The obtuseness of the government and the financial industry on the subject of executive compensation is best summed up by one of the bonus defenders, who complains: "It's suddenly a crime to make money, it seems." Leaving aside the telling stupidity of assuming that the mere act of "making money" obliterates any attached misdeed, there is little doubt in many people's minds that AIG's behavior, and Bank of America's, and Merrill Lynch's, and Goldman Sachs's, and countless others should, in fact, be a crime.
That bonuses for executives of bailed-out companies are wrong and possibly criminal is clearly illustrated by the many explanations we have been given for why bailed out financial industry executives should be compensated despite their performance. Bonuses help retain the best and the brightest (ha!), they are a contractual obligation, they are a "risk consideration" (ie blackmail), New York City would disappear without them, etc. These laughable variations are a sure sign that, in fact, there is no good reason for the oversized salaries and bonuses at rescued companies: the real motive is that the money should continue to flow to executives because it always has and, actually, the primary purpose of the bailout, from the executives' perspective, is to keep them profitably employed, or happily retired. Bankers in New York and London would not be able to believe their luck if they were not so arrogant as to think it was their shrewdness (the best and the brightest!) that is being rewarded, not their luck.
This fortune, though, may finally be turning, as financiers watch in terror as governments everywhere are pushing for publicizing the list of bonus recipients at bailed out companies. Predictably, the executives' advocates, along with Rush Limbaugh, express outrage that they are "private sector workers [who] do not expect that their salaries and bonuses are going to be in the newspaper." Where have these people been for the past six months, besides counting their ill-gotten coins? They are most definitely no longer "private sector workers." They are, for all intents and purposes, federal government employees, and should be subject to the same limitations and disclosures as their new colleagues in government. A choice they do have, of course, is to walk away and get an actual private-sector job, bonus and all. Shocked by the level of our anger, however, they are cowering in anonymity, supposedly fearing for their families. That may well be the case and, if so, they have nobody to blame but themselves. In any event, there is an easy solution to their predicament: they can return the money, and no one will ever need to know that they were on The List to begin with. Or they can join Bernie Madoff where they most likely belong: in a high security jail for mobsters, safe, sound, and away from public scrutiny.
Financial industry executives are hardly the only culprits here, although they are the greediest ones. From the beginning Tim Geithner, supported by the president-elect and backed by Congressional leaders, pussyfooted around the issue of executive compensation in bailed out companies. This is not surprising, considering his incestuously close ties to the financial industry. It is also not shocking that Sen. Chris Dodd, Chairman of the Senate Banking Committee and top recipient of AIG funds, and Sen. Chuck Schumer, for instance, were remarkably late in figuring out that bonuses at bailed out companies were wrong. Bankers have financed these people for decades and it surely cannot be easy to turn on your masters on a dime, even if that would be the right thing to do (the truly right thing to do, of course, would be not to have taken money from them, but it's too late for that now). Barack Obama, in the meanwhile, has had a months-long tin-ear moment, as late as this week calling the popular anger a "tizzy," probably because he too is in debt to and in awe of these cardboard Masters of the Universe. This is a crisis that has been openly brewing for so long, it is unfathomable that Obama is now literally resting a big chunk of his political capital on it. Clearly he, and Geithner, and many members of Congress, not to say the financial industry recipients of the government largesse, surely all hoped the anger would simply boil over. They did not count on the fact that the greed and superciliousness of banking and insurance executives that resulted in the need for bailouts would push them to overreach for an ever-bigger piece of the bailout pie. That is how these people are wired and unless they are smacked down with all the people's strength, they will try, and try, and try again to find a way to get one over us.
Now, Congress and the White House are in a panic, as they should be. Where was the outrage six months ago, three months ago, two weeks ago? It is hard to take any of the government actors in this farce seriously, and not only because they haven't seemed to much care what happens to taxpayers' investments in these shells of companies, but because many of them lack credibility to begin with. Obama's pick of Geithner despite the latter's "tax problem" (ie he knowingly evaded taxes) was one of the ugliest moments of his presidency so far. Besides this and possibly more to the point, Geithner has been completely unable to distance himself from the very industry he is supposed to police. Not surprisingly, Ben Bernanke, Chairman of the Fed, has a share in this too: how is it possible that the AIG CEO does not know the three Fed officials supposed to keep a watch on his sinking ship (should they not be camped in his office? should they not be reporting back to the Treasury?). Sen. Dodd's career could well be coming to an end next year, so sick are his Connecticut constituents of his sweetheart mortgages and his lack of bailout leadership. Democrats better hope that they can find an appropriate replacement in time for 2010, even if it means a bitter primary battle. If we are lucky, Schumer too will face a credible primary opponent next year, preferably one who can eloquently highlight the New York Senator's dreadful ties to the securities industry and to AIG. Not coincidentally, Schumer has been all but invisible in the compensation debacle, too busy sabotaging the nomination of the head of the National Intelligence Council, whom he deemed not sufficiently friendly to Israel. Talk of misplaced priorities. And how can we expect repeat tax-dodger Rep. Charlie Rangel to make any sense on the issue, despite being in charge of taxation for the House (really). The best he could muster on the issue this week was to reassure AIG bonus recipients that the tax code would not be used as "a political weapon." Of course that was just a day before the lopsided vote on applying punitive taxes to AIG bonus recipients. As for Republicans, they are so profoundly guilty in this banking catastrophe that try as they may to stand up and be relevant, they just keep falling back into the mud that spawned them. In truth, they have been serving a purpose, providing welcome comic relief as they battle one another for leadership of their party, an entity that is about as substantial as Citibank would be without government money.
That does not leave many people on our side, including the president. His complaint that Geithner has been too busy rescuing the economy to focus on executive compensation rings uncharacteristically hollow. Making sure public funds which are, believe it or not, limited, are used appropriately is not a small part of Geithner's mission, it is an essential one. More broadly, the abuse of bonuses is a piece of the culture of misplaced greed and corruption in the financial industry that has resulted in the current economic havoc. It is not a peripheral issue, it is the issue. It may be that politicians are so deeply unfamiliar with the banking culture that they can't fathom the insatiable depths of greedy depravity that rule the industry and have lead us to the brink of economic destruction. It may be that all they know about financial types is that they are the ones who write the biggest checks at election time, do so most often, and require the least amount of time and attention: all in all a good return on a politician's investment, at least until now. It seems to have finally dawned on government leaders that bonus recipients are not the only ones who should be afraid, and that there is enough of this brutal and eminently rational anger to go around both houses of Congress and the White House, after we are done with the bankers.