Last Friday, the front page of the Wall Street Journal blared: “Nine Lenders That Got Aid Have $33 Billion Bonus Tab.”
Citigroup received $45 billion in US taxpayer money and paid $5.3 billion in bonuses. That’s on top of very generous salaries. One trader there has a contract for almost $100 million a year. Good work for a company that lost $23 billion last year. Similarly, Bank of America received $45 billion and paid out $3.3 billion in bonuses. JPM Morgan received $25 billion and paid $8.7 in bonuses.
The list goes on. These well heeled financiers lose billions. The US taxpayer fronts their losses. We pay their salaries. We pay their bonuses. For what?
“We can’t attract good talent without large pay packages,” they wine. “Hey, pay me $5 million and I will lose only $10 billion,” we respond.
Let us also remember, these banks and certain financial institutions can borrow from the Federal Reserve at .05%. That is effectively free money. My small business friends cannot borrow near that rate. Many are now denied funding for heretofore good loans. Yet we are asked to contribute our tax dollars for this fiasco?
Remember, these institutions are private. They are not government owned. They make billions in good times, keep it for themselves and ask us to pony up in bad times. We rescue them with taxpayer money, pay their excessive salaries and then pay them bonuses for poor performance?
Paul Volcker questioned the constitutionality of the “independent” Federal Reserve loaning private banks and investment banks such as Goldman Sachs, for example, $22 billion. This loan was granted by Henry Paulson, an unelected Treasury official and former chairman of Goldman Sachs. Goldman Sachs is a wealthy enterprise that has no US depositors. Yet it received a huge loan and now has split bonus money of $4.8 billion (almost $1 million per employee).
Public US taxpayer money for private enterprises? Instead of taxpayer money for education or health care, we spend it on the irresponsible, reckless behavior of private institutions that are politically connected.
White House Chief of Staff, Rahm Emanuel said today: “The industry is already back to their pre-meltdown bonuses… where the institutions have all the upside and the taxpayers have all the downside.”
In “Democracy in America” Alexis de Tocqueville wrote almost 200 years ago, “the American Republic will endure until the day Congress discovers that it can bribe the public with the public’s money.”
Fred Crossman, J.D, C.P.A.
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