2 February 2009
On his ninth day in office, President Obama took a broad swipe at Wall Street, calling the $18.4 billion in bonuses for 2008 "the height of irresponsibility" and "shameful." He said that Wall Street had come to the government for badly needed help and that taxpayers provided the funds to prevent a further meltdown, but that Wall Street had returned the favor by acting completely irresponsible instead of showing restraint and discipline when the rest of the country is dealing with economic hardship.
His remarks sparked a lot of reaction by others who were armed and ready to lash out at Wall Street. Senator Chris Dodd (D-Conn.) the chairman of the Senate Banking Committee has threatened to confiscate the bonuses, Senator Claire McCaskill (D-Mo.) wants a $400,000 compensation cap for executives whose companies participated in the government bail out, and New York Attorney General Andrew Cuomo said he might ask for the return of the $4 billion in bonuses paid by Merrill Lynch & Co. just before being acquired by Bank of America Corp.
Conversely, others felt that the term "bonuses" was a mischaracterization and that the money actually fell into the category of commissions and incentives paid to sales teams and operational staff, rather than being exclusively doled out to top executives. Needless to say, it was the lead story for all the news pundits and a hot topic for bloggers.
But I think everyone needs to widen the lens here because we're missing the bigger picture. My concern is that once again Washington is reacting under pressure and pushing Obama's stimulus plan without first having a strategic framework in place—a plan that would form a basis for prudent decisions, something that stakeholders could align with and support.
We are told that there is no time to waste; that things are getting so bad, quick action is critical, that we don't have a moment to lose. If things are that bad, which by all accounts they seem to be, then all the more reason to step back, take a deep breath and send a task force into retreat to think this thing through.
I'd like to know whether or not the money we doled out to the banks included any preconditions regarding bonuses. If not, then, sorry folks, but we the government are stakeholders, and the boards, the CEOs and executives are running the show.
Banks are not lending any of the bailout money, but it's my impression that this was the intent for giving them the bailout money in the first place (if, in fact, preconditions to do so were actually included). I'm not sure what the stipulations are regarding the next chunk that's slated for corporations. But I do know that when you give out freebies without a watchdog and clear rules of engagement, corporations will waste taxpayers' money and return like Oliver Twist with, "Please sir, may I have some more?"
This sudden outburst over Wall Street bonuses seems like too little too late and however it shakes out, it isn't likely to do much to get the economy moving or put people back to work. Let's put this in perspective. Whether warranted or not, bonuses are just the tip of the iceberg. I'd like to know how much more of the taxpayer bailout dollars have been squandered and where.
Talk is cheap and while the attention right now is on $18.4 billion, there are bigger fish to fry. How about the burden of the national debt—which is somewhere in the trillions—or the falling home prices with foreclosures at record highs, and unemployment running rampant? On Friday, as expected, the GDP shrank by 3.8% but it could have fallen to 5.1% as the output was boosted by a rise in inventories of goods that were produced but not sold in the fourth quarter. So excluding the inventory adjustment, GDP fell at a 5.1% rate, which economists say more accurately reflects the nation’s weakness.
This economic crisis transcends political parties. Both Republicans and Democrats have a stake in the outcome and right now both parties are parading their shortcomings. But I'll withhold judgment on Obama's stimulus package until I see a detailed breakdown. At that point I'm sure I'll have plenty to say.
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