We're starting to see this weird backlash to the rising populist anger over bonus payouts to financial industry employees, who apparently prop up New York City all by their lonesome buying luxury goods so they deserve whatever they get for sending the economy into the tank.
To President Barack Obama, Wall Street's $18.4 billion in bonuses is "shameful." To thousands of bank employees who don't sit in corner offices, that money helps pay the bills. Outrage over the bonuses reached as high as the White House this week following news that financial firms were rewarding employees even as they were being bailed out with billions of taxpayer dollars. The feelings are understandable: The average Wall Street bonus of $112,000 was about twice the average American's income.
But the issue is a complicated one.
While Wall Street investment banks and other financial firms make headlines for the millions paid out to certain executives, more modest bonuses go to workers from human resources representatives to secretaries as well as employees who actually made money for their companies last year.
Jason Weisberg, vice president of the Wall Street brokerage Seaport Securities, said bank employees count on performance bonuses like salesmen count on commissions.
"What are you supposed to pay them?" Weisberg asked. "Or are you not supposed to pay them? And if you don't pay them, how do you expect that employee to stay employed at that company?"
I've worked for, what, between 15 and 20 years now, and I think I got one bonus in my life for a few hundred bucks, and another time I got a $5 Starbucks gift card and a picture frame. You have seriously got to be kidding me. Bonuses are not salaries. Only a self-absorbed and supremely entitled person would think so. If people are relying on bonuses their companies aren't paying them enough. If we're talking about pay for performance bonuses, you can cherry-pick a division or two, but by and large nobody made any money, in fact they crashed the economy, so this "bonus" you speak of - from insolvent banks - isn't deserved.
And I think it's clear that most people are talking about bonuses at the upper tier - for the executives who made the worst decisions that sunk the financial system. This is clever muddying of the waters by the PR staffs, but we're really talking about the ridiculous inequality and lack of accountability for those who failed their companies and the economy. And as I said yesterday, we can get real mad about bonuses, but bailing out these bad actors for trillions is really worth more of the ire. Congress and state Attorneys General can work to get the bonus money back, but if we don't fundamentally restructure the banking system after recapitalizing them, all the bonus clawbacks in the world isn't going to change the fact that we've been ripped off.
The creation of a government bad bank to buy toxic assets is necessary, but then the government will need to take control of and restructure major banks to fix the system, one economist at the World Economic Forum in Davos told CNBC.com.
"They have to do a bad bank," Harvard Economics Professor Ken Rogoff said. But "if that's all they do then it's idiotic."
Institutions like Citi and Bank of America will have to go, boards will have to be fired and equity stakeholders will be wiped out, Rogoff said.
The plan could mirror the one Sweden implemented, where all troubled banks were nationalized, their balance sheets were cleaned up and the good parts of the businesses were sold to the private sector.
That solution was "much cleaner," he said.
But that's too clean for those with ideological blinders on.
...Claire McCaskill is pissed and is calling for a maximum wage (limiting execs who accept TARP money to no more salary than the President of the United States). Which is great, but again, they can have all the bonuses they want if we don't have to pay 4 trillion to make them solvent again.