Bail Out Bonuses
by Todd Beeton, Fri Jan 30, 2009 at 08:02:17 AM EST
I was heartened to see President Obama yesterday express outrage at bailed out banks using that money to hand out bonuses.
Mr. Obama was reacting to a report by the New York State comptroller that found financial executives had received an estimated $18.4 billion in bonuses for 2008, less than for the previous several years but the same level of bonuses as they received in 2004, when times were flush.
"That is the height of irresponsibility," Mr. Obama said. "It is shameful. And part of what we're going to need is for the folks on Wall Street who are asking for help to show some restraint and show some discipline and show some sense of responsibility." [...]
"There will be time for them to make profits, and there will be time for them to get bonuses," Mr. Obama said during an appearance in the Oval Office with Treasury Secretary Timothy F. Geithner. "Now's not that time. And that's a message that I intend to send directly to them, I expect Secretary Geithner to send to them."
New York Attorney General Andrew Cuomo also spoke out against the practice of Wall St. paying out billions in bonuses to executives out of the bailout money and signaled he may even demand the return of $4b from Merrill Lynch:
New York Attorney General Andrew Cuomo may demand the return of $4 billion in bonuses paid by Merrill Lynch & Co. just before it was acquired by Bank of America Corp., a person familiar with the matter said.
Cuomo also wants to know what Bank of America Chief Executive Officer Kenneth Lewis, 61, knew about the accelerated bonuses and about Merrill's surprise $15 billion net loss in the fourth quarter, the person said. Lewis fired Merrill's CEO John Thain this month after the losses required more federal aid. [...]
"No longer will this country stand for wasteful spending of tax dollars on bonuses for executives whose companies have taken huge losses and required taxpayer bailouts," Cuomo said today in a statement about bonuses paid at Wall Street firms that received funds from the Troubled Asset Relief Program or TARP.
Not surprisingly, one voice that stands out from those rightfully outraged by the excess of Wall St. even as tax payers are saving their ass is Rudy Giulilani who made the case that the real danger would be if executives weren't paid those bonuses:
"Those bonuses, if they are reversed, are going to cause unemployment in New York," the self-described fiscal conservative said. "I remember when I was mayor, one of the ways in which you determine New York City's budget, tax revenue is Wall Street bonuses.
"Wall Street has $1 billion, $2 billion in bonuses, the city had a deficit. Wall Street has $15 billion to $20 billion, New York City had a $2 billion, $3 billion surplus, and it's because that money gets spent. That money goes directly into the economy. First of all, it gets taxed as income. Secondly, it gets taxes again when somebody buys something with it."
A bit tin ear, don't ya think, Rudy? I'd like to see him go on the campaign trail running for senate on the pro-bonus platform. There's a winning strategy!
The fact is, this crystallizes the differences in priorities between the two parties. As Josh Marshall points out:
This is the definition of trickle down -- give huge amounts of money to a small number of individuals, most of which will be socked away but a relatively small percentage of which will be spent on luxury goods.
Update [2009-1-30 13:24:40 by Todd Beeton]:Sen. Claire McCaskill will be introducing a bill this afternoon to cap salaries (including bonuses and stock options) of executives at companies receiving bail out funds:
U.S. Sen. Claire McCaskill, D-Mo., plans to introduce legislation Friday afternoon that will cap compensation for employees of any private company that accepts federal dollars because of the economic downturn.
Employees would not be able to make more than the president $400,000 until the company no longer relies on federal assistance from the $700 billion bailout of the financial sector, McCaskills office said.