I have a nit to pick with the Times’s lead story today about Obama calling Wall Street’s $18.4 billion in bonuses “shameful.”
It has to do with its use of the word “populist”, which The Audit has bemoaned before:
It was a pointed — if calculated — flash of anger from the president, who frequently railed against excesses in executive compensation on the campaign trail. He struck his populist tone as he confronted the possibility of having to ask Congress for additional large sums of money, beyond the $700 billion already authorized, to prop up the financial system, even as he pushes Congress to move quickly on a separate economic stimulus package that could cost taxpayers as much as $900 billion.
Let’s face it: “Populist” is a pejorative adjective. It connotes that Obama is saying something he doesn’t believe just to rouse the unwashed masses. But does anyone think that bankers paying themselves $18.4 billion while they take trillions in bailouts and government guarantees and while the economy collapses because of said bankers’ actions is not “shameful”?
Please show yourself then, as long as your name isn’t John Thain. In fact, I’d bet most bankers agree with what Obama said.
In my book, the pinstripes rule out populism.
I will go ahead and raise my hand as someone who doesn't find this to be shameful.
Banks run off brains. In an industry where bonuses make up a much larger share of salary than normal, those brains are going to jump ship if the bonuses dry up. And since the tax-payer is now part owner of the banks, we all have an incentive to keep those brains there, working for us.
Even though the banks screwed up, the current managers are still best placed to decide where to spend money. Obama really doesn't know much about running a bank. Neither do you or I.
On populism, Obama's *tone* is populist. And I don't think there is a dishonest connotation to "populist". I think the connotation is that of imprudence, which is what micromanagement is.
#1 Posted by Chris Corliss, CJR on Fri 30 Jan 2009 at 04:55 PM
Chris,
If a bank loses billions of dollars in a year, has to be bailed out with billions of taxpayer dollars, how can it justify paying billions of dollars in bonuses?
You say "those brains are going to jump ship if the bonuses dry up".
That's a canard I've heard a dozen times from Wall Street. Where are these brains going to go and still earn half a mill a year? Do you know anybody anywhere that's jumping ship in this economy?
I'm not sure I agree with you that "current managers" are best placed to allocate money. First of all, whatever money they have (from us) is not being spent right now except to pay out dividends to shareholders who should have already been wiped out. They're not lending much, that's for sure. Second, these managers are the same ones who drove their companies and the economy into the ditch. They don't know as much as you might think (or hope) they do. The priests have been disrobed.
Finally, "populist", as we've said here in the past, is often used as a slur, something knowing, East Coast elites call things they think might stir up the simplistic rubes in the hinterlands. It's misused more often than it's used correctly, and that applies in this case, as well. A politician expressing outrage--especially over something like this, in a time like this--is not necessarily populism.
Sometimes it's simply outrage, and in this case it's wholly justified.
#2 Posted by Ryan Chittum, CJR on Fri 30 Jan 2009 at 08:08 PM
Right on, Ryan. Sad little hinterlander here, drawing your readers' attention to today's WSJ, and the bar graph here http://online.wsj.com/article/SB123336341862935387.html?mod=testMod
Since 2002, bonuses were always way over net income. last year they were 4x net income. This year, since net income was negative, the percentage is incalculable.
The idea that greed=brains, which is presupposed by Wall Street pay structures, really ought to be dispensed with. The evidence is in.
#3 Posted by ed ericson, CJR on Sat 31 Jan 2009 at 06:34 PM