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Cynthia Tucker

Wall St: Still masters of the universe

7:09 am October 22, 2009, by ctucker

Despite having driven the economy into the ditch, bankers and Wall Street moguls are shameless. With bailed-out banks suddenly showing huge profits, they moved to again reward their executives with huge bonuses.

The Obama administration has little choice but to step in to stop that nonsense. The administration’s special master on compensation has signaled that he will order several firms that received taxpayer bailouts to slash their compensation.

The cuts will affect 25 of the most highly paid executives at each of five major financial companies and two automakers, according to the sources, who spoke on the condition of anonymity because the plan has not been made public. Cash salaries will be cut by about 90 percent compared with last year, they said.

The administration will also curtail many corporate perks, including the use of corporate jets for personal travel, chauffeured drivers and country club fee reimbursement, people familiar with the matter have said. Individual perks worth more than $25,000 have received particular scrutiny.

That’s a step in the right direction. But it doesn’t go nearly far enough. The Obama administration needs to push very tough financial regulations that will prevent the firms from creating the sort of meltdown that brought on the Great Recession. Wall Street moguls are already back to their old ways, creating and selling complex financial instruments that neither they nor their customers understand. They figure they can get away with it because if they get in trouble again, taxpayers will come running to the rescue with another bail-out.

The Obama administration seems to have rejected an idea from former Fed Chairman Paul Volcker, who believes the banks should be prohibited from owning and trading risky securities, which was the law until 1999.

If that sort of regulation isn’t passed, the U.S. economy will experience another cataclysmic recession within the next ten years, possibly worse than this one. Bankers clearly haven’t learned their lesson.

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31 comments Add your comment

Paul

October 22nd, 2009
7:48 am

Yes, they should. And they’ve had lots of time. But they haven’t.

Democrats (Congressional) seem to follow a pattern. Whether it be ‘outing’ of CIA ‘covert agents’ or this or a host of other examples, there seems to be a period of righteous indignation and political condemnation, followed by… nothing.

No legislation to prevent recurrence. No legislation to strengthen existing law and close loopholes.

Just blaming the political opponents.

Lots of people complain. Few bring solutions.

Peadawg

October 22nd, 2009
7:48 am

“The Obama administration seems to have rejected an idea from former Fed Chairman Paul Volcker, who believes the banks should be prohibited from owning and trading risky securities”

“Bankers clearly haven’t learned their lesson.”

Some good those 2 stimulus packages did, huh?

mike

October 22nd, 2009
7:49 am

Tucker seems to forget that Wall Street already bought Obama with their donations.

Jimmy62

October 22nd, 2009
7:53 am

You know something else that would have kept them from getting those huge bonuses? Not bailing them out. They did learn their lesson, that taxpayers will bail them out. New regulations aren’t the answer, the answer is not bailing people out when they screw up. If you actually make them face the consequences of their actions, then they won’t take such huge risks. But since you (and I mean everyone who supported the bailouts and stimulii) reward people and corporations for taking big risks and losing, then they have no reason not to take big risks.

You can’t subvert the free market by bailing people out all the time (and yes, these bankers knew the bailouts would come if they screwed up, this isn’t the first time we’ve bailed out failed companies), and then blame the free market for what happened.

Turd Ferguson

October 22nd, 2009
8:21 am

Oh, this is awful. Then again I would imagine Ms Tucker has quite a stock portfolio, 401K, IRA etc. In keeping with Ms Tuckers socialistic ideals we might only hope she sees the error of her ways, cashes out these evil financial vehicles and gives all rewards, she has rightfully earned, to the poor.

Im sure Obobo would want it that way.

PoliticalMan

October 22nd, 2009
8:24 am

With the likes of Summers, Rubin, Geitner, Bernacke (sp?) what would anyone expect. But if you think this is bad, just what would be going if the Repubs were in charge. It would be worse.

Scott

October 22nd, 2009
8:55 am

If he wants to control their pay like this, how about he does the same with Congres? These companies are in trouble because they are in the RED…in debt. How about every time that Congress creates a budget that is in the Red or makes the deficit deeper, they get just 10% of their pay? That would certainly curtail bills laden with pork, and probably put an end to these stimulus bills that do nothing. And, similarly, make it a sliding scale that if you reduce the deficit by a certain amount, you make 110% of your pay. Of course, we cannot trust the number though because they will always find a way to make it sound like they are cutting the deficit. Kind of like the job creation/jobs SAVED number, which is pulled out of their butts.

Degneration X (HHH and HBK)

October 22nd, 2009
9:01 am

barry is scarey!

TnGelding

October 22nd, 2009
9:13 am

“They figure they can get away with it because if they get in trouble again, taxpayers will come running to the rescue with another bail-out.”
(But it wasn’t taxpayers, it was the government. Taxpayers are barely paying enough to fund half of government expenditures.)

Is this the reason the equities market is recovering so rapidly?

Their poor judgment is stupefying. Why couldn’t they have waited a few years? They’ve skimmed enough off the top for the last 8 years to provide for themselves the rest of teir lives.

Peadawg

October 22nd, 2009
7:48 am

What the hell has this got to do with the stimulus? They received TARP. And any emergency spending by the government can’t do anything but act as a stimulus. True, it will be modest and will cause constraint in the future, but it’s purpose is to lessen the pain for the millions out of work now.

TnGelding

October 22nd, 2009
9:21 am

Turd Ferguson

October 22nd, 2009
8:21 am

And I’m sure you’re wrong!

“Obama refocuses bailout on small businesses”

“These entrepreneurial pioneers embody the spirit of possibility, the tireless work ethic, and the simple hope for something better that lies at the heart of the American ideal. And they have always formed the backbone of the American economy,” he said.

Peadawg

October 22nd, 2009
9:32 am

“but it’s purpose is to lessen the pain for the millions out of work now.”

Yup, bailing out all these companies has done SOO MUCH for the millions that are out of work. That sure did create some jobs, didn’t it?

Joan

October 22nd, 2009
9:34 am

And now the guy in charge of TARP says the banks are going to fail anyway. Congress isn’t known for its smarts. I doubt if there is a financial guy in the crowd. They are all political hacks. Their passing legislation on banking is akin to having kindegartners trying to put together a banquet. They don’t have the first clue. About the “perks”, air travel, etc.–Why aren’t you advocating Congress and Obama give up those goodies too? The taxpayers are paying for all of these idiots to live the good life.

Kevin

October 22nd, 2009
9:45 am

Corporations are evil. The profit motive should be eliminated! All wealth should be siezed. Do away completely with free enterprise.

Your red colors are showing this morning, Cindy.

Quelle surprise.

jconservative

October 22nd, 2009
10:08 am

Thirteen months after the collapse & not one piece of legislation to regulate the financial industry has made its way out of committee in either house.

In the late 19th & early 20th century we had to regulate capitalism to keep capitalism from destroying itself (Sherman Antitrust, Clayton Act, etc). It worked as capitalism had the greatest boom in history the next 90 years. It is time we regulated the capital markets to the same end. History proves that capitalism cannot regulate itself.

Having said that I do not believe anything will be done in the foreseeable future. Too many competing interests. And as a result I see capitalism, as we have known it through the 20th century, on its death bed.

Sunshine and Thunder

October 22nd, 2009
10:13 am

That’s real change. Loan all of your money to a company and then tell that company that it can’t be competive with executive compensation. Cynthia, when I want to know about bicycles I’ll ask a fish. When I want to know about economics I’ll ask an inner city newspaper editor.

Alton E. Drew

October 22nd, 2009
10:50 am

So who is next, Ms. Tucker? Your small town bank? Not even a venture capitalist would make these types of demands. This piercing of the corporate veil and insertion into a bank’s business judgment is absurd. It creates a slippery slope that only fuels the animus of the right-wing fringe. Parroting the talking points of a bunch of Ivy League, out-of-touch, left-wing types in the East Wing doesn’t help us either. The idea behind the government’s investment in these investment banks, commercial banks, and insurance companies was to ensure that they functioned as financial intermediaries in the market; as viable lenders. While the program should not have been implemented in the first place, you can’t fault a corporation for acting like a corporation–to look out for shareholders first. Executives get paid to turn a profit and create residuals for shareholders. If they have to do that by acquiring another going concern that increases the bank’s ability to earn revenues, they do that too. They did their jobs and should be compensated for it.

Spartann

October 22nd, 2009
10:58 am

I wanna know Cindy-Lou… Exactly how much do you hob-nob with your fair haired tingle-legged beau in DC ??? I watched you on MSNBC last night, you’re nothing more than a journalistic Myhna Bird… so why hasn’t any of CM’s savoir faire rubbed off on you ??

It ain’t hard to figure out Obama’s crew only knows how to spend the money, but they haven’t a clue what it takes to monitor and regulate it after the Fed’s check has been cashed ….

Most of the dwarfs from Clinton’s regime are minding the store now… They were wrong on high finance in the 90s, and they’re missing the boat in many ways now… Rubin, Summers, Greenspan, Geithner, all 4 fought against derivative regulation back in 1998….Do you honestly expect them to know which way is up now???

If I borrow funds, any and all conditions of the loan are up front before I ever sign on the line….. Now tell me how Uncle Sam is gonna legally back door Wall Street after the fact ???

booger

October 22nd, 2009
10:59 am

Alton,

Small town banks are already in the cross hairs. The govt. announced yesterday they were making $150 billion in TARP funds available to regional and community banks, regardless of their financial condition in order to stimulate lending. Whoever takes these funds gets as a bonus full govt. control.

Sunshine and Thunder

October 22nd, 2009
11:42 am

And, as I recall, some of these entities were forced to accept TARP money. So here’s the scenario:

Government forces me to pay taxes under the threat of incarceration. It then forces large financial companies to accept some of my money under that same threat and then it tells that company what it may pay its employees. Does anyone think for one minute that this is a better deal than our founding fathers had when they beefed about taxation without representation?

TnGelding

October 22nd, 2009
12:15 pm

Peadawg

October 22nd, 2009
9:32 am

TARP “invested” in the companies. Most of the stimulus is still in the pipeline. Extending unemployment benefits certainly helped the unemployed. Have you considered what would have happened if the entire banking system worldwide had shut down, i.e. closed your bank and your vast fortune was inaccessible?

TnGelding

October 22nd, 2009
12:18 pm

Joan

October 22nd, 2009
9:34 am

I’ve been advocating grounding AF1 since day one. So far it has fallen on deaf ears. How many others in Congress are double or triple dipping like McCain and Biden?

TnGelding

October 22nd, 2009
12:20 pm

Kevin

October 22nd, 2009
9:45 am

No, but common sense should dictate prudence on bonuses so soon after requiring government investment.

TnGelding

October 22nd, 2009
12:23 pm

jconservative

October 22nd, 2009
10:08 am

I think they’ll pass somethng this year, but doubt if it will go far enough. It’s hard to imagine the mindset that over indulges with so many unemployed.

FLEISCH

October 22nd, 2009
12:25 pm

since when did a mortgage become a complicated financial instrument.

Rant

October 22nd, 2009
12:26 pm

So, explain why these compensation restrictions were not built into the bailout conditions???

TnGelding

October 22nd, 2009
12:27 pm

Spartann

October 22nd, 2009
10:58 am

The Wall Street investment banks didn’t get into mortgage backed securities until about halfway through the “ownership society” president’s disastrous 8 years. He didn’t tell us the government ends up owning everything.

TnGelding

October 22nd, 2009
12:30 pm

FLEISCH

October 22nd, 2009
12:25 pm

When they started packaging them and selling them as mortgage backed securities worldwide. The credit rating agencies had them rated AAA and need to be held accountable.

TnGelding

October 22nd, 2009
12:31 pm

Sunshine and Thunder

October 22nd, 2009
11:42 am

I thnk the reason for that was so it wouldn’t cause a run on the banks that needed the investment, badly.

citizen

October 22nd, 2009
12:45 pm

Check out the corporations lobbying Congress to keep the derivatives market unregulated and boycott those corporations’ products. This will work faster and better that government intervention. Wall Street cannot be trusted because it is being run like a ponzi scheme. Even in the ‘Bernie Madoff’ scam, some investors made money because he controlled ALL of the 65 Billion so he got to decide who profitted and who lost.

Dave Shellman

October 22nd, 2009
2:14 pm

If the solution to our financial problem is to cut pay of those who received government bail out money, let’s start with the President, his Czars, and congress. They all take government money and produce absolutely nothing. By the way, this recession was caused by the collapse of Freddy Mac and Fannie Mae two government run enterprises whose demise was a direct result of government stupidity. The government caused the problem, their actions are continuing the problem; don’t expect them to solve the problem.

Spartann

October 22nd, 2009
3:05 pm

TnGelding
October 22nd, 2009
12:27 pm

The arrows in My quiver won’t be aimed at Wall Street today…But Im down for targeting the sanctimonious liars on Capital Hill as well as any journalistic Harpies I may see … Hypocrites all, the same eyes turn away as Washington dogmatists vote themselves a cost of living increase every year…. and for what…a job well done ???