President Barack Obama had harsh words for Wall Street. Americans are frustrated as well. Yet it seems that Wall Street still doesn't get it.
One time Merrill Lynch head John Thain spent more than a million dollars to remodel his office; he just doesn't get it. Citibank had to be shamed into canceling an order for a $50 million corporate jet; they just don't get it. Citibank is also spending $400 million in "naming rights" for the new Shea Stadium in New York; they just don't get it. Bank of America is negotiating for a sponsorship arrangement with the Yankees that will cost millions of dollars; they just don't get it. And, most recently, the Bank of America spent millions of dollars on a Super Bowl party; they really don't get it.
"They just don't get it," is the oft-repeated refrain from every corner of America these days, especially from Capitol Hill, where they know how to seize an issue and run with it. Now the heads of several Wall Street firms have been summoned to appear before Congress to answer questions. Questions like, how do these expenditures benefit taxpayers? Memo to Wall Street: the old way of doing business is over if a company is on life support and needs a huge transfusion of federal taxpayer money to bail it out.
Nowadays America's financial markets appear to be one giant bottomless pit. This is the result of a few bankers who severely damaged our financial system, largely by taking advantage of less regulation and gaming a system that rewarded increased risk. And they were paid handsomely to do so!
Meanwhile, ten of thousands of Americans, many of whom are now struggling to survive financially, are the collateral damage from this turmoil. And layoff announcements are coming out daily from every sector of the American workforce.
New York Governor David Paterson spelled out the magnitude of Wall Street's carnage in his state Monday at the Council on Foreign Relations in New York City. The governor now estimates the state's annual budget deficit will be $15.4 billion dollars, up from a projected $5 billion just a few months ago. The bottom has dropped out, and since Wall Street related business makes up 20% of state revenue, the deficit is likely to grow. In response, the governor has proposed deep across the board cuts in his next budget, including education and even critical health expenditures. More and more governors are facing this economic tsunami as it sweeps across the country. California may go bankrupt in a month!
So, it is understandable that news of $18.4 billion bonus payments by Wall Street banks led to public outrage. Most people who work on Wall Street are paid relatively low salaries and count on a bonus to help meet their expenses. The average year-end bonus was about $112,000. Nonetheless, the problem is that many of these institutions failed; their losses were enormous. And the government had to loan them billions of dollars to keep them afloat. Bonuses were paid for failing? Perception is reality.
I just don't get why they don't get it.