By almost any measure, 2008 was a complete disaster for Wall Street — except, that is, when the bonuses arrived.
Despite crippling losses, multibillion-dollar bailouts and the passing of some of the most prominent names in the business, employees at financial companies in New York, the now-diminished world capital of capital, collected an estimated $18.4 billion in bonuses for the year.
That was the sixth-largest haul on record, according to a report released Wednesday by the New York State comptroller.
While the payouts paled next to the riches of recent years, Wall Street workers still took home about as much as they did in 2004, when the Dow Jones industrial average was flying above 10,000, on its way to a record high.
Some bankers took home millions last year even as their employers lost billions.
What is disconcerting here is that Wall Street pays out the sixth largest haul in bonuses--which is $18 billion--to its executives, even as the financial market has collapsed due to the gambling on subprime mortgages, and those same Wall Street firms going to Washington, asking for bailout money. It is an incredible hypocrisy on Wall Street's part. Continuing with the NY Times story:
The comptroller’s estimate, a closely watched guidepost of the annual December-January bonus season, is based largely on personal income tax collections. It excludes stock option awards that could push the figures even higher.
The state comptroller, Thomas P. DiNapoli, said it was unclear if banks had used taxpayer money for the bonuses, a possibility that strikes corporate governance experts, and indeed many ordinary Americans, as outrageous. He urged the Obama administration to examine the issue closely.
“The issue of transparency is a significant one, and there needs to be an accounting about whether there was any taxpayer money used to pay bonuses or to pay for corporate jets or dividends or anything else,” Mr. DiNapoli said in an interview.
President Barack Obama had some harsh words to say about the $18 billion Wall Street bonuses. From the Los Angeles Times:
Reporting from Washington -- President Obama blasted Wall Street executives on Thursday, calling it the "height of irresponsibility" that they gave employees massive bonuses last year even as the government was forking over billions to bail out ailing financial firms.
[....]
But seated in the Oval Office after a meeting with Treasury Secretary Timothy F. Geithner, Obama said this is not the time for executives to be raking in huge bonuses.
"That is the height of irresponsibility," Obama said. "It is shameful, and part of what we're going to need is for 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 make bonuses," the president said. "Now is not that time."
In issuing the harsh words, the president reached for the most effective tool at his disposal right now: public shame. Though the bailout passed last fall imposes some limits on executive compensation, for example prohibiting incentives for taking excessive risks as well as excessive severance packages, it doesn't ban bonuses for simply being too generous.
But Obama has had success with the tough talk lately. Earlier in the week, after he questioned Citigroup's decision to buy a new corporate jet even as it takes bailout money, the troubled bank canceled the order. Aides say he called for responsibility when he met with corporate executives this week.
At this point, President Obama is trying to shame these Wall Street executives into giving up their bonuses. I doubt that will work. Wall Street was addicted to the greed and the over-speculation of the housing bubble, the repackaging of the over-valued subprime mortgages into investment securities, the gambling of collateralized debt obligations. These guys wanted to make huge amounts of money on these gambling schemes, and they succeeded. They are not going to give up a penny of these bonuses. Instead, they are expecting Washington to socialize their losses with American taxpayer money because these Wall Street banks are just too big to fail. Privatized profits, socialized losses. That is how Wall Street is working today.
Senator Claire McCaskill, D-Missouri, had even harsher words to say about the Wall Street executives:
WASHINGTON (CNN) -- One day after President Obama ripped Wall Street executives for their "shameful" decision to hand out $18 billion in bonuses in 2008, Congress may finally have had enough.
An angry U.S. senator introduced legislation Friday to cap compensation for employees of any company that accepts federal bailout money.
Under the terms of a bill introduced by Sen. Claire McCaskill, D-Missouri, no employee would be allowed to make more than the president of the United States.
Obama's current annual salary is $400,000.
"We have a bunch of idiots on Wall Street that are kicking sand in the face of the American taxpayer," an enraged McCaskill said on the floor of the Senate. "They don't get it. These people are idiots. You can't use taxpayer money to pay out $18 billion in bonuses."
McCaskill's proposed compensation limit would cover salaries, bonuses and stock options.
Here is the video of McCaskill on Wall Street "idiots." From CNN.Com:
I will say that there is an easier way to stop the excessive greed on Wall Street--just take away the bailout money and let these Wall Street firms fail. Washington should agree to give the bailout funds to these Wall Street banks on the condition that these executives and board members should be fired from their posts with no pay, or golden parachutes, or any stock options. They helped send this country into its current financial mess, so they should be canned from their jobs, and should not be hired to any other financial institution that is taking federal bailout money. If these Wall Street idiots object, then let their firms fail, and the government can buy up the assets for pennies on the dollar, and still fire these idiots. The government could then search for competent people to run these firms. Put some serious teeth into re-regulating Wall Street.
Of course, that probably will not happen.
No comments:
Post a Comment