Is Obama Committing Political Suicide? President Calls Obscene Wall St. Bonuses 'Part of the Free Market System'
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In other words, Wall Street paydays are very much part of the problem, and voters know it. Defending Wall Street CEOs while the rest of the country is out of work is not a winning strategy for the economy for the mid-term elections.
Andrew Leonard thinks the criticism is unfair after reviewing the full transcript of the offending section of the Bloomberg interview:
Q: Let's talk bonuses for a minute: Lloyd Blankfein, $9 million; Jamie Dimon, $17 million. Now, granted, those were in stock and less than what some had expected. But are those numbers okay?
THE PRESIDENT: Well, look, first of all, I know both those guys. They're very savvy businessmen. And I, like most of the American people, don't begrudge people success or wealth. That's part of the free market system. I do think that the compensation packages that we've seen over the last decade at least have not matched up always to performance. I think that shareholders oftentimes have not had any significant say in the pay structures for CEOs.
Q: Seventeen million dollars is a lot for Main Street to stomach.
THE PRESIDENT: Listen, $17 million is an extraordinary amount of money. Of course, there are some baseball players who are making more than that who don't get to the World Series either. So I'm shocked by that as well. I guess the main principle we want to promote is a simple principle of "say on pay," that shareholders have a chance to actually scrutinize what CEOs are getting paid. And I think that serves as a restraint and helps align performance with pay. The other thing we do think is the more that pay comes in the form of stock that requires proven performance over a certain period of time as opposed to quarterly earnings is a fairer way of measuring CEOs' success and ultimately will make the performance of American businesses better.
I disagree with Andrew here. Obama is still going out of his way to specifically compliment Dimon and Blankfein, suggesting that while some bonuses might not always be earned, these guys are savvy and deserve their millions. Obama is still shrugging off the pay packages as a ho-hum baseball scandal, not a matter of total market failure or basic democratic fairness.
From a policy perspective, it's all well and good for Obama to endorse say-on-pay, but shareholders of too-big-to-fail banks actually want their CEOs to take outlandish risks-- if the risk backfires, taxpayers will cushion the losses. Dimon and Blankfein have built behemoth businesses and political connections that ensure their shareholders are constantly being subsidized by the federal government. Of course shareholders want to pay them a lot to keep them around.
Even for the rare cases where shareholder democracy might help, say-on-pay is extremely easy to manipulate. Paying CEOs in stock rather than cash is a nice idea, but the current version of the say-on-pay bill moving through the Senate Banking Committee would even allow executives to take out insurance against declines in the value of that stock. In short, there is no way to fix the insane bonus culture on Wall Street without breaking up the big banks.
Zach Carter is an economics editor at AlterNet. He writes a weekly blog on the economy for the Media Consortium and his work has appeared in the Nation, Mother Jones, the American Prospect and Salon.