Bailing Out Banker Bonuses
Bailouts: Amid coast-to-coast cutbacks and layoffs by the thousands, bankers at the center of the financial crisis pay themselves $1.6 billion in taxpayer-funded bonuses. This is a major symptom of what's wrong.
In any real crisis, everyone sacrifices to weather the storm. But the panicky $700 billion bailout that Congress approved for 116 banks in the fall shows an entirely different sense of urgency.
On Sunday, the Associated Press found that $1.6 billion of bailout cash was converted to gravy for 600 bankers. They got bonuses, club dues, financial planners, corporate jet travel, daily limousines and home security systems, courtesy of the taxpayers.
This is a bad sign of what's ahead if failure continues to be rewarded and government keeps propping up uncompetitive companies and industries in crisis.
It's obvious these banker bonuses had no correlation to productivity or performance. In the real world, enterprises provide such benefits only when executives produce results — that is, profits.
On Monday, for example, executives of Caterpillar gave up compensation to ensure that their firm would survive. The banks — especially investment banks — seem to play by different rules.
AP asked 21 bank spokesmen how their companies were spending their taxpayer money and got only evasive answers. Goldman Sachs told AP it needed to retain and motivate its talent to ensure its "continued success," not mentioning where this talent is threatening to migrate in a global and industry downturn.
To take bailout money, even a mere $1.6 billion, and blow it on bonuses is a violation of the public trust.
We reluctantly backed the bailout because banks' main product, money, is a critical medium of exchange. But to use it for perks makes voters distrustful and cynical, and far more reluctant to save cash for a real crisis.
It also makes other bailout mendicants far less willing to make necessary sacrifices. The United Auto Workers cite the bank bailout as reason to not give back bloated benefits that render the Big Three uncompetitive. Their argument has just been fortified by the bank bonuses.
But with unemployment rising fast, there's a real crisis and real sacrifice is necessary, especially from those who require the federal bailouts. Bank bonuses should wait until these banks are profitable; so should raises in inflated salaries.
Maybe Goldman's $600,000 earners can make do on the $400,000 salary of a U.S. president or the $200,000 salary of a senator to show some sort of leadership. At a time like this, they should be marshaling all their resources to invest in viable growth.