In January, 2009, President Obama gave a speech in which he excoriated the executives of companies that received bailout money from the TARP program. The White House posted the transcript of that speech at its official blog with the title “Shameful”.
One point I want to make is that all of us are going to have responsibilities to get this economy moving again. And when I saw an article today indicating that Wall Street bankers had given themselves $20 billion worth of bonuses — the same amount of bonuses as they gave themselves in 2004 — at a time when most of these institutions were teetering on collapse and they are asking for taxpayers to help sustain them, and when taxpayers find themselves in the difficult position that if they don’t provide help that the entire system could come down on top of our heads — that is the height of irresponsibility. It is shameful.
In March, he inveighed against what he considered an exorbitant amount of money paid to executives at the bailed-out AIG.
But before I talk about the new steps we’re taking to get credit flowing to small businesses across our country, I want to comment on the news about executive bonuses at AIG.
This is a corporation that finds itself in financial distress due to recklessness and greed.
Under these circumstances, it’s hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay. How do they justify this outrage to the taxpayers who are keeping the company afloat?
In the last six months, AIG has received substantial sums from the U.S. Treasury. I’ve asked Secretary Geithner to use that leverage and pursue every legal avenue to block these bonuses and make the American taxpayers whole.
Shortly thereafter, the President put a cap on the pay of executives at those TARP companies, so that they could not again get “shameful” “obscene” compensation packages. He capped, or at least said he capped, executive pay at $500,000 so that none of them could commit another fiscal “outrage”.
Problem solved, right? The President believed the “millionaires and billionaires” made too much money, he got control over their salaries and bonuses, and set it at a level he felt was “right”. That’s how it worked, right?
Apparently not. In January of the next year, the President gave another speech in which he called the executive pay over which he had control “obscene”. In that speech, he proposed a brand new “responsibility fee” to make America “whole” and “hold firms accountable”.
We’ve worked over the last year to manage this program effectively, to hold firms accountable, and to recoup as much tax money as possible. Many originally feared that most of the $700 billion in TARP money would be lost. But because of the management of this program by Secretary Geithner and my economic team, we’ve now recovered the majority of the funds provided to banks.
As far as I’m concerned, however, that’s not good enough. My commitment is to the taxpayer. My commitment is to recover every single dime the American people are owed. And my determination to achieve this goal is only heightened when I see reports of massive profits and obscene bonuses at some of the very firms who owe their continued existence to the American people — folks who have not been made whole, and who continue to face real hardship in this recession.
He never did get that fee. As best I can tell, it was only a proposal and never actually became legislation in Congress. Still, the President did have that salary cap in place, so surely he was using his unprecedented power to make us whole and end the outrages, right?
Nope. Two years later, he was at it again, complaining to Rolling Stone magazine about how those wicked TARP firm executives had somehow gotten over on us. He really wanted to fix the problem, though, and he had a proposal to to just that.
I will tell you, the single biggest thing that I would like to see is changing incentives on Wall Street and how people get compensated. That ultimately requires not just congressional legislation but a change in corporate governance. You still have a situation where people making bets can get a huge upside , and their downsides are limited. So it tilts the whole system in favor or very risky behavior…
But…wait. The President, thanks to his actions in 2009, capped executive pay for plenty of companies on Wall Street and elsewhere. What incentives needed to be changed? All he had to do was use his power and…he was using the power he demanded after his inauguration, wasn’t he?
No. No he wasn’t.
Christy Romero, the Special Inspector General for the Troubled Asset Relief Program, delivered a report yesterday on how poorly the Treasury Department actually handled the companies over which they had oversight. According to Romero, Treasury officials did not conduct their own investigations and rely on facts they had learned themselves. Instead, they relied “to a great extent on the companies’ proposals and justifications without conducting its own independent analysis.” As a result, they approved exactly the sort of salaries the President specifically sought to cap, without so much as a twitch.
Ms. Romero said that in 2012 Treasury approved pay packages of $3 million or more for just over half of the 69 top executives at the three firms receiving TARP funds. Sixteen executives received Treasury-approved pay packages of $5 million or more.
This isn’t a new development. The previous TARP auditor reported last year that Treasury officials had already subverted the pay cap and approved multi-million dollar salaries to 49 different executives. At some point, you have to ask yourself why the President hasn’t used the power he has and why no one has been held accountable for their failures to make America “whole”.
Alternately, you could simply wonder if the whole thing was a giant ruse to score political points with voters with no intent at all to punish those Wall Street executives who poured millions into his campaign coffers. You know, if you were particularly cynical…
(Photo Credit: New York Times)