Why Main Street hates the bailout…

October 1, 2008

Yesterday, Sovereign Bancorp (SOV), a 750-branch bank focused on the Northeast corridor that’s had its share of troubles, announced a series of management changes, including the departure of its CEO, Joseph P. Campanelli by the end of the day. The release, as these sorts of things always do, noted that Campanelli was leaving to “pursue other family and business interests”. Also yesterday, Moody’s downgraded Sovereign’s credit ratings because according to the WSJ, the bank is exposed to “a number of problematic asset portfolios” including exposure to Fannie and Freddie.

The announcement of Campanelli’s departure was so swift that Sovereign forgot to yank the executive’s profile from the bank’s website. But somehow they still found enough time to draw up Campanelli’s separation agreement which was filed in this 8K shortly after the market closed yesterday. Though Campanelli had been at Sovereign since 1997, when it acquired Fleet Financial’s indirect auto lending business, he had only been CEO since late 2006, which coincides with a time of diminishing returns to Sovereign investors.

But according to yesterday’s agreement, Campanelli will still come out OK: a $3.2 million severance payment, a bonus equivalent to 133% of his target, a $4.3 million retirement payment, and a bevy of options that vest immediately. But the real piece de resistance is Campanelli’s consulting contract that will pay him $25K a month plus provide him with office space for the next year.

Granted, this isn’t the same type of deal people like Charles Prince and Stan O’Neal wound up with when they left their respective posts hastily. But a lot has changed in the past 10 months and the idea that a company as troubled as Sovereign is — it’s still unclear whether they’ll be able to pull through — chose to do this sort of deal speaks volumes about why Main Street doesn’t trust the $700 billion bailout plan.

Image source: AP Photo by Matt Rourke

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