Wall Street Won’t Do Right. Now They Have To

by Tula Connell, Oct 23, 2009

So, Wall Street CEOs didn’t figure out on their own that when they take taxpayer money, they have a moral obligation to help the overall economy with their $700 billion public-funded bailout rather than single-mindedly line their own pockets with billions of dollars in salaries, bonuses and other ego-inflating perks.

Funny how “moral obligation” and “Wall Street” tend to be mutually exclusive terms.

Wall Street CEOs wouldn’t do it on their own. So now they have to.

This week, the U.S. Treasury Department’s special master for compensation, Kenneth Feinberg, said financial corporations still on the public dole will have to limit salaries to a maximum of $500,000 and that average total pay packages among top employees will drop by 50 percent. Yesterday, the Federal Reserve announced that 28 of America’s largest, most complex financial institutions will be required to submit their pay policies to a regulatory review—whether or not they have received bail-out money from taxpayers.

We can all nitpick with the details or lament that the restrictions could have been tougher, but the bottom line is this: The Obama administration is holding corporations accountable in a way that never would have happened under a Cheney-Bush or Palin-McCain regime.

Noting that the “toga party is already back on Wall Street,” a Boston Globe editorial pointed to and encouraged the Obama administration’s outrage against Wall Street’s greed and hubris. As Bloomberg and other outlets noted, Obama said:

It does offend our values when executives of big financial firms, firms that are struggling, pay themselves huge bonuses even as they continue to rely on taxpayer assistance to stay afloat.

On MSNBC yesterday, Director of the AFL-CIO Office of Investment Dan Pedrotty pointed out that Feinberg has created a model for how corporations should address compensation. Rather than larding CEOs with cash, their compensation is tied now with restricted stocks. That is, if the company does well, so does the CEO. That’s called “incentive.”

Because, as Pedrotty pointed out, the top five investment banks in the five years leading up to the crisis paid out $145 billion in bonuses—and three of the five failed.

The American people have been asked for hundreds of billions of dollars to backstop these failed businesses. The same American people who are suffering record unemployment, skyrocketing foreclosures, 201(k)s and disappearing pensions. They deserve some accountability here.

Got that right.

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