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Leo W. Gerard

Leo W. Gerard

Posted February 6, 2009 | 03:48 PM (EST)

TARP is Welfare; Control It


A decade or so ago, some states gave welfare recipients food stamp debit cards. Welfare mothers could use them to buy groceries with plastic, just like virtually everybody else in the check out line. Plastic made accounting easier for clerks because the debit cards failed to function for excluded items like cigarettes and alcohol.

That's what America needs for Wall Street. When bankers get money from the $700 billion bailout called Troubled Asset Relief Program (TARP), they should receive it on plastic. A TARP debit card would restrict bankers' spending. TARP plastic would fail to function if bankers tried to use it for excluded items like $18 billion in year-end bonuses, private French-manufactured jets and $35,000 inoperative toilets.

TARP debit cards are required because Wall Street's wizards of finance have shown repeatedly they can't or won't control their own spending.

These are the guys who bankrupted their own financial institutions with unrestrained risk-taking. Then they went bawling to Congress for a bailout that was supposed to free up credit for the rest of the country. Not true to their word, the bankers didn't extend credit, and businesses and municipal governments across the nation suffered the ugly consequences: that being, of course, unemployment. In the last quarter of 2008, more than 1.5 million Americans lost their jobs -- the highest number in more than a quarter century.

Still, after causing all that devastation, and asking those same Americans to clean it up, Wall Street's bankers don't understand that they are on the dole. They've behaved as if their banks made profits, as if they had a credit card, not a big fat IOU to the American public.

Let's start with the bonuses. The very financial institutions that already have taken $350 billion in taxpayer dollars to prevent their collapse turned around and gave away more than $18 billion in bonuses to employees. The average bonus was $112,000.

By contrast, the Social Security Administration reported that in 2006, the most recent year for which it has statistics, the average non-Wall Street American's wages for an entire year's work totaled $37,078.

Still, the Wall Streeters pouted about their bonuses. Of 900 surveyed by eFinancialCareers.com, a job search Web site, 46 percent said they thought they deserved more.

And no wonder. Look what their bosses get. The financial services industry pays its CEOs more than any other, an average of nearly $19 million in 2007, according to a study by Lawrence Mishel, president of the Economic Policy Institute. Think about 2007. That was one year before Wall Street crashed, taking the country down with it. And its CEOs were making $19 million while overseeing the bankrupting of the system.

The bankers are all claiming none of those bonus bucks they paid out at year's end came from their TARP funds. But let's look at it this way. Lehman Brothers didn't get a TARP bailout. It failed in September, and its workers left the building with their belongings in boxes. None got a year-end bonus. If the U.S. taxpayers had permitted any one of the institutions that got tens of billions in TARP money to go bankrupt, their workers would be in the same shape as Lehman's -- carrying cardboard boxes not big fat bonus checks.

Of course, there's also the in-your-face bonus behavior of John A. Thain, the former Merrill Lynch chief executive who spent $1.2 million renovating his personal office including that just-for-show toilet and a $1,400 trash can. Thain decided to hand out between $3 and $4 billion in bonuses while Bank of America was struggling to take over the failing Merrill with the help of billions in TARP welfare.

Thain tried to defend the bonuses by saying they are an essential tool banks use to keep their best people. Jon Stewart, host of "The Daily Show," provided the only reasonable response to this assertion: "You don't have 'best people!' You lost $27 billion! Do you live in Bizarro World?"

Yes. Yes, he does. This is a guy who asked the Bank of America board to give him a $10 million bonus in December after Merrill, the company he directed, lost $15 billion that quarter -- for a grand total of $27 billion in one the year.

Though Bank of America originally received $25 billion in TARP welfare, after Thane's third quarter losses, it had to return to the taxpayers of America for $118 billion in government loan guarantees and an additional $20 billion in TARP welfare to complete the purchase of Merrill.

Bizarro World is right.

John A. Thain and his ilk, who blithely spend more on decorative toilets for their offices than middle class families can scrape together for a year of college tuition, need a rude awakening.

More than just the debit card, these guys ought to experience the humiliation of standing in a welfare line.

For some reason, when bankers get in trouble, the treasury secretary and the chairman of the Security and Exchange Commission have been running up to New York to huddle in weekend-long secret meetings in those fancy Wall Street offices with decorative toilets to solve their problems by handing them billions in taxpayer money.

No wonder those bankers act so entitled.

Let them drag their sorry lack-of-assets down to Washington, D.C. and stand in line and beg for taxpayer bucks in tawdry public offices like other welfare recipients must do.

When and if they qualify, hand them TARP debit cards that forbid expenditures on bonuses and $1.2 million office renovations for CEOs. Go ahead with President Obama's plan to limit to $500,000 the salaries of CEOs who receive TARP welfare, but make sure that those wise guys can't find sneaky ways to circumvent those restrictions with bonuses that come in the form of restricted stock, for example. Otherwise, CEOs will just be buying cigarettes with their taxpayer-funded TARP debit cards.

And then taxpayers, who despise the notion of welfare queens, will demand Congress "discredit" and dethrone the kings of Wall Street.