Bonuses - Represent Consumers

While President Obama campaigned for reelection as a candidate to fight for the 99 percent, he has assembled a second-term economic team that is extraordinarily cozy with the 1 percent.

His picks for Treasury, the head of the Securities and Exchange Commission and director of the Office of Management and Budget are guaranteed not to make anybody on Wall Street or the biggest corporations nervous.

First there was the prospective SEC chief, Mary Jo White, a tough former prosecutor who cashed in as a top defense attorney for big bankers post-bailout. When bankers like John Mack of Morgan Stanley needed to make insider charges go away or Jamie Dimon needed to make sure settling federal foreclosure fraud charges didn’t hurt too much, Mary Jo White was by their sides.

Then came the new Treasury secretary, Jacob Lew, the recipient of a series of lucrative favors from Citibank during his incredibly profitable trip through the Wall Street-Washington revolving door. The most galling was Citibank’s nearly $1 million bonus for Lew – after the bank was bailed out by taxpayers. The bonus was contingent upon him snagging a high-level government job.

That was not Lew’s only taste of taxpayer-funded generosity. Earlier, he got another big, highly unusual bonus on his way out the door from an executive position at state-financed New York University, after making a deal for Citibank to handle the school’s loan business. Meanwhile NYU students were seeing their tuition skyrocket. So after cutting a deal with Citibank, Lew gets a bonus from New York taxpayers to leave NYU. Then he gets hired by Citibank – no big surprise – and then gets a bonus to leave Citibank if he can become a high-ranked alumnus.

No wonder we call him “Lucky Lew.”

In the midst of all the recent furor over the sequester, the Senate confirmed Lew with little debate – and few answers to the many questions raised by his taxpayer-funded bonuses and benefits. One Republican senator spoke fiercely against Lew. Sen.Charles Grassley of Indiana said on the Senate floor, “Mr. Lew’s eagerness and skill in obtaining bonuses, severance payments, housing allowances and other perks raises concerns about whether he appreciates who pays the bills.”

Lew was confirmed with barely a peep from Republicans or Democrats. Independent Vermont Sen.Bernie Sanders, who caucuses with Democrats, voted against Lew.

Democrats fell in line with their president. But why did Republicans make so little fuss about Lew? (Only 25 voted against him.) Sen. Orrin Hatch, of Utah for example, offered a long list of reasons why choosing Lew was a bad idea, then voted for him.

This was after Republicans had mounted a robust attack on Obama’s nominee for defense secretary, Chuck Hagel, the former Republican senator from Nebraska. Hagel might have had an easier time if he was pushing Wall Street’s agenda of punishing the vast majority with of Americans with a bitter stew of unemployment, falling wages and austerity after a severe recession that Wall Street, not Main Street, caused.

Lew and White, meanwhile, have both offered comfort to the bankers. Lew told a Congressional committee that he doubted deregulation was a major cause of the financial collapse that wrecked the economy and forced taxpayers to pay for big bankers fraud and recklessness. For her part, White expressed concerns about overzealous prosecutors unfairly targeting bankers.

The latest candidate that Obama wants to put on the economic team, Sylvia Reynolds Burrell is, like Lew, an alumnus of the Clinton administration team who was mentored by then-Treasury secretary Robert Rubin. He helped big bankers’ dreams come undo true by working to end the Depression-era Glass-Steagall law before going through the revolving door himself to become Citibank’s president.

Reynolds went on to work at the Gates Foundation before taking over the Wal-Mart Foundation, the charitable arm of one the nation’s biggest and most profitable corporations, as well as one of the largest employers of low-wage workers.

She is not without ties to big financial institutions, serving on the board of directors of MetLife, the country’s biggest life insurance company. In the post Glass-Steagall world of high finance, Metlife through its subsidiaries lost big on bundled derivatives based on worthless real estate loans.

It’s quite a team the president is assembling, drawn from the country’s largest corporations and those who represent their interests. They may be very smart people. They also share this: one can scrutinize their records and find no hint of any of them questioning the impact of excessive corporate power or the big banks, or advocating policies that would empower and revive the middle-class. President Obama’s economic team exposes the wide and painful gap between his election-year rhetoric about income inequality and his willingness to do something about it.

White has already said she will recuse herself, if she is confirmed, from cases involving her former clients – not that the SEC has shown much interest in scrutinizing the too-big-to fail banks. Lew should likewise remove himself any decision-making that would affect Citigroup, though that would leave him twiddling his thumbs for most days, since the Treasury’s main job in the Obama administration so far has been figuring out ways to prop up Citigroup and the other too-big-to-fail institutions.

Did you hear the one about the hedge fund employee complaining that he’s got to scrape by on $350,000 this year because of his lower bonus?

This is not an anti-banker joke, it’s a Bloomberg News story.

In the story, reporter Max Abelson gets finance industry workers to open up about their feelings about their financial sacrifices in the wake of a reduction in bonuses this year.

One hedge fund marketing director acknowledges that he is “freaking out, like a rat in trap on a highway with no way out” because he will be unable to keep up with his kids’ private school tuition, summer rental and the upgrade to his Brooklyn duplex.

Bonuses were down about 14 percent across the financial industry last year in the wake of a second annual plunge in profits of more than 50 percent.

Noting that profits plunged a lot more steeply that the bonuses, the New York Times Dealbook column, which often takes the Wall Street view, couldn’t summon much sympathy. Reporter Kevin Rose sniffed, “It is apparently going to take more than shrinking bank profits to put a big dent in Wall Street bonuses.”

Wall Street bankers remain by any measure well paid, with an average annual compensation, including bonuses, of $361,180 in 2010, the last year for which averages are available. That’s 5 ½ times the average pay for Americans.

So to help put the bankers’ problems in perspective for the rest of us who might be having a hard time working up any empathy, Bloomberg rustles up a high-priced accountant.

“People who don’t have money don’t understand the stress,” said Alan Dlugash, a partner at accounting firm Marks Paneth & Shron LLP in New York who specializes in financial planning for the wealthy. “Could you imagine what it’s like to say I got three kids in private school, I have to think about pulling them out? How do you do that?”

What a load of malarkey.

What the Bloomberg report neglects to mention is that the financial industry actually compensated for the lower bonuses by raising bankers’ salaries.

While some bank defenders claim the brouhaha over bonuses is just envy, a report from New Bottom Line earlier this year puts the bankers’ bonuses into sharp focus. It found that bankers’ total compensation at the six biggest banks amounted to $144 billion last year – second only to the total paid out in 2007 before the meltdown.

Since the 2008 financial collapse, the banks we bailed have paid out a total of half a trillion dollars in compensation.

According to the report, if the bankers let go of just half of their compensation packages, banks could afford to underwrite principal on all the underwater mortgages in the country.

If bankers chose to forgo just 72% of their bonuses, they could fill the nearly $103 billion budget gap plaguing the nation’s city and states.

The bankers aren’t getting this money because they have contributed so much to the well being of the country. They’re getting it because they’ve captured both the political system and their regulators, who continue to do the bankers’ bidding. We can’t expect them, the bankers or the politicians or the regulators, to stop on their own.

We’re going to have to do it.

Check out our constitutional amendment to undo U.S. Supreme Court’s Citizens United ruling, which opened the gates wide for bankers and other corporate titans to influence our government with an unlimited and anonymous tidal wave of cash.

Recuse Obama's 1 percent economic team

Freakout in the Bonus Bubble