Money Really Is Fungible

Just weeks after the Treasury Department gave nine of the nation’s top banks $125 billion in taxpayer dollars to save them from unprecedented calamity, bank executives are salting money away in billionaire bonus pools to reward themselves for their performance.

Outraged? The bankers (who didn’t anticipate the subprime crisis) were ready for that. So they are assuring everyone that this self-directed largess won’t be paid with the same dollars they got from taxpayers. They’ll use other ones.

What we want to know is will they be marking the bills so they can be sure which is which?

Unfortunately, the legislation that created the $700 billion rescue fund barely touched on the problem of executive compensation — limiting bonuses only when they are found to have been based on inaccurate statements of earnings or when they are deemed to encourage bankers to take “unnecessary and excessive risks.” The new Congress should impose tighter limits on executive pay at banks taking taxpayer money.

Meanwhile, other ways should be explored to recover undue rewards. New York’s attorney general, Andrew Cuomo, sent a letter last week to all of the banks that got money from the Treasury Department asking for information about their bonus pools. He already has used laws on fraudulent payments to convince the American International Group, the insurance giant, to suspend some bonuses.

Banks cannot simply do away with all bonuses for past performance. Many are cooked into contractual agreements. And they are shrinking anyway. The New York State Assembly (which depends on Wall Street payouts for tax revenue) forecast that financial-industry bonuses would fall 41 percent, on average.

Still, there is a solid argument to deny bonuses to executives who eagerly gorged on dodgy securities that drove the banks to the brink of collapse. There is also a solid argument for clawing back the bonuses they made during the subprime-mortgage-backed boom times that set the stage for the present disaster.

This isn’t just an issue of fairness; it’s sound business practice. It is past time that banks — which turn to the taxpayers for help when they get in trouble — institute a system of incentives that aligns rewards with long-term success. It’s about tempering bankers’ intemperate appetite for risk, which has led this country into the most desperate financial crisis since the 1930s.

The new Congress should take up this issue. For starters, it should tighten limits on executive compensation for bankers who have taken taxpayer money. Representative Henry Waxman, the chairman of the House Committee on Oversight and Government Reform, has already asked the nine banks for data about bonuses.

All financial institutions must review their compensation practices. They must do away with a system of rewards that encourages bankers to throw away all caution in pursuit of short-term profits — leaving shareholders and taxpayers holding the empty bag.

As soon as they threw my money, and yours, into their big ass pile; as far as I am concerned the rules changed. No one has asked me if it is fine to give these asshats that started all the trouble we are now in any bonus at all. Based on the fact that they needed our money to stay in business, I don’t feel a bonus is due.

The very IDEA that we must donate to this covey of snakes is reprehensible at best. And to have the gall to use ANY of the money in the pile to allow some slick insider to buy his squeeze a tennis bracelet for Christmas when I can’t afford even the decorations on the tree makes me wonder about our “representatives” in Congress and their real constituency. Yeah, I am pissed off. You should be too.

Nowhere in this post is one party to blame, they are all in bed with the same girl, and we are paying for the ride.

This is American Economy - 101, not politics