When Do Our Bankers Get Their Scolding?

The right wing in the US likes to joke about the weakness and effeminate nature of Europeans but at least those Europeans are taking principled stances on banker bonuses and the selfish financial industry in general.

On Friday, the President of the European Central Bank addressed them:

Mr Trichet said financial institutions should be using higher profits to strengthen their capital bases rather than paying out “unwarranted levels of compensation or bonuses”.

A culture of excessive financial rewards for individuals encouraged “self-referential” and “self-serving” banking, Mr Trichet warned in a speech in London.

His comments amounted to the strongest criticism yet from the ECB of excessive bank remuneration .

Mr Trichet has long urged bankers to take advantage of an improvement in financial markets to increase their resilience in the face of a still-weak global economy.He warned that excessive pay could even threaten the stability of the financial system.

“I will say that the so-called bonus culture is one of the many factors that can drive the financial system in the wrong direction – away from intermediation to self-referential speculation; away from medium-term stability to short-term orientation; and away from being a service sector to being a self-serving sector.”

There was a new development on our side of the ocean today though as the Treasury department said that four bailed-out companies can’t pay some top earners more than $500,000 cash per year with the exception of twelve executives.

Kenneth Feinberg, the Obama administration’s pay czar, said Friday that lobbying by Treasury and Federal Reserve officials helped persuade him to exempt about 12 executives from the salary cap. The pay cap will affect about 300 employees at Citigroup Inc., GMAC, American International Group Inc. and General Motors.

So, as we’ve seen from this administration so far, a mish-mash of policies that are applied arbitrarily. If we’re going to restrict bonuses they should be for across the board. There was no true fight for those that got bonuses last December, nor any sort of regressive tax this April like we have seen the Europeans do.

The argument that they can’t retain top talent is BS. If Citigroup and AIG cannot retain top talent based on their own merits then so be it – they are the ones that helped bring down the economy. They are in cut throat competition with all the other firms and many of them truly believe in ‘survival of the fittest’ so let it pan out instead of riding on the backs of the US taxpayers – if you can’t cut it, you are out. If the executives don’t think their few millions are enough to stay with the company, if they are not dedicated to the business and creating a successful company, only the cash incentives, then let them leave. I’m sure are many many eager people below them waiting to take their places.

It would be nice for the papers to stop reporting what the banks think about our policy decisions – they are not in it for the US or the American people so why should we ask how they feel about getting only $500,000 in a bonus this year instead of a few million?

Obama can earn part of his Peace Prize by settling the war between Wall Street and the American people and start dealing with them more harshly. It confounds me how the Republicans and Democrats cannot be united in their efforts to combat the idiocy that brought the nation to its knees. Then again, it’s not so confusing when you look at who contributes most to their campaigns.

3 Comments

  1. Chris

    Yep.

    It’s a gigantic scam that Washington and the press are convinced that we need the guys who got us into this mess to get us out of it.

  2. Ian

    “Obama can earn part of his Peace Prize by settling the war between Wall Street and the American people and start dealing with them more harshly.”

    What?

  3. Jordan

    Because settling fractures within your own country is an equally valid reason for getting some award for peace. It seems odd to put in there but I think it makes sense.