn’t the biggest thing in the world. But it is an example of how the system is set up to seemingly always benefit these guys. Blow up the economy? Here’s hundreds of billions of dollars. Oh, and here’s free money from the discount window. Pay yourselves record bonuses because of it. And while you’re at it, pay yourselves a little extra for giving us our money back. And don’t forget those campaign contributions!

Good for Sorkin for pointing this one out.


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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.