by J.M. Sylvan
American Reporter Correspondent
February 10, 2009
DUMMERSTON, Vt. -- On Friday, Sen. Claire McCaskill, D-Mo., said what a lot of us are thinking about Wall Street fat cats and how they are taking federal bailout money while handing out bonuses and pay raises to themselves.
"They don't get it," she said. "These people are idiots. You can't use taxpayer money to pay out $18 billion in bonuses...What planet are these people on?"
McCaskill said those words on the Senate floor as she proposed legislation to cap executive pay at any company getting federal bailout money at $400,000, or the U.S. president's salary.
"Right now, they're on the hook to us," said McCaskill. "And they owe us something more than a fancy waste basket and a $15-million dollar jet. They owe us some common sense."
Granted, my senator, Bernie Sanders, was saying this sort of thing last year. But since he is a socialist from Vermont, nobody paid attention to him. But as it usually happens, it takes some time for the Democrats to catch up to Bernie.
Capping executive pay at banks and other institutions that take federal bailout money is an idea whose time has come. That's why the Obama Administration announced Wednesday a plan to impose a cap of $500,000 for top executives at companies that receive large amounts of bailout money. Under the plan, executives would also be barred from receiving any bonuses above their base pay, except for normal stock dividends.
Let's review how we got to this point. The federal Troubled Asset Relief Program (TARP), the Treasury Department has handed out $293 billion to shore up banks such as Bank of America and Citigroup and insurer American International Group. U.S. automakers General Motors and Chrysler also got TARP money. Recipients of government funds must follow rules limiting executive pay, but they haven't been enforced with any sort of vigor.
Despite a down economy, Wall Street financial firms handed out $18.4 billion in bonuses to employees - even though the government had to save the companies from collapsing. That $18.4 billion is roughly the same amount given out during the boom years in the mid-2000s. Last week, President Obama used words such as "outrageous," "shameful" and "the height of irresponsibility" to describe this largesse.
The Wall Streeters certainly didn't like what President Obama was saying. "I think President Obama painted everyone with a broad stroke," Brian McCaffrey, a Wall Street lawyer, told The New York Times last week. "The way we pay our taxes is bonuses. The only way that we'll get any of our bailout money back is from taxes on bonuses. I think bonuses should be looked at on a case by case basis, or you turn into a socialist."
Of course, the financial folks love socialism when the government gives them money. But suggest that the federal bailout money be used to stimulate lending rather than pay bonus, and you're Karl Marx incarnate.
"On Main Street, 'bonus' sounds like a gift," Larry Meyers, who works for an Italian securities firm, said to the Times. "But it's part of the compensation structure of Wall Street. Say I'm a banker and I created $30 million. I should get a part of that."
Using that line of reasoning, if your poor judgment and greed resulted in the loss of $30 million for the bank, those losses should come out of your pocket. Of course, things don't actually work that way. We've seen case after case of people who have destroyed companies, yet walked away with their pockets stuffed with money.
Given the shaky state of the U.S. banking industry, Citigroup, Bank of America and other major banks have no choice but to take federal bailout money. The government shouldn't have to offer the CEOs a bribe. That's why Obama's proposal is a good one. If you're going to take the government's money to keep your firm from going bankrupt, you should have to abide by the government's terms for executive compensation. Don't like the terms? Don't take the money.
Remember, this is our money being handed out to the fat cats. The least the Treasury Department can do is ensure that this money is being used productively.
Randolph T. Holhut, a journalist in New England for nearly 30 year, edited "The George Seldes Reader" (Barricade Books). Write him at email@example.com, and read his blog about The Harvard Classics, updated daily at http://hclassics15.blogspot.com.