The Real Shame of Wall Street Bonuses
As easy a mark as Wall Street bonuses have become for those critical of corporate greed and corruption, President Obama's calling them "shameful" and citing Wall Street's actions as the "height of irresponsibility" may signal a significant shift in the government's tone towards corporate culture. For all his Christian bluster and talk about the axis of evil, former President Bush rarely had much to say on the morality of corporate America and the financial services industry. As the scandals at Enron grabbed headlines and predatory lending poisoned the financial well of this country, there was little executive outrage to be found.
Still, it's hard for me not to respond with cynicism to the media's and government's sudden religion regarding the unseemliness of year-end Wall Street bonuses. The financial meltdown didn't begin yesterday. Why didn't Congress and the press express similar outrage a year ago, when I and a group of activists huddled around the Wall Street bull and challenged the leading investment banks to forgo their end of 2007 bonuses and put their ill gotten gains towards foreclosure prevention? What may have seemed to some as protest gimmickry, turns out to have been an act of poetic prescience. Barely months after that protest, the big five investment houses went out of business, leaving all Americans to pick through the dust and nuclear fallout of credit-default swaps and mortgage-backed securities.
There is no joy in being able to say "I told you so" as this country stands on the precipice of an economic free fall. But as the President and Congress stand "shovel ready" to pour more TARP billions into the black hole coffers of financial institutions, there remain no measures that ensure corporate accountability. And homeowners remain, after almost two years of twisting in the wind, in foreclosure distress. The shame, my friends, lies not just with Wall Street, but with ourselves.
This entry is cross-posted on DMI Blog.
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One of the shameful apologists for the sanctity of the bonus, had the gall to blame "regular" Americans for not saving enough. I worked very hard in the IT industry for over 30 years and was an entrepreneur who sacrificed to build a small company which I successfully sold to a large software firm. I saved a great deal of money only to see it disappear from my retirement accounts, as well as see the home that I own (mortgage free) loose a tremendous amount of its value. I want to rebuild my savings but thanks to the outsourcing of much of the IT directly or indirectly for H1B visas, I cannot make much money, if anyone will even deign to speak to someone 55+. I say put them in chains and return the money to the "regular" Americans.
Exactly, same thing with the medical environment, we have bought in hundreds of thousands of nurses to keep the salaries down and doctors (why should we educate our own when it is cheaper to bring them in)....
Graef Christal has been writing about this for DECADES ever since Reagan inaugurated the GREED IS GOOD and "taxes on the rich are bad" and Trickle Down economics.
TIME TO RETURN THE TOP RATES TO 94% like the 50s....The corporate Boards are a JOKE and should be indicted also for RACKETEERI
If the taxpayers and the government ever want to see any type of return on their investment or at the very least get their money back they are going to have to pay bonuses or the best ibankers and traders are just going to leave and go to other banks and institutions that will. If that happens the government might as well write-off those preferred shares and warrants because they are basically worthless. Nobody is going to work at an investment bank that doesn't pay a competitive bonus with the rest of the street, when all mid-tier & boutique ibanks, hedge funds, private equity firms, etc. still do pay normal bonuses.
The biggest flaw in your argument is that you are calling these guys the best. If they were indeed the best, they would not have gotten these banks and institutions in the shape they were in to start with.
swap desks arn't the only desks on trading floors. what about the equity and convert desks that made money? what about fixed income divisions, equity and fixed income capital markets, investment banking, equity research, etc.??? so those bankers and traders that make up most of the wall street workforce and make money for the bank are supposed to give up their bonuses when their friends are recieving full compensation packages at other ibanks.
What a joke, we have millions who qualify to this extent. All that experience and professionalism
has got us is being bankrupt. Let them go. They are not even mediocre. Besides there is no
competition out there anymore, they all have been caught with their schemes. We have to pay the
workers a liveable wage so the economy can grow again, business 101!
The money from the first portion of TARP is gone. There will little accounting of it in the future. Please direct your outrage at Congress to amend the Tax Code Act of 1986 to levy a 75% tax on performance bonuses.
Maybe then the Wall Street magicians will learn to live within their means throughout the year, and be less dependent on a bonus to fund their average lifestyle.
Because congress was too stupid to put in any kind of oversight on the TARP program you want to levy a 75% tax on people who actually perform. My god that is ridiculous. Don't you want the investments in these companies that we now, as taxpayers, have, to prosper?
Lets move on and figure out how to make this industry actually function properly again....
At least one senator has advocated that any corporation receiving any bailout money needs to cap every employee's salary at $400k/yr. Which is what the president makes.
It's a damn good idea, and I hope it happens soon.
y 20-30 something kids and their friends generally have significant credit card debt and have BAD interest rates. Those that have jobs are paying every cent they make to scrape by . I believe that a lot of older 40-60 year old people have been living beyond their means, lured by credit card cos.
The corporations that benefit from the interest off these credit card accounts are the ones that paid themselves incredible bonuses last year while sucking government money to stay afloat. They should always have been and should be required in the future back to a time certain - say January, 2008, to adjust all of the those outrageous interest rates downward and get their customers in a position to not only service their debt but spend the money they save on interest and get it into the economy. The entity that will bear the burden of this is the credit card issuer, and it SHOULD bear the burden - it is highly responsible for the problem...
Disclaimer: Please do not scream at me and go for my jugular. I’m not an economist, it just seems to me that this is a plausible scenario. I am sure no one will hesitate to advise me of the errors of my way, and I welcome civil remarks.
Ive read many of the CC companies take haven in a eastern state as their are no laws pertaining to fees, rates and charges. This is scary how they also have not been regulated and taking advantage of the people. Its just a free for all and what really shocks me is the attitudes of many regular people. They are mad but not surprised and go about their business. Why are we not OUTRAGED? I have emailed the white house, senators union leaders. Why are they not arresting these people for misappropriation of funds or racketeering? Why arnt we marching onto the steps of every Capitol in this country? Why are we allowing this and simply maybe now creating laws to avoid this again? This needs justice! All the smartest lawyers in this country should be able to come up with a class action suit for the people of the US. this is obsene to just brush off. Im mad as hell!
Interesting ideas, you may really have something here. Should not interest above, say 12%, which doubles the amount owed in 6 years, be usury by definition? I like your thinking.
It would take them MONTHS to figure out how to do that, (cap the interest rates),,But in the meantime, my CHASE account went to 30% this week...bef
If the banks need the money as an institution, then we need tax credits for paying the interest specially for the bottom 80%...Afte
They should all be prosecuted under RICO. It's a racket. It turns out that the banks in this country are nothing but clip joints. Those who STOLE our money need to be living in a flophouse and eating out of cans.
For me the best would be to claw back the bailout money to every bank and business that gave a bonus for the last two disasterous years. Looks like common theft to me. I think that if the goverment took back our money that the banks would soon get the message.
The only people who have a right to be pissed at these companies are shareholders who lost there shirt investing in these companies. Those are the people the executives are beholden to. Everyone else, just get on with your own lives, you've got enough to worry about.
As a taxpayer, I didn't want my tax dollars to go to failing companies. That's like someone taking my money by gunpoint so they can go blow it on the lottery.
And nobody here knows exactly the circumstances behind those bonuses. If these exec's met certain targets set for them by the board months or even years ago, then they earned the money. The board of directors sets compensation (mind you these are major shareholders of the company). These execs don't just take the money for themselves.
these execs don`t just take the money for themselves
Then the Boards of Directors and shareholders deserved to lose their shirts. The stock market is gambling, they didn't pay attention and lost. Those bonuses are their own personal lotteries.
WORD = PRIMADONNA
"President Obama's calling them "shameful" and citing Wall Street's actions as the "height of irresponsibility" may signal a significant shift in the government's tone towards corporate culture."
This shift is happening because Obama loves socialist ideals. He's anti capitalism. duh.
This isn't anti-capitaism as you suggest. This is an indictment on Wall Street's short term gain philosophy. The bonuses are part of a culture that rewards risk/reward. Actually, there should be clawbacks going back as far as the year 2000, when Enron lobbiest helped write the deregulation that caused this mess. Free market capitalism is regulated - it's the people who work within in it's system that need to be regulated. As long as there is capitalism, there will be people looking foor a way to make a short term profit. That's what the problem is. Short term gain equals long term suffering.
Watch the story on NOW pbs.orgg). Better do it soon - the Republicant's want to cut all funding to PBS.
Personally, I don't think they deserve a penny.....
Do you really want the Federal government so powerful so as "punish" people for making what is deemed by the government to be "shameful?" For government to become an arbiter of what is "fair" and "equitable
Try spending less time worrying about what someone else makes, and how they make it and instead, try focusing on yourself. Odds are, you will have alot more to gain.
Yes, I do want my government to be a true voice of moral authority, not just a phoney one like the last 8 yrs.,
Lizr,
Please move to a nice little socialist country where they can tell you what to buy, what to think, and what to wear. Not all of us our still toddlers.
lizr: The government to be a "true voice of moral authority"
If so, and your position is unchanged, it would seem that you would need to either: just throw out out our current Constitution, or find some sort of Constitutional basis for such a power.
If you think it is an appropriate role for government to be a moral authority, on what basis do you see the Federal government being granted such a great power. And have you no fear of your own "morals" being dictated?
Awesome! My thoughts exactly. It's like an episode from the Brady Bunch. All the corporate executives are Marsha and these whiners are Jan. Marsha! Marsha! Marsha!
Big Brother should bud out!
"Big Brother should bud out!"
Are you referring to those, like me, who object to these jerks using taxpayer money to pay themselves unearned bonuses? If so, I would be glad to, but can't because it's illegal.
Our current problems are because big brother DID bud out.
"Do you really want the Federal government so powerful so as "punish" people for making what is deemed by the government to be "shameful?" For government to become an arbiter of what is "fair" and "equitable
Ummm, yes, when THEY TAKE OUR MONEY.
Only goes to show what a CORPORATOCRACY we live in. Mega corps. control EVERYTHING in this country!
so why does the government keep giving them money? this "too big to fail" line is a bunch of bull.
No it's not. It's real. The problem is Bush and Co. didn't require any accountability and basically gave the money with no strings attached to a bunch of immature, selfish, drunk, frat boys who stole shareholder money AND taxpayer money to fund their desire to live extravagantly. They wanted to live well on someone elses dime. These guys didn't work for a living...t
Mark Griffith wrote: "As the scandals at Enron grabbed headlines and predatory lending poisoned the financial well of this country, there was little executive outrage to be found."
Weren't officers of Enron and Worldcom put in jail or, at the very least, indicted and tried? Didn't congress inact and Bush sign the Sarbanes-Oxley Act? The Act that required companies to spend millions in additional auditing fees and infrastructure fees. The Act that calls for the criminal prosecution of executives who cheat the system.
Seriously Mark, you can't say that there was no outrage to be found.
did anyone from Enron go to jail?
The CFO went to jail and the CEO keeled over from a heart attack before he could do the time.
Re-regulation always fights the last war, long after the wounded have been buried. The outrage was directed at the polluted segment that was discovered. And Bush really didn't want to sign Sarbanes-Oxley, but to veto it would have sent even more seats to the Democrats. Look at Bush's largest contributor list.
Quite frankly, we need a much more ethical Attorney General than E. Holder.
The Obama administration could have done so much better with the destruction to the legal system and the economic fraud that has occured.
They must have a new bonus system on Wall Street. Bonuses in hte normal world are paid on above average company earnings. How do you justify a bonus when you have lost money and are asking for a handout?
When the government decides private industry pay we no longer live in a democracy. Why don't you move to a country like this, try it for a while, and see if that's really what you want. If you still want the government to decide our pay you can stay where you are.
What did you just say?
This isn't a red herring arguement as you would suggest. The pay issue is regarding a corporate entity accepting tax payer dollars to keep them from collapsing. When they accept federal bailout funds, they accept terms for that bailout.
The real issue is going to be debated as tax policy. Bonuses are taxed at a lower rate than income. Just wait for the backlash. 75% tax on bonuses, with multi-year clawback provisions.
I have worked in three different companies that paid bonuses but I never got a bonus if those companies lost money. On Wall Street it seems you get outrageous bonuses even if you lose a ton of money for your clients.
OF COURSE, A BONUS, SHOULD MEAN YOU'RE DOING A GOOD JOB, I'M GLAD CLAIRE McCASKIL, WANTS A SALARY CAP, ON THE CEO'S OF COMPANIES, THAT GET BAILOUTS
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