Opinion

Felix Salmon

Wall Street bonus datapoint of the day

By Felix Salmon
December 13, 2010

In a Bloomberg poll, 88% of respondents said that Wall Street bonuses should either be banned outright or taxed at 50%. Just 7% said they should remain an incentive:

poll.tiff

To put that 7% figure in perspective, 6% of Americans believe the moon landings were a hoax; 7% believe Elvis lives; 24% believe that Barack Obama is a secret Muslim; 41% believe in ESP; and 48% believe in creationism.

Americans will believe anything, it seems—except the idea that incentivizing bankers at systemically-important institutions to take big risks makes any sense at all. Now all we need to do is find one or two people in the Obama administration who are aligned with the 88% rather than the 7%. I’m not holding my breath.

Comments
7 comments so far | RSS Comments RSS

So . . . what you’re implying is that 100 percent of the people in the Obama administration believe that Elvis is alive. There’s a headline for you.

Sorry, couldn’t resist.

Posted by Curmudgeon | Report as abusive
 

Curmudgeon: Essentially, yes. It’s an apt metaphor for how out of touch most of Washington is on this issue — or something like the tax cuts. Imagine if the White House, Congress and the D.C. media all agreed that Elvis was still alive. But that’s how we’re operating here.

We had a nice country there for a while….

Posted by jte | Report as abusive
 

Once those firms took Taxpayer money, they become government sponsored enterprises, with an implicit guarantee that they would not be allowed to fail. Therefore, since their management cannot fail, they have no risk, and if there are no risks, there should be no reward.

Now, if those same executives would sign a document that says their company will never again accept taxpayer money, and that any bonus they receive will be placed in an escrow account subject to clawback, then we can talk about bonuses.

Remember that during the housing bubble, the Wall Street banks were declaring huge profits based on their marks going up. Huge profits meant huge bonuses, so it was in the financial interest of those CEO’s to manipulate the marks. How do we know that their present profits are not just the result of their marks going up again? Are these real profits, or paper profits?

Posted by randymiller | Report as abusive
 

That was well said Randymiller!

Posted by hsvkitty | Report as abusive
 

“Americans will believe anything, it seems—except the idea that incentivizing bankers at systemically-important institutions to take big risks makes any sense at all.”

So that’s why I didn’t see clearly: megabonus bankers were paid to take risks, not to make profits. I guess they were pretty successful at the risk thing… shame about the profits.

Posted by FifthDecade | Report as abusive
 

I am a firm believer in captalism. Unfortunately, Wall Street ceased to be capitalist in 2008 and instead became the biggest socialist group in history. The media focus has been on TARP and its payback. Far bigger subsidies are coming from the more hidden programs that the Fed has to keep pumping money into those entities.

The TBTF institutions (most of them can’t even really be called banks) are getting essentially 0% loans on-demand with grossly over-valued assets whenever collateral is needed. Meanwhile, the same entities are jacking up fees and interest rates to average citizens.

Wall Street bonuses should be greatly limited or have significant tax surcharges until the Fed can move away from ZIRP. The bonuses are an annual drain on the financial companies’ working capital while ZIRP is in place to help the banks rebuild that capital. At the moment the Fed is simply a pass through spigot from taxpayers to the financial sectors’ bonus pools. This is not capitalism – it borders on theft.

Posted by ErnieD | Report as abusive
 

Ernie, Socialist no. Plutocracy yes.

Posted by hsvkitty | Report as abusive
 

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