In Wall Street s latest affront to the public trust, the nine mega-banks graced with $125 billion in taxpayer bailout money under the Troubled Asset Relief Program (TARP) were reported last week to be paying out billions of dollars in bonuses to their executives. At least 4,793 bankers and traders received more than $1 million each in bonus payments, although it was one of Wall Street s worst years on record. After months of investigating banker compensation, New York Attorney General Andrew Cuomo said on July 30, "The repeated explanation from bank executives that bonuses are tied to performance in a manner designed to promote (national economic) growth does not appear to be accurate.
To say that it was an understatement would be an understatement. The bonuses paid to executives not only were not tied to national economic growth but were not even tied to some reasonable percentage of company profits. In fact they were generally greater than the net income of the banks. Morgan Stanley, for example, had $1.7 billion in earnings and paid $4.475 billion in bonuses. Goldman Sachs had $2.3 billion in earnings and paid $4.8 billion in bonuses. JP Morgan Chase had $5.6 billion in earnings and paid $8.69 billion in bonuses. JP Morgan s largesse involved showering 1,626 of its favorite execs and traders with bonuses of $1 million or more. For most people, a "bonus is a few hundred dollars at Christmastime. A million dollars is what you work a lifetime to try to save, and few people reach that goal. Even Citigroup and Merrill Lynch, which have been called zombie banks, paid $5.33 billion and $3.6 billion in bonuses, respectively -- although they lost more than $27 billion each in earnings. The bar for merit is apparently so low that you re entitled to a bonus if your zombie bank simply keeps breathing! Â
These blatantly inflated bonuses are just the last in a litany of abuses by those same profligate banks that nearly destroyed our economic system. If the derivatives on their books were "marked to market (valued at what they would fetch on the market), the banks would be bankrupt, and their employees would be out of a job. Instead, they have been allowed to inflate the value of their "toxic assets and sell them to the U.S. government at the inflated value. Then they have taken the money they got from the government at these inflated prices and paid back the TARP money they received allowing them to post inflated earnings and reward themselves with inflated bonuses! Many people feel that these bankers are thieves stealing from the public till who should be looking at jail time. But who is there to stop their parade of outrages? No one in Congress, the White House, or the news media is calling them on the carpet for it. As Senator Dick Durbin said recently, Wall Street owns Congress; and that is also true of the major media.
We may not be able to stop them, but we can join them. We the people need to play the bankers game ourselves. Even corporate giants such as General Motors and WalMart have now gotten into the banking game and are easing their credit problems by forming their own banks. The U.S. public sector is late to the party. States, counties, public universities could take the lucrative system the private banking industry has created for itself and turn it to productive use in the public interest.
Keeping the Banks Honest with Some Public Competition
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In President Obama s July 17 weekly address, he repeated his call for a public option in health care, in order to "increase competition and keep insurance companies honest and to "put an end to the worst practices of the insurance industry. The same call needs to be made for a public option in banking. In some countries, publicly-owned banks have operated alongside privately-owned banks for decades; and in those countries, the current crisis has served to show that public banks generally do a better job of serving the people and protecting their interests than their private counterparts.Â
In Canada, the trendsetter in public banking is the province of Alberta. Alberta s publicly-owned banking system, called Alberta Treasury Branches or ATB, was initiated during the Great Depression to give the private banks a run for the public s money. According to a government publication titled "These Are the Facts: An Authentic Record of Alberta s Progress, 1935-1948 :
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