Wall Street's most prominent firms admitted they helped cause the 2008 financial meltdown. Bad boys. That's okay. The government will bail you out. When that occurred, they were supposed to stop giving employees million dollar bonuses. But they're still doing it. And President Barack Obama called it obscene on Thursday.
Beginning today, JPMorgan Chase & Co. will release its 2009 financials. Other big banks will follow shortly after that. These are expected to show that compensation is near record levels.
The numbers are staggering. The six biggest U.S. banks are paying $150 billion for 2009 compensation. Why? Because the banks have had a remarkable financial turnaround - fueled by the bailout! Fueled by your money. And mine. And all of the little people out there who pay their taxes every year. Why are they allowed to do this? Power. The tremendous power of the financial lobbyists. The banks argue that if they don't compensate their performers according to their performance, they'll go elsewhere. Well, that makes no sense. If all the banks stop paying them such ridiculous bonuses, they've got to take it or leave it and get into another line of work.
Douglas Elliott, of the Brookings Institution and a former investment banker, says, referring to the government's bailout money: "The way the general public sees it is that we wrote a $700 billion check to the banks, and they got to burn through it as they pleased." In other words, they basically split up the windfall and everyone got a piece of the pie. A piece of our pie.
Of course, if the government hadn't stepped in it's possible these bonuses wouldn't be quite so over the top. When the financial meltdown began, banks got access to cheap government loans and other subsidies. And they weren't required to lend this money back out. Thus the tightening of the credit markets. Why should they lend it out when they could just divvie it up among themselves? It doesn't take a rocket scientist to figure out the answer to that one.
Some of them decided to invest it first, before taking it home. In some cases, the money was invested in risky securites. They were using the old "risk/reward theory. It worked. Some of these paid off big when the markets recovered. That resulted in huge profits resulting in even bigger bonuses. In the first three quarters of 2009, Goldman Sachs profits doubled to $8.4 billion. Estimates indicate the yearly profit to exceed $10 billion.
Now here's the part that will tick you off. Almost $17 billion of that was allocated for compensation from January through September. That equates to over $600,000 for each of its 31,700 employees. Naturally, it won't be divided equally. Is it ever?
When insurer American International Group Inc. paid $165 million in bonuses to hundreds of employees, employees of the financial unit that destroyed the company. Treasury Secretary Timothy Geithner referred to Wall Street pay as "out of whack." he promised to get the practice under control
But that may not happen. The lobbying group is powerful. In the past decade, they have spent more lobbying dollars than any other group. They're currently spending millions to fight financial reform measures currently being considered by congress.
Of course, one hand washes the other. Wall Street is especially generous to polical candidates. They contributed $476 million during the last election. The most generous donors included Goldman Sachs, Citigroup, and JPMorgan Chase.
Washington is working feverishly to sooth the public anger. But they have a tough road ahead of them before any changes are made. Their efforts could still be stopped by the huge and powerful financial lobby. One idea the Obama administration is considering is a 10-year tax on the largest banks to pay back a remaining balance of $117 billion. The Federal Reserve is also looking at a program to review pay practices and provide them more oversight on comensation paid by the largest banks.
The FDIC is also investigating fees banks pays and how a bank's compensation plan may encourage its employees to take excessive risks with the funs in order to receive higher returns.
The Federal Deposit Insurance Corp., which regulates most of the nation's banks, is seeking public input on a plan that would tie the fees that banks pay for deposit insurance to how much a company's compensation plan encourages workers to take risks in order to achieve higher returns.
Rep. Dennis Kucinich, D-Ohio, said, "What you're seeing is a public-be-damned attitude from the banks. They're rolling in dough while the taxpayer has to sacrifice. That's an outrage."
It appears that the hard-working American people have, once again, been duped by the wise and greedy Wall Streeters. They even duped the people who have the power to prevent this type of outrage. But, perhaps there isn't really that much power in Washington after all. I don't look for anything to change. The bankers have all the money, and when you have the money you have the power. And if you run out of money, just ask for more. We're stupid. We'll give it to you. Again.
What's going on at the Denver Airport? Have you ever visited it? The murals are quite disturbing. One depicts an Armageddon-like vision, including children in caskets. Another portrays an alien-looking character wearing a gas mask and impaling the white dove of peace on the tip of his sword. Other things seem amiss as well.
