Obama berates Wall St bonuses
Jan 30 2009 10:48
Washington - President Barack Obama on Thursday furiously rebuked Wall Street titans who raked in billions in bonuses while taxpayers bailed out their industry as "shameful" and guilty of acute "irresponsibility."
Obama, anger flashing across his usually calm face, said bosses of big finance firms must sacrifice along with other Americans, as the country tries to dig itself out of a deep economic hole.
The president's ire was sparked when he read a newspaper article detailing the $18.4bn in bonuses collected by Wall Street firms last year, even as stock markets plunged and the economy slumped towards a recession.
"That is the height of irresponsibility. It is shameful, and part of what we are going to need is for the folks on Wall Street who are asking for help to show some restraint and show some discipline and show some sense of responsibility," Obama told reporters in the Oval Office.
"The American people understand that we have got a big hole we have got to dig ourselves out of but they don't like the idea that people are digging a bigger hole as they are being asked to fill it up."
Obama, speaking after meeting Treasury Secretary Timothy Geithner, said he would clearly spell out to Wall Street executives they have to act in a more responsible fashion.
There would be time for them to rake in profits and bonuses later in the economic cycle, he said. "But now is not that time."
Biden takes a shot
"We're going to be having conversations as this process moves forward, directly with these folks on Wall Street," Obama said.
The president, who is piloting an $800bn plus economic stimulus plan through Congress, pledged to make clear that Wall Street fat cats must "start acting in a more responsible fashion, if we are to together get this economy rolling again."
He also brought up the case of Citigroup, which has taken funds under a separate $700bn Wall Street bailout, and nixed plans to buy a $42m corporate jet after the Treasury Department complained.
"Secretary Geithner already had to pull back one institution that had gone forward with a multimillion dollar jet plane purchase at the same time as they're receiving TARP money," Obama said.
White House aides said the massive bonus figures, divulged in a report on Wednesday by the New York state comptroller's office, undercut Obama's appeal for all Americans to share in a new spirit of responsibility.
Total bonuses in the securities industry fell from $32.9bn to $18.4bn in 2008, the largest percentage drop in more than three decades, Wednesday's report said.
"But the size of the bonus pool is still the sixth largest on record," the comptroller's office said.
Vice President Joseph Biden also took a shot at Wall Street financiers in an interview with CNBC.
"It's been outrageous. I mean, it's just offensive, it just offends the sensibilities, I mean, I'd like to throw these guys in the brig.
"I do know what they're thinking and they're thinking the same old thing that got us here, greed. They're thinking, take care of me."
Wall Street works on bonuses
There was mixed reaction from Wall Street analysts to Obama's remarks.
"It's good politics for him to say that, but we have to realise that a lot of bonuses were paid on a contract basis, so many people worked on percentages," said Peter Cardillo, chief market economist at Avalon Partners.
"I am not defending the action of Wall Street and the bankers but I think that one needs to realise that Wall Street doesn't work on salaries but on bonuses."
Alan Johnson, managing director of Johnson Associates, a New York-based compensation consulting firm, also understood Obama's anger, but said the situation was complicated.
"I understand the anger that the president has and most taxpayers probably have. I understand that emotional kind of reaction.
"Were they irresponsible? That's a questionable thing, if you say, 'I'm not paying a bonus to anyone,' you'll probably have several of these firms collapse, which would have been worse than people being angry."
As Obama and Biden spoke in Washington, there was more grim news on Wall Street as stocks tumbled on grim economic data.
The Dow Jones Industrial Average shed 226.44 points or 2.70% to close at 8,149.01, ending a three-day rally on Wall Street.
- AFP
