White House Hits Wall Street Over Bonuses

Washington Post: Top Aides Call Planned Massive Bonuses "Offensive"; Little Action so far to Regulate Bailed-out Firms

(Washington Post)  This story was written by Michael A. Fletcher and Zachary A. Goldfarb.

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Top Obama administration officials sharply criticized Wall Street firms planning to pay big bonuses, pointedly contrasting the soaring profits some financial companies have recorded in recent days with continuing high jobless rates across the country.

The firms are benefiting from government efforts, some initiated by the Obama administration, to stabilize and restore confidence to the capital markets after a global financial crisis that began last year. With their fortunes rebounding, the Wall Street firms plan to pay tens of billions of dollars to executives.

"The bonuses are offensive," Obama senior adviser David Axelrod said Sunday on ABC's "This Week," adding that banks must do more to support lending across the country and should stop their lobbying efforts aimed at blocking the passage of new financial regulations that are being prepared in Congress.

"They ought to think through what they are doing, and they ought to understand that a year ago a lot of these institutions were teetering on the brink, and the United States government and taxpayers came to their defense," Axelrod said. "They have responsibilities, and they ought to meet those responsibilities."

The Obama administration has defied popular opinion in backing huge government bailouts to try to rescue much of the nation's auto industry and stabilize the financial system, steps it saw as critical to fostering an economic recovery. At the same time, it has attempted to tap into popular anger at corporate America with outspoken criticism of bonuses, perks and other practices that have long been staples of big business.

Many banks and other firms have been enjoying fat profits this year in their trading and investment arms. But much of this success has come as a result of new government policies that have kept interest rates low -- on debt and mortgages, for example.

The White House has been taking an increasingly confrontational tone against Wall Street bonuses and lobbying efforts to prevent its broad plan for new financial regulations. Obama has given at least two high-profile speeches in recent weeks urging the financial industry to stop lobbying Congress not to pass laws that would, among other things, create a new agency to police credit card and mortgage lending.

White House Chief of Staff Rahm Emanuel chided Wall Street firms for neglecting their responsibilities "in the short period of time where they have a level of normalcy because of what the government did to help them."

"Not only do they come for a bailout . . . they're now back trying to fight a consumer office and the type of protections that will prevent another type of situation where the economy is taken over the cliff by the actions taken on Wall Street and financial market," he said on CNN's "State of the Union."

Recent news of a pay package for Bank of America's outgoing chief executive, Kenneth D. Lewis, illustrates the challenge facing the White House and Treasury. The Treasury's pay czar, Kenneth Feinberg, persuaded Lewis not to take any compensation for his work this year after the bank received $45 billion in government aid.

But because of Lewis's contract with the bank, he is still on track to receive nearly $70 million in retirement money, something Feinberg can't prevent.

A fiscal predicament

The administration's criticism of corporate bonuses highlights the quandary it faces as the nation slowly emerges from the steepest economic downturn since the Great Depression. While Wall Street has regained some of its old swagger as profits have returned and other parts of the economy show signs of new life, unemployment continues to rise despite the huge economic stimulus plan enacted in February.

With unemployment at 9.8 percent and projected to go higher, Obama is facing mounting political pressure to take further government action to create jobs, but at the same time he is confronted by a near-record budget deficit that cries out for fiscal austerity.

Aides called joblessness a daily concern for Obama but added that the administration is constrained by the ballooning budget deficit, which hit a post-World War II record of $1.4 trillion in the fiscal year that ended last month.

"There is this conundrum -- you've got this huge national deficit; we've got to do what we can to bring that down. At the same time, it's important to stimulate the economy, and the federal government has to do its part," said senior adviser Valerie Jarrett on NBC's "Meet the Press." ". . . So let's wait and see. Let the recovery bill do its job, and then we'll see."

Administration officials have stressed that the $787 billion economic stimulus package is only about half spent, and they are counting on coming expenditures to boost the job market over the next year.

With midterm elections looming in just over a year, Obama is coming under pressure from congressional Democrats to do more to create jobs. While the pace of job losses has slowed considerably since Obama took office, unemployment has crept up to a 26-year high, and about half those out of work have been jobless for six months or more.

Dismal figures

Labor Department statistics show that there are about six unemployed people for every available job. Many Democrats are concerned that voters will punish them at the polls for the continued problems in the job market.

Last week, Obama approved $250 payments to Social Security recipients who otherwise would have seen their payments remain flat. His administration also is backing legislation pending in Congress to extend unemployment benefits. Obama's economic advisers also are weighing a range of other measures that would save or create jobs or help those out of work, including another round of aid to fiscally strapped states, tax credits for small businesses that hire new workers and extension of federal help for jobless workers who buy health insurance.

"Everything is on the table," Jarrett said.

[Ms_enza]

With 48 cents of every tax dollar going to the Pentagon, why should Wall Street feel guilty for their peccadillos? Soldiers are willing to die, but is a general willing to cut a lucrative white elephant project? Say the V-22, or any number of obsolete pigs?

The biggest cesspool of corruption has five sides.

[auntc3]

Nobody really cares about the Republicans...they got us all into this mess. Have you noticed all this just happened a couple of months before Obama took office...was this done on purpose?????? It would not suprise me...I thought that from the start.

[auntc3]

If they asked for a bailout and then gave them selves bonuses, no that is not Legal in any sence of the word...get bonuses back and give it to the Seniors in 2010 and 2011....

[auntc3]

If they asked for a bailout and then gave them selves bonuses, no that is not Legal in any sence of the word...get bonuses back and give it to the Seniors in 2010 and 2011....

[endurorob_5]

If these companies legqlly earn the money it is theirs to do with as they please. Unless the administration can point to something illegal then they need to shut up.

[auntc3]

If they earn money...yes the are entitled; but if they ask for a bailout; that means they did not manage what they had correctly, or made bad investments (they have been doing this along just to make a fast buck), that is not Legal...and then they turn around and give themself's bonus's ....that is soooooo wrong and so not legal...
like I said make them return every penny then give it to the Seniors who are in a depression because of them.

[mollydtt]

The "free market" will do anything they want. They got theirs. Everybody else is just going to have to cope. You realize, of course, that any regulation of big business is going to send the republicans into a frenzy. It will be called "socialism" and every American will be warned that we are on a slippery slope.
Personally, I think that we can expect greed to dominate. The idea is that businesses should have no responsibilities. Eventually, there will be a small trickle-down to the average citizen. It's the American Way.
I don't agree, but the CEO's that got their jobs saved by the government bailouts feel they are just too important.
They just don't live on the same planet as the rest of us.

[sjc_1]

It is over due for the government to tap into some of those profits and bonuses to help reduce the deficit. Corporations used to pay 40% of the budget, now it is less than 7%. The rich getting richer is bankrupting the country and it is time for them to pay for the right to do business in this country.

[mjvwsr]

by sjc_1 October 19, 2009 12:42 PM EDT
It is over due for the government to tap into some of those profits and bonuses to help reduce the deficit. Corporations used to pay 40% of the budget, now it is less than 7%.

_______________________
Corporations pay nothing, never have, never will. Their ENTIRE tax burden is built into the price of their good/service. They collect the tax from you, the consumer, and pass it on to the government.

Econ 101

[sjc_1]

The rich getting richer IS bankrupting the country. Capping the tax rate for the rich causes the government to run deficits which causes them to borrow, which puts the country into more debt that we can not get out of. If the wealthy individuals and corporations are required to pay more of the federal budget, then they will not have to borrow as much.

[sjc_1]

"pass it on to the government"

Corporations will charge whatever the market will pay. They either pay the government which reduces the deficits or they pay shareholders dividends which go to people that not earn the money through productive work. Those wealthy shareholders take those dividends and tax breaks and put it into hedge funds which flip houses, bid up prices for commodities like oil and any other method they can find that will give them money for nothing.

[22monthsunemployed]

While bonuses might seem offensive, in a free market economy it is hypocritical to dictate what a private company does to attract the best candidates, keep the most productive employees, et cetera. What is offensive is for a company that received over $3 Billion dollars as bailout is now suing an unemployed person who is struggling not to be homeless... After 22 months of unemployment, all of my benefits expired September 4. With a glimmer of hope on the horizon in the form of a Federal Unemployment Extension stalled in the Senate, Capital One has decided that this is the time to send their scavengers to pick the bones of my financial carcass. Now, in addition to trying to find work every day, trying to create work everyday, trying to find $15 for groceries for the week, and trying to scrounge up enough money to pay rent on a SRO hotel room, I now have to fight off these vultures... So, while bonuses may seem offensive to the Washington Post, a $3 Billion dollar bailout to Capital One is to me and everyone they continually screw over with doubling and tripling of interest rates and late fee's of their "customers."

[th9876]

If they are not going to seriously regulate banks, all this talk is a waste of time. Banks will do what they can get away with.