Wall Street Executives Don't Get How Angry Main Street Is
Posted: October 23rd, 2009, 1:16 pm
<center>Wall Street Executives Just Don't Get How Angry Main Street Is
by Beth Isbell</center>
Main Street is angry. Really angry. Wall Street executives excessive risk taking almost caused the biggest financial collapse since the Great Depression. If it weren't for a huge taxpayer funded government bailout, it would have. It still feels to most of America like it has despite the bailout. You would think that their near fatal behavior would cause them to reform their ways. Wrong. Instead they have taken taxpayer money, refused to dole out loans to deserving businesses as intended to boost the economy, and instead continued to stuff their pockets with it while continuing to take excessive risks with an attitude that hey, we're too big too fail, so we don't have to worry about it. Anger is probably an understatement for what Main Street thinks. If murder and lynching weren't illegal, Wall Street executives would be hanging from every tree in Central Park. And who could blame the angry mob?
Despite having their butts saved by taxpayers, Wall Street executives continue to engage in outrageous and shocking behavior. Consider these recent articles ...
AIG Executives in the unit responsible for causing it's downfall promised to return bonuses they had been paid using TARP money, ... now they are refusing to keep their promise:
http://www.bloomberg.com/apps/news?pid= ... nr.OOkoPRg
Meanwhile, Bank of America & AIG, and other firms who are subject to pay restrictions because of taking large amounts of bailout/TARP money or new government ownership, are reporting that their top executives are leaving in droves to work for other firms not so restricted ...
http://www.washingtonpost.com/wp-dyn/co ... c-business
Despite now being 1/3 owned by the Government/taxpayers and still owes the Govt $45 billion, Citigroup continues to spend millions to lobby against financial reform:
http://www.bloomberg.com/apps/news?pid= ... HYY4kjRgrA
So the Administration will reveal a new bill on Monday "which would give the government the power to dismantle large financial companies that get into crises. The new draft bill is expected to take a tougher stance toward troubled financial firms than the administration's original plan, and may take out some language that would allow for temporary bailouts."
http://www.reuters.com/article/governme ... 4420091023
Now I get that when executives pay is cut they are not happy and may wish to seek employment elsewhere, what I don't get is why these other non-restricted firms would hire them after their piss-poor performance that caused the collapse of their former employer. Also, the Administration's policy ought to be to impose pay restrictions on persons working at these firms that might have had a hand in the collapse, but not to restrict pay for new hires that have no ties to any of the failed firms - i.e., to encourage the bad apples to leave and encourage good new apples to come on board to fix the mess.
But it certainly is outrageous how these executives that caused their employers to fail act like they should not take any of the hit ... in my view, they ought to lose their savings, investments, stocks, luxury cars & big houses ... just like happened to a lot of their customers.
Former US Labor Secretary Robert Reich explains why Wall Street reform efforts are not making progress and the problems that caused the original collapse may even be getting worse:
So what else can be done to reign in Wall Street excessive risk taking and obnoxious pay excesses even in the face of dismal performance. One suggestion being considered is a financial transactions tax ...
But if they don't ...
by Beth Isbell</center>
Main Street is angry. Really angry. Wall Street executives excessive risk taking almost caused the biggest financial collapse since the Great Depression. If it weren't for a huge taxpayer funded government bailout, it would have. It still feels to most of America like it has despite the bailout. You would think that their near fatal behavior would cause them to reform their ways. Wrong. Instead they have taken taxpayer money, refused to dole out loans to deserving businesses as intended to boost the economy, and instead continued to stuff their pockets with it while continuing to take excessive risks with an attitude that hey, we're too big too fail, so we don't have to worry about it. Anger is probably an understatement for what Main Street thinks. If murder and lynching weren't illegal, Wall Street executives would be hanging from every tree in Central Park. And who could blame the angry mob?
Despite having their butts saved by taxpayers, Wall Street executives continue to engage in outrageous and shocking behavior. Consider these recent articles ...
AIG Executives in the unit responsible for causing it's downfall promised to return bonuses they had been paid using TARP money, ... now they are refusing to keep their promise:
http://www.bloomberg.com/apps/news?pid= ... nr.OOkoPRg
Meanwhile, Bank of America & AIG, and other firms who are subject to pay restrictions because of taking large amounts of bailout/TARP money or new government ownership, are reporting that their top executives are leaving in droves to work for other firms not so restricted ...
http://www.washingtonpost.com/wp-dyn/co ... c-business
Despite now being 1/3 owned by the Government/taxpayers and still owes the Govt $45 billion, Citigroup continues to spend millions to lobby against financial reform:
http://www.bloomberg.com/apps/news?pid= ... HYY4kjRgrA
So the Administration will reveal a new bill on Monday "which would give the government the power to dismantle large financial companies that get into crises. The new draft bill is expected to take a tougher stance toward troubled financial firms than the administration's original plan, and may take out some language that would allow for temporary bailouts."
http://www.reuters.com/article/governme ... 4420091023
Now I get that when executives pay is cut they are not happy and may wish to seek employment elsewhere, what I don't get is why these other non-restricted firms would hire them after their piss-poor performance that caused the collapse of their former employer. Also, the Administration's policy ought to be to impose pay restrictions on persons working at these firms that might have had a hand in the collapse, but not to restrict pay for new hires that have no ties to any of the failed firms - i.e., to encourage the bad apples to leave and encourage good new apples to come on board to fix the mess.
But it certainly is outrageous how these executives that caused their employers to fail act like they should not take any of the hit ... in my view, they ought to lose their savings, investments, stocks, luxury cars & big houses ... just like happened to a lot of their customers.
Former US Labor Secretary Robert Reich explains why Wall Street reform efforts are not making progress and the problems that caused the original collapse may even be getting worse:
Why Wall Street Reform is Stuck in Reverse
by Robert Reich
Huffington Post, October 22, 2009
At a conference in London, a Goldman Sachs international adviser, Brian Griffiths, praised inequality. As his company was putting aside $16.7 billion for compensation and benefits in the first nine months of 2009, up 46 percent from a year earlier, Griffiths told us not to worry. "We have to tolerate the inequality as a way to achieve greater prosperity and opportunity for all," he said.
Eight months ago it looked as if Wall Street was in store for strong financial regulation -- oversight of derivative trading, pay linked to long-term performance, much higher capital requirements, an end to conflicts of interest (i.e. credit rating agencies being paid by the very companies whose securities they're rating), and even resurrection of the Glass-Steagall Act separating commercial from investment banking.
Today, Congress is struggling to produce the tiniest shards of regulation that would at least give the appearance of doing something to rein in the Street.
What happened in the intervening months? Two things. First, America's attention wandered. We're now focusing on health care, Letterman's frolics, and little boys who hide in attics rather than balloons. And, hey, the Dow is up again. The politicians who put off Wall Street regulation for ten months knew that the public would probably lose interest by now.
Second, the banks keep paying off Congress. The big guns on Wall Street increased their political donations last month after increasing their lobbying muscle. Morgan Stanley's Political Action Committee donated $110,000 in September, for example, of which Democrats got $43,000.
Official Wall Street PAC donations are piddling compared to the tens of millions of dollars that Wall Street executives dole out to candidates on their own (or with a gentle nudge from their firms). Remember -- the Street is where the money is. Executives and traders on the Street have become the single biggest sources of money for Democrats as well as Republicans. And with mid-term elections looming next year, you can bet every member of Congress has a glint in his or her eye directed at the Street.
That's why the President went to Wall Street to raise money Tuesday night, gleaning about $2 million for the effort. He politely asked the crowd to cooperate with reform -- "If there are members of the financial industry in the audience today, I would ask that you join us in passing necessary reforms" -- but those were hardly fighting words. It's hard to fight people you're trying to squeeze money out of.
Which is the essential problem.
Ken Feinberg, the President's "pay czar" came down hard on executive pay yesterday, for those banks still collecting money under TARP, as well he should. But Feinberg isn't trying to pass new financial reform legislation, and TARP no longer covers several of the biggest banks with the highest pay and bonuses -- although they're still getting subsidized by the government with low-interest loans.
Wall Street and the Treasury want us to believe that the TARP money will be repaid to taxpayers, but Neil Barofsky, the special inspector general keeping watch over TARP, said yesterday that just 17 percent of the TARP money has been repaid, and "t's extremely unlikely that taxpayers will see a full return on their investment." Later he told a reporter that it's unlikely "we'll get a lot of our money back at all."
Brian Griffiths, the Goldman international adviser who told us inequality is good for us, doesn't know what he's talking about. America is lurching toward inequality once again, led by the financial industry. The Street is back to where it was in 2007, but most of the rest of us are poorer than we were then -- largely due to the meltdown that occurred because Wall Street overreached. The oddity is that we bailed out the Street, including Griffiths and his colleagues, but apparently won't even be repaid.
And now that Griffiths et al, knows his firm and the other big ones on the Street are too big to fail, he and his colleagues will make even bigger gambles in the future with our money.
Source: http://www.huffingtonpost.com/robert-re ... 30105.html
So what else can be done to reign in Wall Street excessive risk taking and obnoxious pay excesses even in the face of dismal performance. One suggestion being considered is a financial transactions tax ...
Perhaps it may actually take a mob of pitchforks and ropes marching into Wall Street and gathering up the executives responsible for this mess before they finally understand how angry Main Street actually is. Let's hope they get the message before that happens.The $200,000 Insult: Come to Chicago
by Dean Baker, Co-Director of Center for Economic & Policy Research
Huffington Post, October 22, 2009
Kenneth Feinberg, President Obama's compensation czar for bailed out banks, appears to have taken some genuine steps to rein in excessive executive compensation at the basket case banks that received the most TARP money. He cut cash salaries by 90 percent in some cases and reduced overall compensation for the top executives at the seven institutions that received the most government money.
This is a good first step, but it is only a first step. The pay caps involve only a relatively small number of people in an industry where hugely bloated salaries are the norm. Even in these cases it is too early to know that the pay caps will actually prove to be binding. After all, Wall Street's main craft is evading regulations and taxes. It is entirely possible that those clever Wall Street boys will find a way to get around whatever pay restrictions Mr. Feinberg puts in place.
Whatever happens to the pay of this small group of executives the real problem goes much deeper. The Wall Street folks view the wreckage from last year as a minor distraction and are eager to get back to business as usual. This attitude was best expressed by "a person close to A.I.G.'s board," who said of plans to restrict pay at the AIG division that wrecked the company to $200,000: "that's insulting ... why wouldn't anybody quit?"
Of course, this "insulting" pay package would still give our AIG executives more pay than 99 percent of the work force. They would be getting more than three times as much as the average teacher, firefighter, or nurse. They would be getting more than five times as much as the average factor worker and more than ten times as much as minimum wage worker.
Furthermore, if anyone among these other groups of workers mess up so badly that they bring down their employer, they lose their job. They don't get to go somewhere else because a $200,000 paycheck is "insulting."
Wall Street badly needs fixing. Fortunately we have the tool to do the job. It's called a financial transactions tax (FTT) - a modest tax on trades of stock, futures, options and other financial instruments. Such a tax could easily raise $100 billion a year, while cutting the financial sector down to a manageable size.
An FTT is not an alien concept. We actually had a tax on stock trades until 1964. The United Kingdom still has a 0.25 percent tax on stock trades that, relative to the size of its economy, raises the equivalent of $40 billion a year in the United States.
If we follow the lead of the UK, we will a great revenue source that will barely touch most of the population. Investors who buy and hold stock for 10 years will barely be affected, as is the case of a farmer hedging her wheat crop. However, someone who buys stock at 2:00 with the intention of selling at 3:00 would pay a substantial price.
There are many other good arguments for an FTT, including that it is the fairest way to fix the damage to the budget caused by the recession and the bailout, but an FTT will not get an airing in a Congress where the banks continue to wield enormous power. Congress will only consider an FTT, as opposed to more regressive proposals like a national sales tax, if the public demands it.
The public will have an opportunity to express their outrage at the banks and the need to rein them in at the Showdown in Chicago beginning on October 25. If this protest proves successful, and there are hundreds more like it around the country, then Congress may start thinking more clearly about measures to change Wall Street culture and to get back our money.
Source: http://www.huffingtonpost.com/dean-bake ... 31038.html
But if they don't ...