09/12/2009 05:12 am ET Updated May 25, 2011

The Pay Czar Has No Clothes: The Obama Administration Has No Guts?

"Citigroup Inc's contract with energy trader Andrew Hall, which reports say could pay him up to $100 million this year, will not be subject to rulings by the Obama administration's pay Czar, a source close to the bank said on Wednesday."


If ever we needed proof that the Obama administration really doesn't want to change the way Wall Street does business, this is it. Allowing Citigroup to shell out $100 million dollars to a contracted trader makes a mockery of any efforts to reign in executive pay and put an end to the fantasy finance casino that wrecked our economy.

We were led to believe that the Pay Czar would review all compensation packages and keep them at a reasonable level. Although the Obama Administration ditched the $500,000 cap, it "felt that in cases where we're offering exceptional government assistance that we had a duty to the taxpayer to ensure that, even if the letter of the law had no restriction on overall salary, that there needed to be a review process to ensure that it was neither excessive, inappropriate or oriented to short term risk taking," said Gene Sperling, a senior counselor to Mr. Geithner in a June 11th Wall Street Journal report.

Everyone knew there would be loopholes, but if $100 million is not "excessive, inappropriate or oriented to short term risk taking" nothing is. Apparently, since the contract was executed before February 11, an arbitrary date set by the Treasury Department, it is exempt. But what's so special about February 11th? By then we had already provided Citigroup more than $387 billion dollars in loans and asset guarantees, according to the excellent accounting provided by Nomi Prins. Of that $45 billion came from the TARP program in November 2008, well before Andrew Hall's contract.

If the taxpayers had not bailed out Citigroup, Mr. Hall would have received bupkis. In fact, had we not bailed out Wall Street in general, Mr. Hall and many others financiers might be selling apples on the street-corner. (See The Looting of America for a detailed account of how we got here.)

I don't care what lame excuses the Czar or Citigroup come up with, Mr Allen is being paid with our money. He's walking off with a hundred million and for what? What value did he add to our economy? Just want did he do to help re-employ the more than 25 million who are now unemployed or underemployed? (This is the kind of stuff that makes you feel sorry for Bernie Madoff.)

But the real question is why is the Obama team is letting this happen. If ever there were a financial institution that is totally indebted to the government, it is Citigroup. Without Uncle Sam, it's a bankrupt enterprise from top to bottom. No one on Main Street would blink if Obama just told Mr. Hall that it was his patriotic duty to get by on only $500,000 year, not $100,000,000.

The Obama strategy is obvious. They want to soothe the markets and get the financial system get back to "normal" as soon as possible, even if it means allowing the rip-offs to begin again. The first clear signal was when the Obama administration opposed the $500,000 wage cap. The next tip-off was when Goldman Sachs started selling risky derivatives without a peep from any regulator. And of course, the administration didn't say a word when Goldman and JP Morgan announced outrageous profits based entirely on government largess. Now the Czar is hiding behind arbitrary dates to allow Wall Street traders to rob us blind.

Clealy, the Obama administration is hoping that such largess will restore "investor confidence" leading to a Wall Street boom, resuscitated 401ks, a happy upper-middle class, and even a few more jobs for the unemployed... all before election day 2010.

But the next election could be a real shocker. Americans might decide to protest the fact that the banks got everything and they got nothing, especially if unemployment hovers at record highs. They could easily blame the government for this failure. And you know, they'd be right. The government hasn't done nearly enough to help the average American during this crisis. It would be easy to design attack ads that picture Hall's $100 million bonus check side-by-side with shots of unemployed workers getting evicted from their homes. The administration's failure to come down hard on these excesses is creating the perfect conditions for a right-wing populism that only will further entrench the rich and the powerful.

Unless we start putting some serious progressive pressure on the Obama administration, we had better get used to watching the big boys on Wall Street cash their undeserved bonus checks -- financed with our tax dollars. Don't be surprised to hear them cheering all the way to the bank, "Yes We Can! Yes We Can!"

Les Leopold is the author of The Looting of America: How Wall Street's Game of Fantasy Finance destroyed our Jobs, Pensions and Prosperity, and What We Can Do About It, Chelsea Green Publishing, June 2009.