Just last week two of America's leading newspapers, the New York Times and the Wall Street Journal presented opinion pieces discussing why Americans remain bitter about the federal bailouts.
The WSJ's contributor Matthew Winkler's "Time for Bailout Transparency" 10.28.08 lamented that the public outrage is centered on the government's lack of transparency given the government's refusal to date to disclose all facts attendent to the bail out. Information such as how public funds were disbursed, who made the decisions, how it was allocated, which firms borrowed from the Federal Reserve and accessed the Federal Reserve discount window. All interesting, well and good. And could even be embarrassing to the likes of J.P. Morgan Chase, Citigroup and Wells Fargo, who are suing to have recent rulings mandating transparency reversed.
Just a few days before Ross Douthat expounded in the New York Times with "The Great Bailout Backlash" 10.25.10, declaring "Nothing this election season, no program or party or politician is less popular than the Troubled Asset Relief Program of 2008 (TARP)." He then went on to quote one Matthew Yglesias in a blog of the Center of American Progress Action Fund, that the Wall Street rescue package is "one of the most unfairly maligned policy initiatives of all all time." Douthat then continues to put us at further ease, stating "As it stands the government may actually end up turning a modest profit on the money injected into Wall Street's failing banks."
There is much in each Op-ed piece about necessity of TARP, without which the nation would have slid into depression and far greater unemployment. And that is understood by most Americans. What they can't abide was the patent unfairness of it all. The financial engineers who very nearly sank the ship of state were permitted to reward themselves munificently while the public bailout brigade that did the bailing were left holding their rusted buckets, and even then, if they didn't bow humbly and comply to the financial engineers' admonitions, even those rusty buckets along with their homes were taken from them. This while the financial engineers could take shore leave from their saved ship and tear up the town.
What galls most Americans is the manner in which Wall Street rewarded itself after it was the public that took the risk of bailing them out. While millions of Americans were losing their homes and their jobs Wall Street was setting aside humongous bonus pools such as Goldman Sachs's $23 billion in 2009. Earlier this month we learned that Wall Street would achieve a record in 2010, setting aside some $144 billion as compensation ("Wall Street Pay: A Record $144 Billion", WSJ 10.11.10).
Had the companies been permitted to fail or had they been administered under some form of managed bankruptcy the bonuses of the "failed" companies would never have been paid out, or if they had, the bankruptcy courts would have recaptured them as 'fraudulent transfers'. Only a vigilant government initiative to 'clawback' these dubious payouts would have abated the public's feeling that they were being taken for a ride and gamed by well connected insiders.
Sadly, our government -- probably under pressure from Wall Street lobbyists and the meek of heart -- did practically nothing. Yes, they did delegate that stalwart fighter for all things fair and equitable, Ken Feinberg, as the Administration's 'Pay Czar' who came away soft pedaling the outrageous bonuses as "ill-advised" and left matters at that (please see "The Administration's "PayCzar" Soft Pedaling Bank Bonuses as "Ill Advised." What Is This Man Talking About?" 07.25.10).
The issue may have come to an end for the Administration but Americans are still seething. Yes, more openess will be helpful but that is not the core issue. The Wall Street perpetrators were rewarded while Main Street and the rest of America paid the price. Is this the new American Way?