Notes &
Secretary Geithner already had to pull back on one institution that had gone forward with a multimillion-dollar plane it purchased at the same time as they are receiving TARP money,” he said, using the acronym for the government’s $700 billion Troubled Assets Relief Program, intended to rescue shaky financial firms. “We shouldn’t have to do that, because they should know better.
Obama Harshly Criticizes Wall St. Bonuses - NYTimes.com
This is just getting outrageous. I don’t know whether the bonuses are more troubling or the fact that the Secretary of Treasury has to involve himself in the travel purchasing decisions of CitiGroup. TARP itself has been shamefully executed; if the government didn’t want those bonuses paid out, why didn’t they just stipulate it as a condition of receiving aid?
It seems like these companies are worried that they’ll lose talent if they don’t continue to compensate their employees at these levels. But that’s the point. The financial services industry doesn’t deserve the talent it currently has. Many of my smart, ambitious friends need to be compensated less for doing work that often requires neither their level of intelligence nor ambition. That way, they’ll leave those firms and engage in more productive work. The problem with the 2008 bonuses was not only that it was an abhorrent waste of taxpayer’s money, but that it delayed the necessary outflow of talent from financial services into other industries that would better employ the talent.
The crazy thing about blocking the plane purchase is that the government’s objection seems entirely symbollic. I’m sure real scrutiny would uncover a lot more wasteful spending on the part of BOFA, C, and the others, but a corporate jet, for whatever reason, is something that taxpayers can more readily see / pick at.
We’re not going to fix our economy simply by preventing crappy businesses from buying corporate jets! I remain unconvinced that this is a better alternative to letting unprofitable leaches just fail. I will personally start a bigger, better banking company out of the fire sale of BOFA / C assets if the government just gave me a few bill… do you know what I’m saying?
[thank you for endulging in this rant]
UPDATE: It only gets worse later in the piece with this statement:
Mr. DiNapoli’s report was compiled based on the annual December-January bonus season, mostly through personal income tax collections. In an interview published on Thursday, he said it was unclear if banks had used taxpayer money for bonuses.
“The issue of transparency is a significant one,” Mr. DiNapoli said in the interview, “and there needs to be an accounting about whether there was any taxpayer money used to pay bonuses or to pay for corporate jets or dividends or anything else.”
I don’t pretend to be all that sophisticated when it comes to understanding corporate accounting, but how is this even raised as a question. Did the government somehow mark certain bills and just wants to make sure those bills weren’t the ones that ended up being paid out as bonuses? If a company “needs” government support to fund its operation, and part of that operation turns out to be employee compensation through bonuses, then well, of course, government support has been used to fund bonuses. In other words, if $18.4 billion were paid out in bonuses by firms receiving government aid, then if no bonuses were paid at all, the government could have provided $18.4 billion less. What am I missing here?
