Rein in Wall Street’s bonus babies
Hey, what’s with all these bonuses
They’re givin’ to the rich?
They’re fillin’ up their pockets,
Walk away without a hitch.
Gotta get myself some TARP
Because I hear it’s going fast. . . .
Things were hunky-dory last September between CEOs John Thain of Merrill Lynch (left) and Ken Lewis of Bank of America. Now things are neither hunky nor dory. (AP Wirephoto)
Viewers don’t usually tune in to CNBC for laughs. But last week the financial news network played a song parody by a man named Bill Zucker that’s become an Internet sensation. “The TARP Song” should be downloaded onto every iPod in Washington.
America’s getting restless about the Troubled Assets Relief Program. And rightly so, given a report in last Wednesday’s Financial Times. It seems that in early December, one month ahead of schedule, John Thain, chief executive of Merrill Lynch, approved $15 billion in bonuses for its employees. Merrill, it will be recalled, was saved from bankruptcy last fall by a government-engineered takeover by Bank of America. Taxpayers contributed $25 billion from the TARP program to the deal.
But in mid-December, after shareholders of both companies had approved the deal and after the compensation committee had approved the bonuses, Merrill revealed that its fourth-quarter losses would reach $21.5 billion, greater than anticipated. Bank of America then went back to the Treasury Department, threatening to pull out of the deal. BofA was soothed with another $20 billion.
Did taxpayers, in effect, pick up the tab for $15 billion in bonuses for a company they’d already pulled out of a ditch?
It could have been worse. Mr. Thain, a former New York Stock Exchange president once known as Wall Street’s “Mr. Fix-it,” had to be talked out of approving a $10 million bonus for himself. Still, the uproar over the bonuses cost him his job with the combined Bank of America/Merrill.
This leaves a very nice office vacant. In early 2008, Mr. Thain spent $1.22 million of Merrill’s money to renovate his corporate office — including $131,000 for area rugs, a $68,000 antique credenza, guest chairs costing $87,000, a $35,000 commode and a $1,400 wastebasket.
Wall Street executives — and for that matter, the people who bring them their mail and their coffee and who drive them around town — have long depended on end-of-year bonuses as a big part of their compensation; Mr. Thain’s driver was paid $230,000 in salary, bonus and overtime last year. In the glory years of the mid-2000s, executive bonuses would be many multiples of paltry million-dollar base salaries.
The practice was defended as a way to increase performance: You eat what you kill, and the more money you bring into the firm, the more you take out.
Unfortunately, as we now have seen, Wall Street’s profits during the boom years often were based on the buying and selling of things that turned out to have little value: mortgage-backed securities, derivatives and other financial ephemera.
President Barack Obama and Treasury Secretary-designate Timothy F. Geithner — who apparently will be confirmed despite problems with back taxes — quickly must lay down the law to the banking and financial community: The TARP program was supposed to instill confidence and unlock the credit markets, not underwrite the continuation of the greed that made it necessary.
Public cynicism, i.e., “The Tarp Song,” may be funny, even understandable, but it is not helpful. Last week, the House voted 270-155 to reject Mr. Obama’s request to release the second $350 billion in TARP funds. The vote was symbolic — the Senate previously had approved it, and it would have taken “no” votes from both houses to block it. But Mr. Obama, of all people, should know the importance of symbolism.
Right now, public confidence in the TARP program is in the $1,400 wastebasket.
McCain voted for the first TARP bill and Thain donated $28,000 to his campaign. Some maverick. President Obama told the GOP that he can’t promise one job will come from the new stimulus package. So here we go again. Einstein said the definition of insanity is doing the same thing over and over and expecting a different result. I say the more things change, the more things stay the same. Some change I can believe in folks. Congress is despicable! Obama says he won’t have lobbyists in his administration, then highers lobbyists. Hello?
A CENTRIST,
I was called an idiot in another blog for thinking the way you do. I see no “change” with this administration and don’t expect it either. Congress has the power and they know it.
Lobbyists are not under control as this link shows.
http://hosted.ap.org/dynamic/stories/T/THE_INFLUENCE_GAME_STIMULUS_LOBBYING?SITE=MOSTP&SECTION=HOME&TEMPLATE=DEFAULT
When the TARP program was proposed, the media was a giant echo chamber for the Paulson claim that we had to do it big, we had to do it with no strings attached, and we had to do it immediately. I don’t remember the Post’s position, but I’m guessing they went with the crowd on this one. Now, we’re reaping what you’ve sown.
And as far as the new “stimulus package” … what is it but the earmark to end all earmarks? It will provide some relief to people in a handful of industries who happen to do a lot of government contracting. It will do nothing for the rest of us - but we’ll have to pay the bill.
Let there be no doubt, times are hard. I know several people who have been severely hurt by this downturn. One lost his job as a tire salesman, and has only been able to find part-time work in a call center. Another works for an automobile contractor, and still has a job - but he’s only working 32 hours a week. These people won’t see a dime of the trillion dollars Washington plans to spend.
I listened to John Boehner, the Republican Minority Leader complain about liberal give-aways on “Meet the Press”….What a hypocritical GOP. He’s the one who pushed the minority party members into supporting Henry Paulson’s “hurry and pass this bank bail-out bill before the economy tanks”. No oversight, no questions..nobody’s business.
Now, he wants to be more cautious and is calling Obama the “Give-away President”….J-E-R-K!
It was Boner and the Republicans that set the barn on fire, and now they want to know what the Democrats are going to do with the horses.
Garrison, you and your liberal cronies continue to blame the GOP and Bush for the poor way the first bailout money was spent with no oversight. What you continue to forget is that it’s the Democrats that are/were in the leadership positions. Barney Frank is the first to blame everything on the GOP….yet HE is the one who is Chairman of the House Finances Committee, overseeing housing and banking and has been since 2007..when both industries started tanking. I think there is plenty of blame to go around.
What TARP WON’T do is loosen the credit markets. The reason banks got into the trouble they did was due to the lowering of their standards by giving people with poor credit home loans. Unless you have a credit rating of 725-750, you’re not going to get a loan or at least one at a good rate.
I liked McConnell’s comments on FOX: cut out the payroll taxes for a year. This would allow those that work to keep more of their money.
As for bonuses…I would love a great bonus..wouldn’t you? Would YOU turn down a multi-million dollar bonus? Would YOU turn down great pay because you wouldn’t want to be “greedy”? I bet not. Money IS good.
Logic…. Only the unions are greedy? Should they turn down wages and benefits negotiated with multi-million dollar management?
This current economic financial mess landed on Bush’s watch.
Garrison,
Bush’s watch, Pelosi’s House and Reid’s Senate. I’d say they all had a hand in it.
So the guy spends $1.22M to redecorate his office. Chicken feed. Seems to me he would have to hire people to get the job done who in turn hired other people or bought supplies directly. This sounds like a great way to get money into the economy quickly. Isn’t that what an economic recovery is all about?
Do you really think this mess started with Pelosi?
http://www.academycomputerservice.com/economics/charts.htm
Bush’s millionaire/billonaire tax-cuts really stimulated our economy.
How’s your 401K look today?
Garrison,
No, I think it started with the Community Reinvestment Act to be honest.
http://en.wikipedia.org/wiki/Community_Reinvestment_Act