As we head into this year's Wall Street bonus season, there is an eerie sense of déjà vu. Ordinary Americans continue to suffer from foreclosures, unemployment, and cuts in public services, as the largest banks take in the nation's wealth and prepare to use it to award massive bonuses to the bankers that crashed our financial system. By continuing to reward risky behavior, the Wall Street bonus culture fosters a system full of perverse incentives and inflated executive compensation which puts the economy at risk and endangers Main Street.
In recent polling by Bloomberg more than 70% of Americans said big bonuses should be banned this year at Wall Street firms that took taxpayer bailouts. And in addition, one in six favored a 50% tax on bonuses exceeding $400,000. Resentment of bonuses and banking profits unites Americans across political, gender, age and income groups.
In the UK, when polls were showing strong support for limits on pay, former British Prime Minister Gordon Brown pushed for a tax on banker bonuses and one on financial transactions to curtail speculative trades.
In the U.S., five big Wall Street banks -- Bank of America, JPMorgan, Citigroup, Goldman Sachs and Morgan Stanley -- have already set aside more than $91 billion for salaries and bonuses this year. However, we have an immediate opportunity to fix our corrupt system of runaway pay for bankers by creating strong rules on pay under the Dodd-Frank legislation.
The SEC and other agencies are in the midst of promulgating rules that, among other things, would require banks and risky non-bank financial institutions to provide better disclosure of executive pay and how that CEO pay compares to the median pay of workers in a company; mandate "clawbacks" of unjustly awarded bonuses; and prohibit pay practices that put the economy and shareholders at risk.
The agencies must be given the resources they need to accomplish these rulemakings, and be encouraged to make them as robust as possible. Unless these strong rules are put in place, the robbery of billion dollar bonuses at the public's expense will continue to destabilize the economy -- and the déjà vu will continue year after year.