Thursday, January 29, 2009

Scandal on Wall Street: Corporate Bonuses Amidst Depression = Class Warfare

While scandalously high corporate bonuses have been the norm of late, as executive "compensation" has badly outpaced the pay of people who actually work for a living, it seems especially flagrant to "reward" executives with hefty bonuses as the financial sector tumbles. Yet, according to Ben White of the New York Times, that is exactly what's happening.

My meager stock portfolio - like the portfolios of so many - is worth on paper a fraction of what it claimed to be worth a couple of years ago. Yet as banks fail and the financial sector raids the American taxpayers, first in the portfolio and then, gun and ski-mask in hand, in the form of government subsidies we laughingly call a "bailout," those who have run these economic institutions into the ground have been rewarded with billions in bonuses, the sixth largest such haul in history.

Bonuses, part of the great euphemistic system that grants "compensation" to the great sages of the marketplace with the rest of us earn our paltry salaries, serve a two-fold purpose: to reward performance, and to retain the services of those who have performed well. But who on Wall Street merits a bonus in this economic climate? White captures the scandal of it well in this understated line:

...Wall Street disbursed billions despite staggering loses and a shrinking job market.


In other words, to say that these bonuses - which amount to the sixth largest in history! - are without justification may be the greatest understatement I will utter this young year. They can't be a reward for good performance, as there has been no good performance to reward. In fact, many of the companies offering these bonuses have been run into the ground by those they are now "compensating." And, these bonuses are certainly not offered to retain the service of valuable employees. In this job market, where are they going to go?

White notes that Merrill Lynch - a once-proud institution who has now appeared twice in Washington, hat in hand, begging for a "bailout" - just paid out somewhere between $4 and $5 billion in bonuses. Let me get this straight. They did so poorly that they now need my tax dollars to secure their very survival, yet they can afford to pay out billions in bonuses to the people who have put them in critical condition!

I heard an awful lot, during the most recent presidential campaign, about "class warfare." Let me stipulate that this is class warfare. The use of my tax dollars to subsidize billions in corporate bonuses so that the rich don't have to give up their inalienable right to obscene wealth, is class warfare. It is robbing to poor to pay the rich, and should be infinitely more scandalous than president Obama's plan to raise the taxes on the highest income bracket to pre-Bush levels.

11 comments:

brian beech said...

taking that further, many fiscal conservatives look at things like:

- $50 million for the National Endowment for the Arts

- $150 million for the Smithsonian Institution

- $50 million for the National Cemetery Administration's monument and memorial repairs

- $400 million for global warming research

- $100 million for reducing the danger of lead paint in homes

- $2.4 billion for carbon-capture demonstration projects

- $50 million for NASA facilities that may have been harmed by natural disaster


As paying for things that are unneeded and unnecessary. I agree with you on your points though (mostly). We have money forcefully taken from us and doled out to these companies that aren't even able to sustain themselves; then they give it to the leaders of that company. Theft at the most blatant level. Theft from the American people; whom supposedly run this country.

I could vent on this for years...I shall not. :)

Anonymous said...

this disgusts me but does not surprise me. I respect the philosophies of some companies, like Costco, which offer good products and good prices and pour the majority of their profits back into employee wages and benefits (working at Costco is a true living wage). But most companies, it seems (Wal Mart comes to mind) do whatever they can to pay their employees poorly and limit benefits while sending as many dollars as possible into stockholder's pockets. The entire system is corrupt. So, no, it does not surprise me the WS execs are giving themselves huge bonuses, and distributing bonuses among those they know. They probably think none of this is their fault, really.

It's like the CEO culture in acadaemia: one sure way to get to be President of a college is to fail miserably and be drummed out of your prior job as President of a college. It is amazing to me how those in those positions protect themselves and those they view as peers. I've seen the same thing in hospital admins.

What brought on the current crisis? Greed. Greed at the micro and macro level, but just plain greed. The bonuses are more of the same.

Troy

Liam said...

It seems Wall Street is now run by the same type of people who ran the previous presidential administration: irresponsible incompetents with an unexplainable sense of entitlement and not an atom of decency.

brian beech said...

Give me a break Liam. With the Clinton administration's decency, how could you even think about saying that; not to mention the Democratic party's fostering of an entitlement mentality with their social welfare thought pattern.

Liam said...

Brian,

Why do you think that because I criticize Bush, I’m pro-Clinton? I have a lot of problems with Clinton. Still, can you really defend Bush without referring to Clinton?

As far as entitlements go, I’m not sure what you’re talking about. Here are some examples of entitlement: Bush himself, Blackwater, Enron, Michael Brown… I could go on. The entitlements in this country have enabled the gap between the rich and poor to widen drastically over the past twenty years, especially over the last eight. Also the infant mortality rate among African-Americans in our country rivals that of third-world countries. Those entitled poor people…

Personally, I’m in favor of clothing the naked, housing the homeless, and feeding the poor. I consider that what a just society does.

Brian Beech said...

Liam,

We agree on one thing; I'm also in favor of clothing the naked, housing the homeless, and feeding the poor. I also believe that is what a 'just' society does (if there is such a thing). I just don't believe gov't is the way to do that - gov't is not society, even if it is supposed to represent society.

As far as defending Bush, I have a lot of problems with what he did/didn't do. But I bring up Clinton because it gets old seeing Bush attacked for everything - and I didn't see Clinton attacked for everything he did. Clinton even cut Medicare by 17% and had it go into affect in Bush's term - and Bush got blamed. Ignorance is bliss.

When you talk of entitlements, you must have a different definition than I do. As far as I know, Bush hasn't made any laws to give himself special rights, or that of Enron. If you want to talk about entitlements, let's talk about American's belief that the gov't owes them something and needs to take care of everything. I saw it in Katrina as the Mississippi Gulf Coast handled things quite well (considering the massive devastation) and the inept leadership of New Orleans that successfully, with media frenzy help, pushed any responsibility off to the federal gov't. Night and day!

I suppose you're tying the infant mortality rate among African-Americans to a lack of money? That's a bold conclusion to jump to.

Brian Beech said...

Liam,

I leave you to the last word. Use it well. ;)

Liam said...

Brian,

Just a couple of things. Whatever Clinton did well or badly, Bush had eight years, almost all of it with a lockstep GOP congress, to do what he wanted with the country. You can see what we have on our hands now.

Society is more than government, but government is best positioned to marshal resources and favor certain sectors of society. Lately it has been favoring the rich. Enron helped Bush write his energy policy. Blackwater and Halliburton got lucrative no-bid contracts. That's what I mean by entitlements.

I don't think the situations in New Orleans and Mississippi are comparable. Both were hit by a hurricane, but NO suffered massive flooding in a densely populated area. I won't sing praises of the local administration there, but the response of the federal government was shameful.

The infant mortality rate among African-Americans has a number of causes -- institutionalized racism, broken neighborhoods, etc. Just "money" is not the question -- more spending is needed, but also a determination to address deep problems of social injustice.

Michael Westmoreland-White said...

The most disgusting was the complaint of CEOs that they cannot live on $500k per annum!!! If you can't live on $500k, you don't need to be running CitiCorps (etc.), you need to be going back to budget 101.

Paul said...

Greed !!! It is all around us. And it has taken a toll on America.

Michael Westmoreland-White said...

I am starting a new series on moral discernment and would appreciate your import.