A salesman for Company X - which makes widgets - has a quota of $1 million in sales per year. His compensation is $50,000 per year base salary plus 10% of everything he makes over quota. The salesman busts his rear all year, working the phones and hopping on airplanes. He does well, bringing in $2 million in sales, doubling his quota. His compensation is $150,000 that year. Additionally, those on his work support team - back office, administration, etc - would also likely share in that success. I suspect few in America would have a problem with that scenario.
But what if Company X lost money that year because top management decided to get into the business of selling "whatsits." The whatsits didn't sell, and in fact did damage to the company overall. Now let's add that Company X was not only suffering massively but whose overall business is seen important to the American economy and it received Federal assistance to keep operating. Should the salesman who did his job selling widgets and beat his quota not be paid his bonus? If you say he shouldn't, you probably want to stop reading.
Now let's turn that to Wall Street. This will be one of the least popular stories I have written but it needs to be said: the President is wrong on the issue of Wall Street bonus payments and when he says Wall Street should have "know better." Just as we should not lump any group of disparate individuals together to make a political point, neither should the President and his cabinet lump "Wall Street" into one, singular group of financial evildoers.
The President is wrong on the bonus issue for the following reasons:
Most of that $20 billion dollar bonus figure thrown around Washington goes to the rank and file and not the top executives
Many banks factored into this bonus pool did not take TARP money
Most of the bonuses are paid as a percentage of sales and profits, and there are many on the Street who had nothing to do with the economic collapse and made money for their firm
Most CEOs have canceled their bonuses (or been fired)
Bonus payments have already fallen by nearly half
As equity shareholders in many of the big banks, Americans now have an economic incentive to keep the best workers at the firms they now partially own
Thursday the President once again attacked Wall Street, calling bonuses "shameful" and making other strong remarks (video) about financial industry pay. While no one can or will defend money-losing CEOs giving themselves multimillion dollar payouts, it is important to differentiate between the C-suite top executives and the majority of those working in finance. Let's put aside the rhetoric and examine the reality.
First, Despite the big headline numbers Washington likes to throw around, bonuses are already way down. From the office of New York State Comptroller Thomas DiNapoli:
Cash bonuses paid by Wall Street firms to their New York City employees declined by 44 percent in 2008 in response to record losses suffered by the securities industry. DiNapoli noted that the federal Troubled Asset Relief Program (TARP), which infused billions of dollars into the financial system, helped prevent more institutions from failing. TARP placed restrictions on bonuses for top executives and many have voluntarily forgone bonuses, but it did not impose limitations for lower-level employees.
Next, what many in Washington (and across America) forget is that most people on Wall Street are, at the core, salespeople. Additionally, the majority of "Wall Street" - despite politicians who like to lump the hundreds of thousands of financial industry workers into a single group of "them" - had nothing to do with what is happening right now with the economy or credit crisis. They are a diverse group who do thousands of different jobs across a variety of industries. Stock brokers, commodities traders, investment bankers, and the hundreds of other specialized careers in finance have little to do with each other, much less be able to be harvested into some "group" to be singled out for misdeeds. The President likes to use phrases such as "Wall Street folks" when making critical comments about the state of the economy. That is no better than saying something to the effect of "those folks in California" should've "known better" than to buy homes when the market was clearly in a bubble.
What is also misunderstood is that many on the Street make a majority of their pay through a bonus. This is not just the highest paid investment bankers and traders. It is also the secretaries, administrative staff, and hundreds of other positions that support the company. Guaranteed salaries among much of this group can actually be relatively low, and there are many positions where more than half of compensation comes in the form of a once a year payout.
Outside the upper echelon of management most highly paid financial professionals merely have a product, sell it, and make a percentage of the revenue and profit. If an oil trader makes $10 million dollars for his firm, he expects a percentage of that profit to come back as his pay. If he loses money he won't get anything but his base salary and probably a pink slip. Bankers are the same way. They help companies buy and sell each other. If they do deals, they get paid. If not, they don't. Despite the mystery surrounding much of finance, most Wall Street workers are not that different than other sales driven industries. Those who peddle software, cars, toothpaste or the thousands of other products sold around America each day face the same reality: sell, make money for the company or face getting the boot. Most lawyers by the way, the previous occupation of most on Capitol Hill, operate the same way.
Right now you are no doubt saying I am wrong (if you are still reading at all). After all, you say, Wall Street helped create the crisis and are now asking for taxpayer money and using some of that to pay their workers. That's wrong, you say, and so we should penalize the lot of them by getting rid of their "shameful" bonuses. Let's say then for arguments sake that you are right and I am wrong. Let's use that same logic to another end.
If the idea is that industries who 1) helped promote the economic collapse through 2) over zealous and some say greedy behavior and 3) who are now getting Federal help should not be able to receive the pay they earned that may have been related to the economic crisis, shouldn't it also hold true then that others, and not just Wall Street, face the same penalty?
If you answered yes, then should we ask all the others related to and involved in the housing boom and economic malaise to "know better" and give up all future commissions on what they sell? Should realtors not receive their sales commission because home prices are down 30% in some areas, the market was clearly in a bubble that should have been obvious to many, and now their industry is receiving Federal assistance through the Treasurys buying of mortgage related assets? What of the auto industry? GM and Chrysler accepted Federal money to keep themselves in business. Does this mean that the car dealer who sells a GM or Chrysler product should "know better" and refuse to accept a commission on the sale because the car companies got themselves into trouble and needed rescue?
The answer on both of the above examples is "of course not." The majority of realtors, mortgage brokers, car salesmen and others associated with at-risk industries had nothing to do with the global crisis we now face. Wall Street, despite what many want to believe right now, is much the same. As with most companies, the big decisions - like begging for TARP money - are made at the top, by a small group. Many of the people I know on the Street also believe many of their top management needs to be fired.
I am not a Wall Street apologist. There are those on Wall Street who deserve to be stripped of their jobs and their headline-making compensation. Those are the people at the top making the macro calls on company strategy, as well as the small group of those directly involved in selling the most toxic of assets. But despite the desire in Washington to find a convenient scapegoat for the downturn we cannot punish the many for the mistakes of the few. The majority of those working in finance do not receive million dollar bonuses. Demonizing profit-based packages for those who earned it strikes at the very heart of capitalism.
Two other points:
Tax filings show that the President's 2007 income was $4.2 million dollars, based primarily on sales of his book. He was a Senator in 2007, a year when the U.S. government ran up huge deficits and failed to anticipate the economic collapse. Should he give some of that money back because the government needs to bail itself out?
Additionally, before the government throws stones, it should look at its own home. This excellent Bloomberg story outlines how the government isn't exactly managing its own "bonus home" very well either.
Wall street should raise employee base salary a little higher to match (market based salaries) with the expectation that bonuses may or may not be given. And be very thankful to even have a job. Try being self employed and pay yourself a salary and profit and business expense .....
I have no sympathy for the wall street employees not getting bonuses when many other company in the several past years have reduced employees salary, removed bonuses, no vacation, increase health insurance premiums, ......
I was one of them. Now I am self employed. Quit your crying and do something about it.
January 30, 2009 at 4:21 pm
James
I agree with some of what you are saying, but the disgraceful thing is that we spent that TARP money to pay for it.
How many bonuses would have been paid out if these companies failed - which they should have done without the government intervention. Then these people would not only have no bonus, but no job as well.
And sure it's unfair for an employee who works hard to make less money because his bosses were criminals. But it's also unfair that US taxpayers who had nothing to do with the company should have to pay for your "bonus" instead.
Are you implying that if I lose my job I'm entitled to steal from you because it was so unfair that I worked for a company run by greedy idiots who promised me a bonus they couldn't afford to pay? I "earned" a lot more than my company could afford to pay me - can the government give me a $100,000 bonus too?
Yeah, it sucks for these "salesman" . Let them collect unemployment benefits and struggle like everyone else who was unlucky enough to work for a foolish employer.
You do make a very good point about the government. What an outrage for congress to give themselves a $4300 raise while the country is in an economic crisis and they are bankrupting the country with the largest deficit ever. Odd that it's not getting as much press - I guess because Obama is OK with it.
January 30, 2009 at 4:16 pm
Greg
It's sad that so many of you know nothing about how banks are setup, because there ARE top performers. The loan issues with banks were mainly in housing loans and credit cards. What if you were a bond trader and made $100mm for you bank last year? Your job had NOTHING to do with the banks losses, and even helped them survive longer than they otherwise would. I agree the people involved in the areas of the bank that lost money shouldn't get rewarded, but for those who did well, they should be paid.
The bonus should be performance based, and if they were, people should enjoy them. It's funny how the press is also talking about how the lower bonuses have a "trickle down" effect. For example, someone NOT getting a $100,000 bonus results in less shopping, no huge tips for the maid, etc. I've heard the "trickle down effect of these losses" 10x in the past week. I thought "trickle down" didn't work?? Apparently it only works with losses??
January 30, 2009 at 4:05 pm
chops
Also, it isn't communism to want our tax dollars to be spent appropriately. Once a company receives money, the money they have is all the same. You can't just go in and say, "we didn't use TARP for that." If you had $X before TARP and $X+Y after TARP and spent $Z on bonuses, $Z*(Y/X+Y) was how much TARP went into bonuses. So, that is how much taxes money went to bonuses.
I don't want my tax dollars spent that way. Anyone that thinks that is a communist position is an ignorant fool. I want my taxes spent on roads, police, schools, military, and such "public" goods. Pretending a libertarian position is a communist one, is just laughable. I by and large agree with the conservatives on this site, but some of you just don't get it. Those against spending taxes on bonuses (even if this article is right), stem from libertarian ideals. Libertarian ideals are even farther from communism than what conservative has come to mean in this country. So Joseph, and an other that somehow think that way, get a clue!
January 30, 2009 at 3:28 pm
chops
Just lazy analysis. I don't care about bonuses in companies that didn't receive TARP money, but we all know the ones that received TARP and they gave out bonuses. Bonuses are to reward individual work, yes, but they are also there as a means of profit sharing. So, when you need government money to keep your company afloat no bonuses should be payed. Without that government money these people wouldn't even have jobs, much less a bonus. Then without this government money the market would be flooded with bankers, loan officers, what have you, and they still couldn't get another job for some time. So no, TARP receiving companies shouldn't have bonus, and certainly not much if any. Get rid of the bad people that @%$#ed the company over, and keep the good ones. When the company can turn a profit and doesn't need TARP they can get their bonuses again.
Also,comparing the bonuses to last year is faulty. Last year marked, for the most part, the largest bonuses ever payed out. So don't compare to just one data point, use an average over a large sample adjusted for inflation.
Lastly, the outrage is also stemming from hearing this news while the banks are not using TARP funds as they were supposed to be used. Had the banks started lending this money out yet, as it was supposed to happen, people's reactions would be attenuated.
You don't have to be against everything Obama says, you know. I'm against 90% of it, but will admit when he gets that 10% right.
January 30, 2009 at 3:12 pm
Karen L Duke
Brian you are so right again. Great job of hitting the nail on the head. What about Obama's friends ( Rubin for example ) that were making the calls at some of these BAILED OUT COMPANIES, how much did they walk away with. The double standard is alive and well in the "WHITE HOUSE" or should we call it the Green House with temps over 72 degrees so it feels like Hawaii for the Big O Kahauna. How long ago was it that Obama
lived in Hawaii, I thought Chicago has been his home for years. by now he should be used to colder weather and knows what a sweater is. Another double standard. It's been just one party after another at the GREEN HOUSE since he's moved in. No wonder he can't get to work until after 9:00 am.
January 30, 2009 at 3:03 pm
Eric
What you fail to acknowledge is that many of those poor regular joe salespeople on Wall Street weren't out selling cars, toilets or shoes, they were selling crap! Crap that helped wreck our economy, and those of most of the rest of the world. I recall reading an article here on the Fox News website which included an email between two mortgage brokers, in which they conversed about hoping they would all be rich and retired by the time this all came crumbling down. I have zero sympathy for these people. They all reaped the benefits when times were good, and now they have to pay the piper because things aren't so good. This is the life they chose went they went to work on Wall Street, tuff luck.
January 30, 2009 at 2:49 pm
chuck
Hey I was just on the Drudge Report where a Fannie/freddie contract employee tried to destroy information on the GSE's servers. But Justice Department foiled it. It's on Drudge just thought I pass it along.
January 30, 2009 at 2:28 pm
jason
TARP = Fixing irresponsible borrowing and lending with irresponsible borrowing and lending. When you have a problem it's best to define the source of the problem. In this case it was banks making stu.pid lending decisions and levering up those stu.pid lending decisions. Now the stu.pid lending levering mo.rom wants you to give him money for his stupid behavior, he thinks his s.tupid risks should be yours. The best thing for you is to get a chain saw a downsize his ego a bit.
January 30, 2009 at 2:26 pm
Pete
Why don't they try wage control. Oh yeah, Richard Nixon did try that. We the voters are responsible for trading our freedom and independence for a promise that the politicians will take care of us. Even though they have to take our resources to do it and of course, they decide from many choices what is best for us.
Why not let the stockholders decide if the people they employ are worth the money?
No where does anyone talk about whether these companies have a contractual obligation to pay these bonuses or golden parachute payments.
January 30, 2009 at 2:13 pm
Ray
I've never worked on Wall Street (where the rules are probably different from the real world). I do know that in the companies I have worked for over the years, the general rule is that a company that loses money doesn't pay out bonuses to anyone. The company's survival is more important than a bonus. The situation you describe with the widget salesman sounds more like a commission than a bonus. He makes a 10% commission on everything exceeding his quota. That is a salary agreement, not a bonus. Big difference.
January 30, 2009 at 2:11 pm
R Williams
Finally, someone with good sense about the bonuses. The workers are already suffering enough with the economy, without someone trying to stop them from collecting what they have legitimately earned. Just because a portion of their annual earnings is productivity based does not mean they are not entitled to it.
January 30, 2009 at 2:03 pm
Dr McCracken
The bonuses paid out to CEOs in companies -banks, or brokerages- that lost investor's money, and caused investor's savings and annuities and 401K accounts to diminish in value by 20% to 40% - and then received bailout money from the taxpayers are CRIMINAL.
This practice, along with deceiving investors, is unethical and immoral.No wonder the American populace is outraged. The old, traditional excuses, endlessly babbled by brokers - " you can't time the market", or "this is only transitional, and temporary", are simply irresponsible when presented to older people who do not have the time to wait for the market to recover , and who depend upon their savings in retirement - millions and millions of people in this country who are now suffering while executives collect huge bonuses, and then still ask for government bailout money.
Outrageous. They should be prosecuted.
January 30, 2009 at 1:54 pm
joseph
To get any of your precious TARP money back, you fools, you are going to need to retain good people! To retain good people, you have to pay them what they deserve - as illustrated by this article! What is wrong with you people!!?? Suddenly, right-wing or left-wing, everyone's a socialist. Yes, the mess we're in is tough - but there is PLENTY of blame to go around - NOT JUST BANKS SHOULD BE BLAMED FOR THIS MESS!!!...and TARP money (and we as investors, since we ARE the TARP money) should be treated as any other investor...and we should let the banks go forward create shareholder value!
January 30, 2009 at 1:22 pm
Zarras
The market lumps groups together and punishes them all. As a home owner who has a conventional mortgage and has maintained an accelerated payoff schedule, I am punished equally by lower home prices due only to the actions of others. If you are only going to correct bad policies for people who got caught this time, how much are you willing to pay to single them out with due process? Then aren't you leaving the bad policies in place for other groups to get caught by some new bubble scheme? No, cut all the cancer out at one time. There should be limits on the terms of bonuses. Bonuses should be strictly based on performance that is defined by contribution to the OVERALL long term profitability of the enterprise. "Golden parachutes" should be outlawed as these are pay to fail contracts.
January 30, 2009 at 1:14 pm
jason
In the case of receiving government money to shore up a failing corporation I would have to disagree. All bonuses should be completely recinded until the company has shown it is profitable. We are talking about bonuses, not base pay. Bonuses are for success, not failure, and although your scenario is for a performing individual, that individual is part of the greater corporation who's job is being subsidized by the taxpayer. To say that they should get bonuses anyway is just the same old pass the risk rhetoric. Government subsidizing says continue to try and make the failing parts of that corporation work. If this corporation does not want to make the tough decisions of downsizing then all of it's employess have to suck it up and take the hit not just the departments that aren't profitable. Look at it from the other way around. Say it is expanding and it is successful, these same individuals then receive even more as a bonus. Bottom line if you want taxpayer money then it is the whole, not just the part receiving it. Lose your job or suck it up, your choice! As far as Obamas remarks about irresponsibility, one look at the proposed stimulus pork and he has just made himself to be a hypocrite.
January 30, 2009 at 1:11 pm
BSReader
I have advanced university degrees, 36 years work experience, an exceptional work history, and many years of community service under my belt, and yet I am struggling on minimum wage because I have back problems that limit my job choices.
In spite of this, I pay my taxes in full, on time, and thus contributed to the bailout pool.
I am enraged that people in the financial industry less qualified than I, who are making irresponsible business decisions and posting quarterly losses, are rewarding themselves with billions of dollars in bonuses.
The purpose of a bonus is to reward exceptional dedication and achievement leading to unusually good profit. This reward system has been perverted into a black market golden parachute system, except that the executives don't even have to jump out of the plane. They keep flying in circles so they can do it again and again.
January 30, 2009 at 1:01 pm
Eric Scott Mering
Great Article. I have been in sales all my life and like those on Wall Street, I don't live off my salary (If I wanted to make that little I'd work a different job), I live off my commissions (Bonus). These banks did not go our of business. I have worked for a company who went out of business, guess what they still paid their employees when they weren't making money. To use the logic the President and many other ignorants are using, the auto workers on the assembly lines shouldn't be paid because the product doesn't make money. The problem is that we should not have given them money and let the natural evolution of business take place. If you don't produce a product that people want, people buy, and do it at a profit you won't be long in business. The failure is always caused by a few who knew better and did nothing. As employees we are responsible to hold our employers accountable. I have worked for a company who wouldn't allow that, I left. We always have options, if we take them or they are forced upon us, is up to us.
January 30, 2009 at 12:55 pm
Don
There are no top performers. I want to work on Wall Street where you get as fat a bonus for totally screwing up as you do for doing a great job. The "top performers" at these companies drove them into the ground and don't even deserve to keep their jobs let alone a fat bonus check.
January 30, 2009 at 12:35 pm
plumbers wife
Couldn't agree more, it's as if some people think that the EMPLOYEES(not workers) for these wall street firms weren't doing everything they could to keep the business from failing,keep there own jobs as well as the jobs of all their staff and the other employees of the firm, going without sleep, working weekends! Do you think they wanted to have to get federal help? Even when a business goes out of business the owner STILL PAYS THE EMPLYEES FOR THEIR TIME! This class warfare has got to stop, in the words of Thomas Paine, if we do not all hang together then we will surely all hang seperately.
January 30, 2009 at 12:30 pm
John
Brian,
I agree with DS in Texas. 'bonus' and 'commission' need to be distinguished. If Wall Steet is using the word 'bonus' and it is really a 'commision', then they need better PR. Right now, everybody believes they are bonuses that are getting handed out to companies that are requesting TARP money. The best weapon against the current perception is truth. You point out some truths in your article, but Wall Street, particularly TARP firms must do much better explaining exactly what these payments represent. If they don't, they will remain on the defensive and most of the population will not understand the issues.
John
January 30, 2009 at 12:21 pm
john m
Bonuses paid to anyone whose company received any tarp money is greed and unacceptable.
Any bank or company that accepted any tarp money should have the ceo resign or fired. Most of the ceo's are still in charge even though they led their institution down the tank.
You article reeally really sucks.
I am a businessman and not a give away democrat by the way.
January 30, 2009 at 12:09 pm
Don Kamp
Thank goodness for not succumbing to the Big O Kahuna hype! It's just a big shell game to divert the anger away from our elected officials and towards convenient targets. These liberal jerks got us into this mess and are now trying to dictate how much we all have to pull in our belts while the Big O Kahuna sips cocktails and dines on $100 an oz. steak. The only thing that's really shameful is Non-stop Nancy riding in her new jet and spending about $25,000 of taxpayer money per year on flowers while the Kahuna points the finger at us civilians. They ought to take a look in the mirror, fess up, and offer to make things right while giving themselves a 50% pay cut.
Don Kamp, Canajoharie, NY
January 30, 2009 at 12:04 pm
DWS in IA
The perspective and conclusion of the matter:
How many apples does it take to spoil a barrell? Should we (taxpayers including the President) "buy" into this sales scenario any different than other perishables? We are indeed finding out how perishable the financials are! For example, I look in a bag of apples and stop at the first bad apple. That bag and all the good apples in it won't go home with me. Do I take the time to sort out the good and bad apples? No, the rest of the apples are probably coming along in earlier stages of spoiling as well. Maybe I will check other bags but generally just mozy off to see the oranges or bananas. A good sales department usually anticipates objections and marks down the price.....makes a bigger bag.....sorts the apples for the customer.
In most perishables like produce or meat, customers require open or more modern transparent packaging. (Should we inspect financials more like meat?) Now, who wants to buy all those financial instruments that are invisible and impossible to examine before asking taxpayers to buy into the scam?
Any more sales analogies?
January 30, 2009 at 11:59 am
Aaron Garber
For the most part I agree with you Brian. The salesman in your hypothetical situation is entitled to his bonus because it is part of his agreed upon compensation. However, a CEO is paid a bonus based upon the performance of his company. If the company does well, then executives should be paid a bonus. One thing that I think is being overlooked is why does Congress get away with giving itself a pay raise when they are also part of blame to the downfall in the economy?
Brian Sullivan joined FOX Business Network (FBN) in April 2008 as an anchor. He co-anchors the 10am-12pm ET hours of the FOX Business block.
Prior to joining FBN, Sullivan served as an anchor for Bloomberg Television where he hosted the programs Morning Call and In Focus.
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Common Sense
Wall street should raise employee base salary a little higher to match (market based salaries) with the expectation that bonuses may or may not be given. And be very thankful to even have a job. Try being self employed and pay yourself a salary and profit and business expense ..... I have no sympathy for the wall street employees not getting bonuses when many other company in the several past years have reduced employees salary, removed bonuses, no vacation, increase health insurance premiums, ...... I was one of them. Now I am self employed. Quit your crying and do something about it.
James
I agree with some of what you are saying, but the disgraceful thing is that we spent that TARP money to pay for it. How many bonuses would have been paid out if these companies failed - which they should have done without the government intervention. Then these people would not only have no bonus, but no job as well. And sure it's unfair for an employee who works hard to make less money because his bosses were criminals. But it's also unfair that US taxpayers who had nothing to do with the company should have to pay for your "bonus" instead. Are you implying that if I lose my job I'm entitled to steal from you because it was so unfair that I worked for a company run by greedy idiots who promised me a bonus they couldn't afford to pay? I "earned" a lot more than my company could afford to pay me - can the government give me a $100,000 bonus too? Yeah, it sucks for these "salesman" . Let them collect unemployment benefits and struggle like everyone else who was unlucky enough to work for a foolish employer. You do make a very good point about the government. What an outrage for congress to give themselves a $4300 raise while the country is in an economic crisis and they are bankrupting the country with the largest deficit ever. Odd that it's not getting as much press - I guess because Obama is OK with it.
Greg
It's sad that so many of you know nothing about how banks are setup, because there ARE top performers. The loan issues with banks were mainly in housing loans and credit cards. What if you were a bond trader and made $100mm for you bank last year? Your job had NOTHING to do with the banks losses, and even helped them survive longer than they otherwise would. I agree the people involved in the areas of the bank that lost money shouldn't get rewarded, but for those who did well, they should be paid. The bonus should be performance based, and if they were, people should enjoy them. It's funny how the press is also talking about how the lower bonuses have a "trickle down" effect. For example, someone NOT getting a $100,000 bonus results in less shopping, no huge tips for the maid, etc. I've heard the "trickle down effect of these losses" 10x in the past week. I thought "trickle down" didn't work?? Apparently it only works with losses??
chops
Also, it isn't communism to want our tax dollars to be spent appropriately. Once a company receives money, the money they have is all the same. You can't just go in and say, "we didn't use TARP for that." If you had $X before TARP and $X+Y after TARP and spent $Z on bonuses, $Z*(Y/X+Y) was how much TARP went into bonuses. So, that is how much taxes money went to bonuses. I don't want my tax dollars spent that way. Anyone that thinks that is a communist position is an ignorant fool. I want my taxes spent on roads, police, schools, military, and such "public" goods. Pretending a libertarian position is a communist one, is just laughable. I by and large agree with the conservatives on this site, but some of you just don't get it. Those against spending taxes on bonuses (even if this article is right), stem from libertarian ideals. Libertarian ideals are even farther from communism than what conservative has come to mean in this country. So Joseph, and an other that somehow think that way, get a clue!
chops
Just lazy analysis. I don't care about bonuses in companies that didn't receive TARP money, but we all know the ones that received TARP and they gave out bonuses. Bonuses are to reward individual work, yes, but they are also there as a means of profit sharing. So, when you need government money to keep your company afloat no bonuses should be payed. Without that government money these people wouldn't even have jobs, much less a bonus. Then without this government money the market would be flooded with bankers, loan officers, what have you, and they still couldn't get another job for some time. So no, TARP receiving companies shouldn't have bonus, and certainly not much if any. Get rid of the bad people that @%$#ed the company over, and keep the good ones. When the company can turn a profit and doesn't need TARP they can get their bonuses again. Also,comparing the bonuses to last year is faulty. Last year marked, for the most part, the largest bonuses ever payed out. So don't compare to just one data point, use an average over a large sample adjusted for inflation. Lastly, the outrage is also stemming from hearing this news while the banks are not using TARP funds as they were supposed to be used. Had the banks started lending this money out yet, as it was supposed to happen, people's reactions would be attenuated. You don't have to be against everything Obama says, you know. I'm against 90% of it, but will admit when he gets that 10% right.
Karen L Duke
Brian you are so right again. Great job of hitting the nail on the head. What about Obama's friends ( Rubin for example ) that were making the calls at some of these BAILED OUT COMPANIES, how much did they walk away with. The double standard is alive and well in the "WHITE HOUSE" or should we call it the Green House with temps over 72 degrees so it feels like Hawaii for the Big O Kahauna. How long ago was it that Obama lived in Hawaii, I thought Chicago has been his home for years. by now he should be used to colder weather and knows what a sweater is. Another double standard. It's been just one party after another at the GREEN HOUSE since he's moved in. No wonder he can't get to work until after 9:00 am.
Eric
What you fail to acknowledge is that many of those poor regular joe salespeople on Wall Street weren't out selling cars, toilets or shoes, they were selling crap! Crap that helped wreck our economy, and those of most of the rest of the world. I recall reading an article here on the Fox News website which included an email between two mortgage brokers, in which they conversed about hoping they would all be rich and retired by the time this all came crumbling down. I have zero sympathy for these people. They all reaped the benefits when times were good, and now they have to pay the piper because things aren't so good. This is the life they chose went they went to work on Wall Street, tuff luck.
chuck
Hey I was just on the Drudge Report where a Fannie/freddie contract employee tried to destroy information on the GSE's servers. But Justice Department foiled it. It's on Drudge just thought I pass it along.
jason
TARP = Fixing irresponsible borrowing and lending with irresponsible borrowing and lending. When you have a problem it's best to define the source of the problem. In this case it was banks making stu.pid lending decisions and levering up those stu.pid lending decisions. Now the stu.pid lending levering mo.rom wants you to give him money for his stupid behavior, he thinks his s.tupid risks should be yours. The best thing for you is to get a chain saw a downsize his ego a bit.
Pete
Why don't they try wage control. Oh yeah, Richard Nixon did try that. We the voters are responsible for trading our freedom and independence for a promise that the politicians will take care of us. Even though they have to take our resources to do it and of course, they decide from many choices what is best for us. Why not let the stockholders decide if the people they employ are worth the money? No where does anyone talk about whether these companies have a contractual obligation to pay these bonuses or golden parachute payments.
Ray
I've never worked on Wall Street (where the rules are probably different from the real world). I do know that in the companies I have worked for over the years, the general rule is that a company that loses money doesn't pay out bonuses to anyone. The company's survival is more important than a bonus. The situation you describe with the widget salesman sounds more like a commission than a bonus. He makes a 10% commission on everything exceeding his quota. That is a salary agreement, not a bonus. Big difference.
R Williams
Finally, someone with good sense about the bonuses. The workers are already suffering enough with the economy, without someone trying to stop them from collecting what they have legitimately earned. Just because a portion of their annual earnings is productivity based does not mean they are not entitled to it.
Dr McCracken
The bonuses paid out to CEOs in companies -banks, or brokerages- that lost investor's money, and caused investor's savings and annuities and 401K accounts to diminish in value by 20% to 40% - and then received bailout money from the taxpayers are CRIMINAL. This practice, along with deceiving investors, is unethical and immoral.No wonder the American populace is outraged. The old, traditional excuses, endlessly babbled by brokers - " you can't time the market", or "this is only transitional, and temporary", are simply irresponsible when presented to older people who do not have the time to wait for the market to recover , and who depend upon their savings in retirement - millions and millions of people in this country who are now suffering while executives collect huge bonuses, and then still ask for government bailout money. Outrageous. They should be prosecuted.
joseph
To get any of your precious TARP money back, you fools, you are going to need to retain good people! To retain good people, you have to pay them what they deserve - as illustrated by this article! What is wrong with you people!!?? Suddenly, right-wing or left-wing, everyone's a socialist. Yes, the mess we're in is tough - but there is PLENTY of blame to go around - NOT JUST BANKS SHOULD BE BLAMED FOR THIS MESS!!!...and TARP money (and we as investors, since we ARE the TARP money) should be treated as any other investor...and we should let the banks go forward create shareholder value!
Zarras
The market lumps groups together and punishes them all. As a home owner who has a conventional mortgage and has maintained an accelerated payoff schedule, I am punished equally by lower home prices due only to the actions of others. If you are only going to correct bad policies for people who got caught this time, how much are you willing to pay to single them out with due process? Then aren't you leaving the bad policies in place for other groups to get caught by some new bubble scheme? No, cut all the cancer out at one time. There should be limits on the terms of bonuses. Bonuses should be strictly based on performance that is defined by contribution to the OVERALL long term profitability of the enterprise. "Golden parachutes" should be outlawed as these are pay to fail contracts.
jason
In the case of receiving government money to shore up a failing corporation I would have to disagree. All bonuses should be completely recinded until the company has shown it is profitable. We are talking about bonuses, not base pay. Bonuses are for success, not failure, and although your scenario is for a performing individual, that individual is part of the greater corporation who's job is being subsidized by the taxpayer. To say that they should get bonuses anyway is just the same old pass the risk rhetoric. Government subsidizing says continue to try and make the failing parts of that corporation work. If this corporation does not want to make the tough decisions of downsizing then all of it's employess have to suck it up and take the hit not just the departments that aren't profitable. Look at it from the other way around. Say it is expanding and it is successful, these same individuals then receive even more as a bonus. Bottom line if you want taxpayer money then it is the whole, not just the part receiving it. Lose your job or suck it up, your choice! As far as Obamas remarks about irresponsibility, one look at the proposed stimulus pork and he has just made himself to be a hypocrite.
BSReader
I have advanced university degrees, 36 years work experience, an exceptional work history, and many years of community service under my belt, and yet I am struggling on minimum wage because I have back problems that limit my job choices. In spite of this, I pay my taxes in full, on time, and thus contributed to the bailout pool. I am enraged that people in the financial industry less qualified than I, who are making irresponsible business decisions and posting quarterly losses, are rewarding themselves with billions of dollars in bonuses. The purpose of a bonus is to reward exceptional dedication and achievement leading to unusually good profit. This reward system has been perverted into a black market golden parachute system, except that the executives don't even have to jump out of the plane. They keep flying in circles so they can do it again and again.
Eric Scott Mering
Great Article. I have been in sales all my life and like those on Wall Street, I don't live off my salary (If I wanted to make that little I'd work a different job), I live off my commissions (Bonus). These banks did not go our of business. I have worked for a company who went out of business, guess what they still paid their employees when they weren't making money. To use the logic the President and many other ignorants are using, the auto workers on the assembly lines shouldn't be paid because the product doesn't make money. The problem is that we should not have given them money and let the natural evolution of business take place. If you don't produce a product that people want, people buy, and do it at a profit you won't be long in business. The failure is always caused by a few who knew better and did nothing. As employees we are responsible to hold our employers accountable. I have worked for a company who wouldn't allow that, I left. We always have options, if we take them or they are forced upon us, is up to us.
Don
There are no top performers. I want to work on Wall Street where you get as fat a bonus for totally screwing up as you do for doing a great job. The "top performers" at these companies drove them into the ground and don't even deserve to keep their jobs let alone a fat bonus check.
plumbers wife
Couldn't agree more, it's as if some people think that the EMPLOYEES(not workers) for these wall street firms weren't doing everything they could to keep the business from failing,keep there own jobs as well as the jobs of all their staff and the other employees of the firm, going without sleep, working weekends! Do you think they wanted to have to get federal help? Even when a business goes out of business the owner STILL PAYS THE EMPLYEES FOR THEIR TIME! This class warfare has got to stop, in the words of Thomas Paine, if we do not all hang together then we will surely all hang seperately.
John
Brian, I agree with DS in Texas. 'bonus' and 'commission' need to be distinguished. If Wall Steet is using the word 'bonus' and it is really a 'commision', then they need better PR. Right now, everybody believes they are bonuses that are getting handed out to companies that are requesting TARP money. The best weapon against the current perception is truth. You point out some truths in your article, but Wall Street, particularly TARP firms must do much better explaining exactly what these payments represent. If they don't, they will remain on the defensive and most of the population will not understand the issues. John
john m
Bonuses paid to anyone whose company received any tarp money is greed and unacceptable. Any bank or company that accepted any tarp money should have the ceo resign or fired. Most of the ceo's are still in charge even though they led their institution down the tank. You article reeally really sucks. I am a businessman and not a give away democrat by the way.
Don Kamp
Thank goodness for not succumbing to the Big O Kahuna hype! It's just a big shell game to divert the anger away from our elected officials and towards convenient targets. These liberal jerks got us into this mess and are now trying to dictate how much we all have to pull in our belts while the Big O Kahuna sips cocktails and dines on $100 an oz. steak. The only thing that's really shameful is Non-stop Nancy riding in her new jet and spending about $25,000 of taxpayer money per year on flowers while the Kahuna points the finger at us civilians. They ought to take a look in the mirror, fess up, and offer to make things right while giving themselves a 50% pay cut. Don Kamp, Canajoharie, NY
DWS in IA
The perspective and conclusion of the matter: How many apples does it take to spoil a barrell? Should we (taxpayers including the President) "buy" into this sales scenario any different than other perishables? We are indeed finding out how perishable the financials are! For example, I look in a bag of apples and stop at the first bad apple. That bag and all the good apples in it won't go home with me. Do I take the time to sort out the good and bad apples? No, the rest of the apples are probably coming along in earlier stages of spoiling as well. Maybe I will check other bags but generally just mozy off to see the oranges or bananas. A good sales department usually anticipates objections and marks down the price.....makes a bigger bag.....sorts the apples for the customer. In most perishables like produce or meat, customers require open or more modern transparent packaging. (Should we inspect financials more like meat?) Now, who wants to buy all those financial instruments that are invisible and impossible to examine before asking taxpayers to buy into the scam? Any more sales analogies?
Aaron Garber
For the most part I agree with you Brian. The salesman in your hypothetical situation is entitled to his bonus because it is part of his agreed upon compensation. However, a CEO is paid a bonus based upon the performance of his company. If the company does well, then executives should be paid a bonus. One thing that I think is being overlooked is why does Congress get away with giving itself a pay raise when they are also part of blame to the downfall in the economy?