Obama’s Biting Rebuke of Wall Street

“These were, to put it mildly, strong words from a U.S. President, and a clear signal that he appears ready to use his bully pulpit, and his executive powers, in a way the previous occupant of the White House did not: He will publically shame his own countrymen when they appear to abuse the public trust.”
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Micheal Scherer is getting it.
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Mike, how long do you think it will take before those FOX-addled brains see the light?

Once again, there is no shaming these people. Holding a press conference or writing an article will not make them change their ways. You drive your multi-billion company into the ground and then come groveling to the tax payer to save your company? First of all the people that did the driving need to lose their jobs. And not just a token CEO here and there. The decisions that led to this catastrophe were years in the making and many people (including those in government) played a part.
Next any bailout money used to purchase a 5th corporate jet, spa treatments, pay out multi-million dollar executive bonuses or to stencil the CEO’s wall with golden puff the magic dragon applique should require that the entire amount of bailout money be given back asap. Further that company should be barred from receiving any bailout money for at least the next 20 years.
Again, just my two cents.

He will publically shame his own countrymen when they appear to abuse the public trust.
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In other words, he’s going to do YOUR job.

“That is the height of irresponsibility. It is shameful,” he said about the payouts. “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.”
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So, Obama follows up his $700B blow job of Wall Street with a little light S&M?
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Please, Obama, not the dreaded “strongly worded letter”!

Paul Dirks,

http://swampland.blogs.time.com/2008/12/21/the-bank-executive-bailout-shame/

And he needs to send that same message to congress. Now is not the time to be an obstructionst because you want to see a president from the opposing party to fail on marching orders from Rush Limbaugh. If you oppose something the president proposed because you truly believe it would not be good for the country than fine state solid reasons for opposing it and offer realistic counter proposals.
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And the same should go for members of his own party, but he should add that now is not to time to load up needed legislation with unneeded pet projects. Put in projects that will help the American people and not soley help you get reelected.
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Lets get the country on the road to recovery. There will be time for politics. Now is not that time.

@ Paul -
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Obama will not only do Mikey’s job for him, he will do it better, and still have time for a pickup basketball game before dinner.
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Awesome.

Then, after lunch, he welcomed the new National Tax Cheat, er, Czar with a rousing game of Magic 8 Ball.

As a liberal who is disgusted by the actions of folks like John Thain but who is also a mid-level manager at a Wall Street firm, I think we have to be a little careful about the number published by the NY Times. I read the article and I don’t see any breakdown regarding how much of this $18.4B in bonus money went to top-level executives who a) are already rolling in the dough and b) may be in part responsible for the mess we’re in right now. I have no sympathy for people like that and if they took exorbitant bonuses this year, shame on them.
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But as anybody who has worked on Wall Street knows, once you reach a certain level – and we’re not talking about a very high level…say, for example, junior associate – a decent chunk of what you would consider your income comes via bonus. No, these bonuses aren’t guaranteed, but in good or even fair economic environments, they usually remain stable and, in better times, can even go up a bit. They aren’t really merit based except in the sense that if you are an exceptional performer (at my firm, only 10% of the folks working here get that designation…and it’s the same at many firms), you might get a bit more based on your annual review. But for lower level, salaried employees, these “bonuses” are something you depend on each year. (kind of like Clark Griswold in Christmas Vacation)
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In 2008, my company’s (since departed) CEO did not get a bonus. Most other employees saw their bonuses cut significantly. My own bonus – and I am solidly middle class, live in a modest home, have 1 car (a Honda CRV), don’t spend a lot of luxury items, etc – was cut by about 35%. It’s hurting our family but it was also not unexpected and it’s also understandable – hey, at least I’m still employed. Some people weren’t as lucky.
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So, before we go through a wholesale demonization of the folks who got these bonus dollars, let’s first figure out who got them and how much less it was than last year’s bonus. The Times notes that bonus dollars for Wall St. were down 44% from last year. That’s a lot. There are no excuses for failed CEOs and other senior execs who received big bonuses for running their firms into the ground. But a large number of the folks who got part of the $18.4B dollars may be schlubs like me – junior associates, mid-level managers, etc – who actually made considerably less last year than they did in 2007 and who, like me, are making considerably less than they were five years ago if you account for inflation.

Touche, Paul Dirks. Though, fair’s fair. MS did write about corporate exec excesses before.

As for Obama’s message: Hallelujah. He just said what small investors, retirees and the working poor have been saying for months.

hulu:
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Stuff it!
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BTW, FYI:
http://www.techcrunch.com/2007/08/29/hulu-translates-to-cease-and-desist-in-swahili-oh-the-irony/
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I like it, however, ’cause if you combine them all together the collective meaning is:
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Cease grabbing your great old hairy butt, lest there be thunder upstream!

Dear Mr. President. You appear a little lost in the world. Let me clue you in.
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Some people will take as much money as they can possibly get their hands on. They will NEVER stop. They will NEVER feel shame. NEVER feel remorse. And NEVER feel responsibility for screwing over anybody else. Indeed, the have no responsibility unless the government tells them they do, upon threat of criminal prosecution.
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The job of government is not to get into “conversations” with such people. It is to protect the rest of us from them.
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John Thain goes after money, and will continue to go after money, like a serial pedophile goes after 10-year-old boys. Your only options are lengthy prison terms or strict oversight.

What 53_3 said.

Wednesday: Obama surrounds himself with corporate CEO’s (that gave to his tainted internationalist campaign).

Thursday: Wag The Dog, er, finger at different peas in the same pod.

Friday: Surrender to Iran.

Saturday: Name the Gaza Strip the 58th state.

Sunday: Skip church, again. Go jogging instead. Watch blue state Steelers lose to the McCardinals.

Monday: Blame Bush for breakfast.

Tuesday: Offer Pockeestahn the carrot of unlimited USO floor shows featuring Ellen Degenerate and Cher, if they dis-arm their 80% Taliban.

Wednesday: Nuke Alaska.

Thursday next: After reading another good idea in Mother Jones, invoke executive order that all rural skoo busses will hereinafter be run on hemp oil alone, or the first born of every Republican household will be forced to watch Bill Moyers’s kid go through rehab again on the PBS Frothline taxpayer dime so help me Allah.

Friday next: Unionize the Coast Guard, Marines, and 82nd Airborne, as punishment to Blackwater (for defending Americans).

Saturday next: Golf shirtless at the Army-Navy Club just to show those D.C. wimps what a Chicago-Hawaiian-Indonesia-Kenyan is made of.

Sunday again: What’s this church thing you speak of?

Monday III…

ogliberal makes a very good point. Most of the people on Wall Street even at the lowest levels get bonuses and count them as a major part of their salary. However, another thing to consider is that this is the way Wall Street chooses to pay its employees low salaries and count on getting a bonus to make up. This is not the tax payers problem though. I’m not trying to be heartless, but its not.

“This is not the tax payers problem though. I’m not trying to be heartless, but its not.”
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I would have been a lot less critical than I have if these bonuses were paid exclusively to the lower ranks.
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Unfortuntaly, it wasn’t to be…

53:

You IS Jihad Joke Klein’s skinny wiener.

Ahyuh, ahyuh, ahyuh (laughing like a Republicker) and pointing…

sqr1 is right! Obama’s response is definitely analagous to those Democrat “strongly worded letters.” This bailout allows these bankers to do pretty much whatever they want with this money… spend it on cool airplanes, lavish retreats, million-dollar bonuses… even light the whole pile on fire (H/T Atrios). There’s not much we poor saps (or Obama) can do about that now, is there?

@gysgt213

That is true – our firms could give us hire salaries and smaller bonuses. I wish they would. I’m sure the mix they choose to give us somehow is beneficial to them from an accounting/tax perspective. Plus, in times like these, it makes it easier for them to give us less. (of course, giving us less may also help to reduce the number of layoffs) But it still really hurts folks like me, especially since my salary and bonus have stayed pretty much the same for the past 6-years and haven’t even kept up with inflation, despite getting very good performance reviews each year. If I had received no bonus this year, my wife – who now stays home full time with our 2-year-old and 1-year-old – would have had to get a job. But where? And even if she did get one, she’d have to make a decent chunk of change just to be able to pay for full-time day care for our two kids. In the end, we’d be lucky to break even. And we aren’t even saddled with debt – we’ve been very responsible over the past 5 years because we knew this day was coming. (even though a lot of so-called experts and politicians seemed to think it would last forever – or at least that’s what they wanted us to believe)
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The NY Times also didn’t break dollars out to show how much were distributed by firm’s who received federal bailout money and those who didn’t. My firm received no bailout money and almost certainly never will. Our former-CEO didn’t take his bonus last year and other senior execs voluntarily either refused or allowed their bonus to be drastically reduced. So the bonus I received this year – the one that was 35% smaller than the one I got in 2007 (or 2004, for that matter) didn’t tap in to taxpayer dollars at all.
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Again, there is plenty of inexcusable stuff people in my industry do for which they should be taken to the woodshed. But the NY Times story doesn’t provide a complete picture of where these dollars went. Some may have went into John Thain’s vacation home. But a large chunk probably went to people like me.

hulu:
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Bite this, and stop grabbing your great old hairy butt while you’re at it:
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http://politicalticker.blogs.cnn.com/2009/01/29/mcconnell-warns-of-grim-gop-future/?eref=politicalflipper
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Even he can see what I see in you…

Actions speak louder than words. I’ll be impressed when Obama and my fellow Democrats try to claw back the last several years’ worth of fraudulently obtained bonuses (and, most especially, the bonuses paid by banks in which we taxpayers had pumped cash in order to bolster their capital reserves); put realistic caps on the tax-deductibility of executive compensation, hold management accountable and stop the revolving door between the SEC/FDIC and the banks and securities firms which they supposedly regulate. Until then, talk is cheap.

Does anyone seriously expect bankers and other “Davos Men” to change their ways when there is no penalty for making outrageously reckless gambles with other peoples’ money? Realistically, I think most of us would be happy to trade a little bit of “shaming” for, say, $15 million in annual salary + perks like private jets + $25 or $50 million in bonuses. I know I would.

“Biting rebuke!” Bite me!

But as anybody who has worked on Wall Street knows, once you reach a certain level – and we’re not talking about a very high level…say, for example, junior associate – a decent chunk of what you would consider your income comes via bonus. No, these bonuses aren’t guaranteed, but in good or even fair economic environments, they usually remain stable and, in better times, can even go up a bit. They aren’t really merit based except in the sense that if you are an exceptional performer (at my firm, only 10% of the folks working here get that designation…and it’s the same at many firms), you might get a bit more based on your annual review. But for lower level, salaried employees, these “bonuses” are something you depend on each year.
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thank you ogliberal, for pointing out the obvious — that compensation in financial firms is “salary plus bonus”, and that when employees take the job, they do so with the expectation that the bonus will be forthcoming if they do their jobs.
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Obama’s message is pretty much pure demagoguery in light of the actual facts — the equivalent of Boehner’s “$600 million for condoms” approach to public policy. The problem here is with over-compensation of the financial industry in general (the average bonus was still over $112,000) and that is the result of the structural flaws that resulted in the meltdown. Making it about “bonuses” misses the point entirely.

“Actions speak louder than words. I’ll be impressed when Obama and my fellow … supposedly regulate. Until then, talk is cheap.”
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It probably is, but what you propose is more like trying to trap smoke in a bottle.
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The 7.2 Godzillion dollars the GOP handed out is gone, and Paulson and Bernanke were not required to account for any of it.

ogliberal makes a very good point. Most of the people on Wall Street even at the lowest levels get bonuses and count them as a major part of their salary. However, another thing to consider is that this is the way Wall Street chooses to pay its employees low salaries and count on getting a bonus to make up.
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I guess it is comparable to servers in restaurants being paid low salaries and being expected to make enough in tips to earn a decent living.
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Obviously that structure won’t change overnight, but they should be required to show the salary and bonuses of all officers and top management.

The most amazing part of that article is finding out that we now have a President who actually reads the newspaper every morning!

“The NY Times also didn’t break dollars out to show how much were distributed by firm’s who received federal bailout money and those who didn’t.”
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I agree not breaking down tars a lot people that probably shouldn’t be including responsible CEOs.

ogliberal –

So to middle level folks, “bonuses” are analogous to what I called “tips” when I was a waitress? (Except my hourly pay was well below minimum wage, of course).

Time magazine asserts: “These were, to put it mildly, strong words from a U.S. President, and a clear signal that he appears ready to use his bully pulpit, and his executive powers, in a way the previous occupant of the White House did not: He will publicly shame his own countrymen when they appear to abuse the public trust.”

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Indeed. I await Time magazine and its adored, aforementioned socialist to denounce Michelle Obama and the University of Chicago for paying her $300,000 per year for a sham, bogus “job” which was so worthless the University of Chicago has eliminated the “job” now that Michelle “For the first time in my adult life, I am proud of my country” Obama has moved to Washington, D.C.

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BTW, did anyone else barf when they read this from Time magazine: “He will publicly shame his own countrymen when they appear to abuse the public trust.”

plukasiak says
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thank you ogliberal, for pointing out the obvious — that compensation in financial firms is “salary plus bonus”, and that when employees take the job, they do so with the expectation that the bonus will be forthcoming if they do their jobs.

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So is it your assertion that they did their jobs?

Relax Michael, sure these guys took bonuses they most certainly didn’t deserve…but rhetorically they’re against it.
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Honestly, a little mob justice would do the trick. Anyone remember in Japan a few years back a company failed and some of the employees went up to the CEO’s office and murdered him w/ machetes? Yeah, something like that would go a long way to putting some healthy fear into the financial elites.

Pointing and laughing at textee and hula
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BWAHAHAHAHAHAHAHAHA.
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Yall should date, SERIOUSLY!

ogliberal — I feel for you because I used to work on a similar system when I was hired I was told from the outset what my end of the year bonus would be, although there was a discretionary portion that could go up in good times. But its harder to feel sympathetic when so many people are losing their jobs and will never get any kind of bonus unless unemployment rules change drastically.

So is it your assertion that they did their jobs?
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yup. Most of the employees who get bonuses weren’t responsible for the bad decisions that were made in these financial firms (indeed, I’d bet that most of them had little or no involvement at all). Eliminating the bonuses of the average financial sector worker is like blaming the assembly line worker for installing parts that later turn out to be defective.
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The real problem isn’t the bonuses, it the overcompensation in the financial sector in general. The “bonuses” are just part of that structure — but if there weren’t bonuses, salaries would be much higher (and much harder to reduce — keep in mind that the average bonus was down by over 36% this year.)

Plukasiak is right that the real preoblem is the overcompensation of the financial sector.
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Workers in this country have allowed the titans of industry to convince us that unions were bad for us and we fell for it. And when they got rid of unions (thank Reagan) our wages stagnated and they started putting every dime they could find in their own pockets.

53_3,

I disagree. The solutions are waiting to be implemented. All that is lacking is the courage to do what is right and to impose (and enforce) our will on those people who are destroying our nation’s economy to feed their insatiable greed. For example, it is easy to limit excessive executive compensation by simply saying that compensation over a certain amount (expressed as either an absolute dollar amount or as a percentage of that company’s average compensation) will no longer be tax-deductible.

Similarly, you are probably right in saying that the TARP money is probably gone—much of it siphoned off by bankers in the form of bonuses—-and the taxpayers got nothing in return. But you are mistaken in your belief that it is necessarily so. It is not. If it was made clear that those who received these bonuses (and the corporate directors) would be pursued, even hounded and that every legal effort would be made to hold them personally accountable for this money, I believe it is likely that at least some of it could be clawed back. Certainly the deterrent effect of heavy prison sentences followed by a lifetime of poverty on future choices regarding whether to loot the public fisc is indisputable.

So, I reiterate why I am not so impressed with Obama’s “shaming” of these bankers. Shaming does nothing to change the behavior of Davos Man, only going after these wrongdoers and imposing the most severe consequences possible will make an impression on them.

Like I said, talk is cheap. When Obama’s “public shaming” of the bankers is followed within a matter of hours with an announcement that he’s going to give the same bunch of pin-striped gangsters another $250 billion of the taxpayers money with which to gamble and gorge themselves, it’s very hard to be as enthusiastic or impressed with Obama’s fine words as Michael Scherer and Joe Klein seem to be.

I just had a whole post go kaploowee
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But shorter me, the article says the bonuses paid was the sixth most in history according to the comptroller. That to me is a problem and I don’t give a damn what kind of spin is put on it.

ogliberal–
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It’s very hard to be sympathetic to someone who has decided to take a job where compensation is tied to company performance complain when compensation is actually tied to company performance. Nobody forced you into this compensation scheme. And, by the way, my guess is that your “middle manager” pre-bonus compensation puts you in the top decile of earners.

Eliminating the bonuses of the average financial sector worker is like blaming the assembly line worker for installing parts that later turn out to be defective.
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Frankly, taking a 30 percent pay cut is a lot less painful than being fired, which is what has been happening to assembly line workers. Especially what that is getting 178K rather than 240 K.

I don’t disagree, Jay. My point was that most of the people getting these bonuses aren’t the people who made the bad decisions.
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BTW, the number of employees getting bonuses is way down due to “downsizing”/cutbacks. While the total payout in bonuses was down about 44%, the average bonus was down only 36%.
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as I’ve said repeatedly, the problem is that the financial sector in general is overpaid — most stockbrokers are glorified clerks, but they get salaries well into six figures (and titles like “vice president”) because its necessary for the financial sector to provide the image that the services they provide are worth the fees being charged.

I agree that words are not enough. Disciplinary action needs to follow. But I’m very encouraged by Obama’s outrage, because in order for him to implement his “we are all in this together” and “rebuilding the economy from the ground up” philosophies, he needs to engage the ENTIRE public in the process. What he said today will get in the news, piss people off, and lets all of us know we are on notice.
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Weren’t there control mechanisms built into the second stimulus bill relative to how and where the money is spent? I recall outrage that the first bail out had no “conditions” and that Obama’s plan more thoroughly delineates appropriate distribution. Is there a process for which the expenditures can go through a governmental approval process BEFORE they are alloted (such as bonuses, planes, etc.), or is that just crazy talk.

Is there a process for which the expenditures can go through a governmental approval process BEFORE they are alloted (such as bonuses, planes, etc.), or is that just crazy talk.
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its crazy talk, because the purpose of the bailout money is to prevent financial institutions that are (at or near) insolvency on paper from declaring bankruptcy or being taken over by the Fed. In other words, the money is (by and large) not supposed to be “used” because it needs to sit there on the balance sheet.

@MS,
Nice response – well played.

In other words, the money is (by and large) not supposed to be “used” because it needs to sit there on the balance sheet.
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Then if it is “used” (on exorbitant things) they are in violation of the agreement made in order to receive stimulus funds, and for that I say shut their asses down! Sorry lower-level people who work there, but something has got to give.

Obama’s remarks to me were another breath of fresh air. Will it never end? I hope not.
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To ogliberal, 5:11 and plukasiak at 5:31, I say Pfffffffttttt. I was always confused by that salary plus bonus routine even during prosperous times when it might be expected. In my travels I have encountered Austrailians, in which country the thought of a tip to service people is an outrage. That confused me too, yet it is nothing more or less than the high income salary plus bonus routine. I still support the tip culture, and am generous in that regard. Not so with the bonus deal. Let them sell one of their mansions and eat caviar in one of the others.
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Obama spoke for many, many, many, common Americans who didn’t even know of the traditional salary plus bonus routine. Its time seems to be over.

And Gunny, per your poetic Limbaugh hand-j0b turn of phrase at Amy’s dead thread, I attempted to link to a Youtube montage of Rushmore h-j references. Simply brilliant. Apparently, I’m not allowed to post on her threads, something about Jesus, the Virgin Mary and … h-j’s?

I think the most telling statistic in the article was at the end where 46% of those who received bonuses didn’t think they got enough.

Worth repeating, for the pinheads:

Wednesday last: Obama surrounds himself with corporate CEO’s (that gave to his tainted internationalist campaign).

Today: Wags The Labradoodle, er, finger at different peas in the same pod.

Friday: Surrender to Iran.

Saturday: Name the Gaza Strip the 58th state.

Sunday: Skip church, again. Go jogging instead. Watch blue state Steelers lose to the McCardinals.

Monday: Blame Bush for breakfast.

Tuesday: Offer Pockeestahn the carrot of unlimited USO floor shows featuring Ellen Degenerate and Cher, if they dis-arm their 80% Taliban.

Wednesday: Nuke Alaska.

Thursday next: After reading another good idea in Mother Jones, invoke executive order that all rural skoo busses will hereinafter be run on hemp oil alone, or the first born of every Republican household will be forced to watch Bill Moyers’s kid go through rehab again on the PBS Frothline taxpayer dime so help me Allah.

Friday next: Unionize the Coast Guard, Marines, and 82nd Airborne, as punishment to Blackwater (for defending Americans).

Saturday next: Golf shirtless at the Army-Navy Club just to show those D.C. wimps what a Chicago-Hawaiian-Indonesia-Kenyan is made of.

Sunday again: What’s this church thing you speak of?

Monday III…

Pretty good spoof of a right-wing moron, Hulagate. Hysterical.

You know, with hulu standing with the guys who stole so much money that it could not be paid back even if the terms were over the lifetime of this, our dear Earth, his credibility is rising.
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Hey hulu!
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I hope you’re saving money with Geico, because maybe you should pay that money back.
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After all, at 0% interest, and if you start now, $131 / month payments will only take you 4,568,000,000 years!
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BTW, maybe you can put that picture of Madoff up there next to those pictures of that child molester David Koresh, Timmy McVeigh, and Paul Abramoff!
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You can light another smokey candle in your basement cult shrine to the National Republican Victory Monument!
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What a crock…

Loser…

Mitch Guthman:
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I don’t know how they’d be able to trace all that money back to the sources. With Paulson and Bernanke shoveling 6.9 trillion dollars into a black box even FOIL requests couldn’t garner a peek inside, there isn’t much hope of tracing the course of every stream in that gargantuan fund as it flowed out.
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I’m not talking about the TARP money, that’s bad enough. But this stream of money was 23 times as much which also had no oversight whatsoever.
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I would love to see it too, but I’m not going to put the onus on Obama over it. I hope that someone will get around to it.
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I’m not sure just how badly the Treasury has been looted, but I’ve alluded to the sheer size of what the GOP did. None of it passed any muster whatsoever, and I don’t know how historians will look at what they did in their waning days.
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Even if we raised an extra $1,000,000,000,000 a year by increasing the income tax on the very rich to 70% again just to force them to pay it back some way, it would still take 10 years!

STAIRWAY TO BAILOUT HEAVEN
(Stairway to Heaven, DEBT Zeppelin IV)
WilliamBanzai7

Here’s one for all you Bankers out there….

There’s a banker who’s sure all that his bonus is gold
And he’s buying the Stairway to Bailout Heaven.
When he gets there he knows, if the doors are all closed
With a scheme he can get what he came for.
Ooh, ooh, and he’s buying the Stairway to Bailout Heaven.

There’s a sign at Wall and Broad read it close to be sure
‘Cause you know opaque words have two meanings.
Getting fleeced by pinstriped crooks, there’s a jailbird who sings,
Sometimes all of our thoughts are misgiven.
Ooh, it makes me wonder,
Ooh, it makes me wonder.

There’s a feeling I get when I wish to invest,
And I’m trying to avoid innovative thieving.
In my thoughts I have seen rings of smoke in the breeze,
And the voices of those who were taken by Ponzi scheming.
Ooh, it makes me wonder,
Ooh, it really makes me wonder.

And it’s whispered that soon if we all call the regulator’s tune
Then the piper will lead fear and greed to reason.
And a new day will dawn for those who buy and go long
And the markets will echo with laughter.

If there’s a bust in your hedge, don’t be alarmed now,
It’s just a spring clean for the market queen.
Yes, there are two paths you can go by, but in the long run
There’s still time to change the trade you’re hooked on.
And it makes me wonder.

Your head is humming and it won’t go, in case you don’t know,
The market piper’s calling you to join him,
Well now laddy, can you hear the DOW blow, and did you know
Your stairway lies on the whispering winds of greed and irrational exuberance.

And as we wind on down the mythical Alpha Road
Our shadows taller than our NAV soul.
There walks a lady we all know
Who shines transparent white light and wants to show
How every get rich quick scheme can never turn to gold.
And if you listen very hard
The tune will come to you at last.
When all are one and one is all
To be a rock and not to roll.

And he’s buying the Stairway to Bailout Heaven.

These CEO are shameful but Obama should also say that he was and/or is naive(or stupid) for giving them billions without a string attached. He should find a way to take the money back from these shameful CEO who legally robbed Americans.

Here’s what I’m taking away from this: I’m glad we now have a president who admits to reading the newspaper.

as I’ve said repeatedly, the problem is that the financial sector in general is overpaid — most stockbrokers are glorified clerks, but they get salaries well into six figures (and titles like “vice president”) because its necessary for the financial sector to provide the image that the services they provide are worth the fees being charged.
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Sure thing, pluk. But it’s one thing when they are taking small fractions of very large numbers. Outright fraud, banking on the treasury to cover their losses is entirely different. It’s hard to believe these clerks were unaware, given the magnitude of the fraud.
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I mean, the guy at Citibank who wrote up the CD replacing the funds that I moved out of a commercial paper mutual fund didn’t have any impact from this. He’s just happy to still have his job (as he told me).
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So, yes, the work is primarily clerical, and way overpaid. I don’t see why that should elicit more sympathy. Less, rather.

53_3,

Actually, it’s pretty easy to trace the money that was improperly used to enrich corporate executives. Each corporation knows who much it paid its executives. Assuming that they were not entitled to things like bonuses because they were basically cooking the books, they can claw that money back (or they could be forced to do so if shareholder suits against directors for improperly paying out bonuses were made easier by federal legislation, thereby overriding the laws (like Delaware’s version of the “business judgment rule” ) which shields which most corporate wrongdoing from shareholder oversight. Likewise, Barney Frank has legislation pending right now in the House which will permit the Obama administration to claw back TARP money which was used to pay bonuses.

As to putting the onus on Obama to act to claw back TARP money and prevent federal bailout money from being diverted to excessive executive compensation, I don’t really understand your point. Obama is the president. If the onus isn’t on him to act, then on whom should it be? If he’s really outraged, then he is the one man in the world who is in a position to do something about this problem and to recover the bonus money for the taxpayers. On the other hand, if all he’s doing is posturing then he should just shut up and stop pretending that what’s going on bothers him.

Wall Street Better Get The Message: There is a New Sheriff in Town

We have lived through a period when political and business leaders seem to have been able to avoid being held accountable for their reckless and negligent behavior. Sounds like lawyer talk. Well lawyers were intricately involved in this sorry state of affairs. Lets take the Bush administration. What did all the Republican cronies like Cheney learn from the Nixon saga? Don’t put yourself in weak position legally. Don’t testify under oath. Better yet, don’t testify. Don’t provide information under threat of perjury and obstruction of justice, better yet don’t provide information. They artfully avoided political accountability for a litany of constitutional abuses, executive misconduct and malfeasance.

Now lets consider what has happened in the financial services industry. Until recently, our securities laws forced Wall Street to worry about the way it conducted business. Don’t play by regulatory rules with origins in Roosevelt’s New Deal and sooner or later the SEC or an Elliot Spitzer clone will hunt you down. You had to worry about adequate disclosure and a battery of rules designed to protect Joe public and the sanctity of the markets. If you misbehaved, you also had to worry about a ravenous plaintiff’s bar charged with the duty of prosecuting claims on behalf of investors unable to fend for themselves (for a generous fee, of course).

Those New Deal rules are still there. However, Wall Street managed to water everything down to the point where a man made Katrina hits the financial markets and there is little or no means to hold the perpetrators accountable. The SEC was either clueless or too feeble to chase the bankers who designed, peddled and later lied about their exposure to toxic asset backed securities. What about Credit Default Swaps? Oh, those so called financial weapons of mass destruction are not securities within the meaning of the securities laws. Those are cutting edge risk management tools.

How about so called victims like poor old AIG banding together to sue those who set them up with these improvised financial explosive devices. Never mind, those were sold to sophisticated institutions and “accredited” investors more than able to fend for themselves. Sales to these financial sophisticates are not subject to the same legal regime. We now see that “sophisticated investor” means one who expects to be bailed out by Uncle Sam.

Finally, you won’t be seeing any widows and orphans starting class action suits, because no one sold them any securities. Instead, they are accused of being culpable in the great sub-prime meltdown because they fell prey to the army of mortgage brokers who aggressively peddled shadow bank loans. Mortgage brokers owned by who else? Wall Street investment banks like Merrill, Lehman and Bear Stearns. Shadow bank loans? Yep, AAA legal advice.

Let the markets regulate themselves! That is the fundamentalist mantra of the lords of the Street. Well, that is what the markets were actually doing until the SEC decided to act on the shorts. Self regulation came in the surprising form of punishment by the shorts. After all, it was the hedge fund industry, Messrs Einhorn et al, and not the SEC that called Lehman and AIG to the carpet. The SEC, fixed the short problem. Trading bets against financial institutions were temporarily banned. In a comic twist, the SEC planed to force hedge fund managers to testify under oath. Something more than you can expect from the likes of Harriet Myers and Alberto Gonzalez. Ultimately, the reckless bets that the investment banks made with shareholder capital went unpunished.

Well you begin to see how what seems like one big scam is actually a legally airtight apparatus for screwing the public in an indirect manner, albeit without being held legally accountable. Time to throw out all of the New Deal regulatory assumptions and start all over again. Wall Street, like the Bush administration, managed to innovate its way out of accountability.

Next came the TARP bailout. Hank Paulsen, a former Goldman Sachs honcho connived Joe taxpayer into shelling out billions to save a corrupt and broken financial juggernaut. Plenty of new opportunities for Wall Street bankers to make a killing cleaning up their own mess.

As we have seen, Paulsen threw the first tranch of TARP money out of the helicopter without attaching any strings. No one seems to be able to explain where the money has gone or the magnitude of the losses yet to be uncovered. Now we learn that billions of dollars were paid in bonuses to employees of institutions that are essentially insolvent absent taxpayer largess. Paulsen and his fellow Goldman Sachs henchman Neel “Kash n Carry” can be credited with designing an opaque bailout that lays perfect ground cover for the continuing incompetence and greed of the scions of Wall Street.

In the latest Act of the Bailout Soap Opera, BAC’s CEO Ken “Screwless” Lewis is claiming that management of BAC should not be held accountable for proceeding with the Merrill Lynch merger despite having knowledge of surprise mega losses last December. His defense, “the Feds made me do it”. This Bailout defense is the latest twist in the science of executive non-accountability. The bonus hissy fight between Screwless Lewis and John “Complain” Thain is a comedy that rivals Abott and Costello’s “Who’s on First” (http://www.youtube.com/watch?v=sShMA85pv8M)

There you have it. The TARP Bailout has created a black-hole of corporate accountability. If you are a stakeholder (a shareholder, creditor, bondholder, taxpayer) it is impossible to divine who the Boards and managers of these companies think they owe their fiduciary duty to.

The Obama Administration certainly has its work cut out for it. It looks like we are off to a good start. Someone should have read the “riot act” to the Consumer Finance Industrial Complex long ago. Yesterday, President Obama took the first shot across Wall Street’s bow. “Shameless” behaviour will no longer be tolerated. He characterised Wall Street’s 2009 bonus payout as “the height of irresponsibility”. Concurrently, a message was sent to Citigroup, –your not leaving on a 50 million dollar taxpayer subsidised jet plane. Richard Parson’s, Citigroup’s incoming Chairman, met with Obama earlier this week. One can only guess what was said in that meeting.

One hundred years ago a prominent Wall Street lawyer named Franklin Keyes, Esq. published a tract entitled: “Wall Street Speculation, Its Tricks and Its Tragedies”. In it he said: “Wall Street is dominated by some of the brainiest and shrewdest men in the country, natural born sharpers and schemers, and before the average man can get the better of them, except through the merest chance, he will have to eat brain food for a long time.”

Finally, we have a President who has eaten plenty of brain food for a long time. Wall Street better get the message: There’s a new sheriff in town.

WilliamBanzai7

First, ogliberal, it’s good to have someone who can bring a point of view that presumably gives you a balanced but insider view of Wall Street — not one of top guys under so much fire, but not some mailroom beginner, either. I personally find what you’ve written very informative and well-presented.

I suspected, but didn’t know, that there might be something left out of the picture in the media reports, whether the bias was conscious or unconscious on the writer’s part being rather beside the point, now anyway.

Clearly, there have been *some* abuses, such as the guy who redecorated his office and blew $1.2 million of his company’s pany doing so. Then there were the Big Three auto CEO’s flying to the capital in individual corporate jets — a perfectly normal thing to do — *in* perfectly normal times.

I don’t begrudge a person getting a whole lot of benefit when he or she has brought even more benefit to his company, at whatever scale (which I had to acknowledge the mid-level folks such as you). Were I a shareholder in your firm, assuming it’s listed, and you landed your firm a contract that brought in, say, $10 million profit (and I stress “profit,” all accounting smoke and mirrors aside) over the next 12 months, it wouldn’t bother me at all for your firm to award you significant compensation.

I do resent the person who plays a pea-and-shell game, a person high enough up the ladder to pull it off, in which he gets way too much payback — especially in the run-up to a merger and the other company doesn’t even know his game. There have been allegations of that.

Of course, the government must bear a large part of the responsibility. Congress and the previous administration threw money at the problem without sufficient controls, but some economists are arguing that even that was better than doing nothing. We can’t blame Bush alone, nor the Republicans or Democrats, nor the other players. They all played a role. Ditto the current government; there are many players, with plenty of responsibility to go around, and then some. Both groups deserve credit in at least one way, IMHO: the previous group didn’t sit around with everyone wringing their hands doing nothing, and neither are the current actors. Action has been taken.

Thanks for sharing your experiences and perspective.

And ivb3016, glad to see you bring in the waitperson-tip analogy. While not an identical situation to the Wall Street executive’s, it plenty close enough, especially in the broader view, to be useful to help people who are even less informed than me (if there is such a person!) to catch the plot, so to speak.

And Mitch Guthman, your contributions have interested me. In one, you questioned the value and effectiveness of using shame as a tool for behavior modification. Let me submit some thoughts to you: what made the Big 3 auto big shots crawl back to Detroit (well, okay, not crawl, since they returned on their corporate jets), empty-handed, then return by car next time they went hat in hand? What made the company that had ordered the 12-seat luxury jet, priced at a cool $50 million, cancel the order? I submit that shame at the very least played a significant role, and I personally suspect the defining one, in both cases.

To be humbled can be a salubrious experience. Most of us have experienced being publicly shamed, if not in such grand contexts, so most of us no it’s no — damned — fun.

Of course, there are those individuals who are arguably so psychologically and socially impaired as not to have a sense of guilt in any context you and I understand, and those people do, indeed, require, um, “stronger correctives” than shame, since the point is utterly lost on those people. But looking through the backside of bars can get even the most evasive attention.

There are others of you who have made valuable contributions to this thread as well, but I don’t want to write a magnum opus, so I’ll leave it here.

Sorry for the grammar and spelling goofs above; that’s what I get for not proof-reading. Jeez.

In one, you questioned the value and effectiveness of using shame as a tool for behavior modification. Let me submit some thoughts to you: what made the Big 3 auto big shots crawl back to Detroit (well, okay, not crawl, since they returned on their corporate jets), empty-handed, then return by car next time they went hat in hand? What made the company that had ordered the 12-seat luxury jet, priced at a cool $50 million, cancel the order? I submit that shame at the very least played a significant role, and I personally suspect the defining one, in both cases.
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I don’t think that either move was motivated by a sense of shame — they were “business” decisions made by people who were looking for massive government handouts, and making purely symbol gestures of fiscal responsibility was the price of getting tens of billions of dollars in handouts.
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Do you really think that the big 3 execs are eschewing private jets now? Do you really think that Richard Parsons is going to be booking commercial flights? Of course not — and not only will Parsons continue to use private jecs, the costs involved in cancelling the contract and leasing (instead of buying) luxury private jets may wind up outweighing the costs of the Citibank jet instead.
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If these people had any sense of shame, they wouldn’t be at the top of the corporate ladder to begin with. And while you can certainly mock, humiliate, and embarrass these people, you can’t provide them with a sense of shame. Indeed, their sense of entitlement will make it impossible to them to acknowledge that shame is the appropriate response; instead, they’ll consider themselves scapegoats.

They make contaminated peanut butter and reward themselves with bonuses. The current Peanut Butter crisis is a perfect metaphor for the Republicans. ……………

http://thefiresidepost.com/2009/01/29/republican-peanut-butter/

Just a few notes. To all of those who don’t sympathize with my situation – good, I wasn’t looking for your sympathy. My sympathy goes to the 12% of my former co-workers – most of whom were good people, good workers, and not senior managers – who were laid off by my company in the last quarter of 2008…and the millions like them across the nation. I was expecting no bonus in 2008 so don’t count me among the 46% who thought their bonus was too low. I’m just happy to still have a job.
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The goal of my original post was to point out that by simply publishing a single lump sum dollar amount for the entire industry, the Times is not telling the entire story. It could be that 90% of that $18B went to people already bringing home $200K or more a year. That wouldn’t surprise me at all. If that’s the case, then it is a scandal and despicable. But it could be that a lot of it went to lower level folks who are not at all to blame for the abuses of the people running the industry, the masters of the universe. And it could be that these folks saw a significant cut in their 2008 pay as a result of decreased bonuses, regardless of how well they performed their job. I simply would have liked to have seen how and to whom that money was distributed. (and how much of it was distributed by firms that received TARP money) Throwing a single dollar amount out there without any kind of breakdown is kind of like the Bushies claiming that the “average” tax cut under their plan is XXXX amount of dollars….it doesn’t tell the whole story.
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For the record, I would love nothing more than to see the “salary plus bonus” structure go the way of the Whigs. I’d rather my firm pay me what they think I’m worth in salary and then reward me – or not – each year with a bonus based both on my personal performance and the ability of the firm to pay that bonus based on company performance. And this should be applied for all employees – no guaranteed multi-million dollar bonuses for execs who run their companies into the ground.

For the record, I would love nothing more than to see the “salary plus bonus” structure go the way of the Whigs. I’d rather my firm pay me what they think I’m worth in salary and then reward me – or not – each year with a bonus based both on my personal performance and the ability of the firm to pay that bonus based on company performance. And this should be applied for all employees – no guaranteed multi-million dollar bonuses for execs who run their companies into the ground.
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Hear, Hear!!
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I have some good friends in the reinsurance industry and that is how their compensation works – appropriate salary then bonus based on personal and company performance.

“As to putting the onus on Obama to act to claw back TARP money and prevent federal bailout money from being diverted to excessive executive compensation, I don’t really understand your point.”
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The point is that the TARP money is but 1/23 of the total amount of other money passed out by Bernanke and Paulson (who refused requests under FOIL to reveal the particulars of the money they handed out to these same (assumed, since we don’t really know) bankers and financial institutions.
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As anyone saw last week even with the report on tax shelters (it’s in the previous blogs here), some of these corporations are experts at funnelling money offshore (one, a commenter noted, had 158 subsidiaries in the Caymen Islands alone!).
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If Obama is able to find just who and where that money went, I will cheer as loudly as you, but if their shell game is successful, and it might just be, I’m more interested in putting a few former Bush officials in jail for doing it than I am in blaming O.
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After all, he didn’t create this mess…
http://www.cnn.com/POLITICS/analysis/toons/2009/01/28/mitchell/index.html

Ghouliani, in classic Republican/New York elitist form, defends the Wall Street bonuses for his Manhattan brethren. His logic being, of course, that NYC just can’t be the overpriced, 5-million-dollar-apartment gilded cage it is now without those bonuses. I mean, my God, how else will Mr. Big and his dopey gf from Sex and the City be able to lunch?
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http://thinkprogress.org/2009/01/30/giuliani-wall-street-welfare/

mekhongkurt,

What plukasiak said. Also, I think you (and arguably Obama, assuming he is speaking and acting in good faith) have missed is that these changes regarding the use of private jets are basically small beer—-mere symbolic gestures. There is no reason to believe that “shaming” corporate executive will cause them to either return their ill-gotten gains or forgo future opportunities to hugely enrich themselves at the expense of either shareholders or taxpayers. Certainly, the fact that none have forward to disgorge even a dime of their loot should tell you something about the difference between political symbolism and real change. Moreover, as plukasiak says, there is a world of difference between not using your corporate jet today and recognizing that it is inappropriate for corporate executives to live and travel in such opulence at the expense of their shareholders or the public fisc.

As I said before, the real problem is that CEO’s and investment bankers can take outrageous risks with large pools of other people’s money. If these gambles pay off, they pay themselves vast, obscene sums. If, however, things do not work out they can still pay themselves vast, obscene amounts of money, which they do not have to give back.

If there is no real reform of the compensation culture, there will be no real change and our economic well-being will continue to be held hostage to corporate executives’ greed. If Obama means what he says (and isn’t just posturing) he should immediately support Barney Frank’s efforts to claw back unjustified bonuses. He should say that all future rescues will be conditioned on clawbacks of at least five years “bonuses” and stock options. And he should support the changes which I’ve suggested in terms of the way corporate CEO’s and other executives pay is treated for tax purposes, namely, the the cap be increased to, say, $5 million per year but that the cap applies to all form of compensations, including bonuses, housing allowances and the use of the corporate jet. That would be change you could really count on.

Well, at least we know, among the GOP luminaries, Judy Ruliani, er, Rudy Ghouliani, I mean, is all for the excesses following the GOP’s Grand Theft Treasury:
http://www.cnn.com/2009/POLITICS/01/30/giuliani.corporate.bonuses/index.html
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To this idiot, it’s a stiff upper lip, stay the course, stare straight ahead, and march right on by any reform. In his mind, what’s good for New York is good for the county.
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Damn the torpedoes, full speed ahead, to infinity and beyond!
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Oooof! Ouch.
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Damn, that hurt like hell…

Mitch Guthman:
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Here’s a start, at least. I’m not sure if it is targeted the right way. I’m not sure about what these salary limitations mean:
http://www.cnn.com/2009/POLITICS/01/30/executive.pay/index.html

53_3,

Thanks for the link. Yes, this is exactly what we need to be doing except that we need to make any new caps much more difficult to circumvent than the existing $1 million limit. It is essential that the all forms of compensation be counted towards the cap. The market value of stock options, bonuses and all perks of any kind whatsoever need to count against the cap. Every single penny that a corporate executive receives from the corporation counts against the cap, without exception!

I does seem that at the very least, whether money can be retreived or not, O’s intent is there. It seems that this is a “popular” bill, maybe short on the technical issues.
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Hopefully that will get fixed in the process of maturation.

Thanks to those of you who replied to my posting, particularly the part in which I discussed “shame.”

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I wrote on the presumptuous assumption that individuals acts reflected a broader sense of shame, but you folks have caused me to pause and reflect, in an almost military way (about which I know a bit) on the differences between *tactical* decisions and moves and “strategic” ones. You’re probably right that those executives foregoing a luxury corporate jet ride (or purchase) today is a short-term — i.e., tactical — business decision, not a strategic one.

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Perhaps T. Boone Pickens might be a useful model for those executives to study. Pickens makes absolutely no apologies for either his background in oil or his move into wind energy with the idea of making more buckets of money in that field (or in natural gas, for that matter). Yet if he succeeds, he may do some good for everyone else, regardless of how “pure” or altruistic his motives may be — or how greedy.

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The late Sam Walton could be another model. I remember when a lady entered an aisle in a Texas Walmart and fell — the floor was wet, and warning signs were at each end of the aisle, but she went anyway. Naturally, she sued. Walton *personally* went to Texas, offered to pay ALL her expenses PLUS a hefty settlement — but she insisted on pursuing the suit. I don’t know Walton’s motives, of course, but whatever they were, in the part of Texas where the story got heavy play, there was considerable appreciation for his actions in and of themselves, and a lot of putting the woman down (which I feel she deserved).

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Looks like we may get some caps after all — some *meaningful* ones. Sure hope so.

[...] shocked by that as well," he added. This is a long way from the adjectives that Obama has typically used to describe such payouts, words like "obscene" and "shameful."About a year ago, on January 29, 2009, Obama described Wall [...]