Network News

X My Profile
View More Activity

A Spoonful of Populism

Well, that changes things a little. President Obama, in an appearance with Treasury Secretary Timothy F. Geithner, just ripped into banks for continuing their profligate ways even as they are being bailed out with taxpayer money. He even mentioned the $50 million luxury jet that I referenced earlier today.

"One point I want to make is that all of us are going to have responsibilities to get this economy moving again," he said. "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...

"The American people understand that we've got a big hole that we've got to dig ourselves out of, but they don't like the idea that people are digging a bigger hole even as they're being asked to fill it up....

"And, you know, 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.

"We shouldn't have to do that, because they should know better. And we will continue to send that message loud and clear."

By Dan Froomkin  |  January 29, 2009; 4:12 PM ET
Categories:  Financial Crisis  
Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   StumbleUpon   Technorati   Google Buzz   Previous: Where's Obama the Populist?
Next: Cartoon Watch


I understand what you write in today’s column, but I think it is a wee bit incomplete. I read much about the money problems in America, but I am struck by how few, if any, really talk about the basic problem: the simple point that everyone seems to miss is that there is plenty of money in the economy- it is just concentrated in too few hands. It is interesting that people want the banks to lend more money; well, how can you lend to people who are maxed out as it is? With the rise of foreclosures and bankruptcies, isn't it obvious that the 90 percent of us who own 30 percent of America's wealth are tapped out? Even if we create a dollar's worth of new wealth, the way our economy is structured, 70 cents of that dollar will go to 10 percent of the population. Hence, the 90 percent of us share 30 cents- roughly 1/3 of a penny each goes to the rest of us. It would seem to me that it would take a staggering amount of money to be printed to have any effect on the 90 percent of us. Meanwhile the other 10 percent would get even more insanely wealthy if we printed gobs of money.
I hate to say it: but until we figure out a way to share the wealth, no amount of printing money, rebate checks, deflation, dollar an hour raises, etc. will make a spit of difference. Look at the math:
median US income-50k
median US home price-250K
monthly budget family of four:
take home pay- 3300
mortgage (based on 200k assuming 20 percent down on 250 k)- 1199
real estate taxes- 200
new car loan- 425
elec- 100
heat- 100
health ins- 200
car ins- 100
food- 800 (less than 10 dollars per meal)
gas- 150
Our median family is now at 3174 dollars without credit cards, without clothing, dental, car repairs, out of pocket medical expenses, home equity loans, etc...
So, where did the ability to consume more things come from? A phony increase in housing and the use of credit cards led the way. There was no wealth there to spend. It was predicated upon people making more money and being able to afford more expensive homes. That did not happen, as you know.
The reality is that the median US household is broke and has been broke for a long time. While wealth zoomed for the top 10 percent, the rest of us flat-lined. A bank, if run properly, would be insane to lend money to the average US household. They would never, most likely, get their money back.

Posted by: bokun59 | January 29, 2009 4:26 PM | Report abuse

Bokun59 is right on target! Something has to done otherwise we will have real trouble in this country. We could be alot closer to a revolution than people think. Heaven forbid that happens! All that is needed in this environmentis a catalyst and things could take off. Scary

Posted by: eskieville | January 29, 2009 5:07 PM | Report abuse

Harping on bonuses after dining on $100/lb cute...backed up by a tax cheating Treasury Secretary no less. Mr. Obama should set an example and serve up some some Little Smokies in BBQ sauce and PBR the next time he invites congress over to gloat. Too bad NY will lose a billion in tax revenue because Wall Street bonuses were so relatively small this year..that's gotta hurt the little folk.

This is just a bunch of political theater garbage designed to chum the lefty waters.

Posted by: tom2 | January 29, 2009 5:21 PM | Report abuse

I'd like to ad, that when CITI ordered that plane over two years ago, everyone thought we were all doing just fine and that the party would last forever. So, the writer needs to keep it in mind that you just don't order a corporate jet a few weeks in advance.

One could argue that maybe CITI should have seen the snowball that hit them coming, when they witnessed the auto makers debacle in Washington. That might have been a good heads up for them. But no one is accusing any of the financial types for having any foresight.

So far as excessive financial and benefit renumeration to corporate executives, that was seen by many a long time ago. I'm not even a minor player anymore, and I saw the screaming about golden parachutes and massive stock awards coming more than five years ago. My small voice warned that this would come back to haunt those recipients and their companies.

Now, I'm hugely in favor of the bailouts as I am not going to have to repay the money, my children likely will not have to, and as I do not have any grandchildren and it looks as though I never will, my family is not going to suffer the economic doldrums that will hit when the bill comes due.

Posted by: surfer-joe | January 29, 2009 5:31 PM | Report abuse

If you don't think that the people in charge of running a company aren't doing what's best for the company, then DON'T BAIL THEM OUT! This whole money with strings attached (we'll give you money, but then tell you what you can and can't spend it on) is ridiculous. Either loan the money and get out of the way, or don't loan the money.

Posted by: armstrong001 | January 29, 2009 5:51 PM | Report abuse

Obama is undermining the intelligence of the people who elected him. As though these corporate perks just appeared out of nowhere. Has he been asleep? Or is really so condescending as to think that we have to be told by the crown prince himself how wasteful these CEO's are? Touting his own horn in times like this will get him nowhere.

Posted by: gumstick2003 | January 29, 2009 6:04 PM | Report abuse

It would be a fruitful and pertinent exercise to break down, one by one, the hundreds of thousands of bonuses comprising that $20 billion figure. This is impractical, due to its scale. It is also impossible, institutionally speaking, given the secrecy of the bonus-awarding process.

This is not merely a secrecy between a given institution and the outside world. Every single bonus awarded is, in principle, a secret shared by the recipient and his or her immediate superior. It's a safeguard against defections and internal dissensions. I don't know the history of this procedure, but it goes back a long, long way, and it's considered, by most of the parties involved, to be the glue that holds the operation together--even as it provides a mechanism of rewards and punishments for productivity or the lack thereof.

What productivity? Here's the essential question. It's obviously more a matter of generating income than of Doing the Right Thing, howsoever this is measured apart from the generating of income.

For this reason, I suspect that the bonus will disappear with the disappearance of finance itself--and not before.

I'd like to think that it's not the system of bonuses that ought to be addressed, but the system of rules and regulations governing the income-generating transactions in the first place. Certainly there's room for improvement here.

But this improvement only gives rise, as we all know, to a different set of problems--problems created by the increasing magnitude and complexity of the field as it evolves.

In effect, the SEC could only keep up with the field if it were populated by the same "geniuses" as the industry itself. The regulatory process would then continue to be what it already is--a somewhat fabulous exercise in hide-and-seek--but with a necessary difference: in order to motivate and retain talent at this level, the SEC would have to generate its own bonuses (or "bounties")....

The idea that this would raise the ethical level and the productivity of the financial scene is a fantasy I'd rather not entertain at the present time. I'm too busy fantasizing about "transparency".

Posted by: alabama5 | January 29, 2009 6:15 PM | Report abuse

There are a lot of people on Wall Street below the top earners who get a significant share of their income in bonuses. A trader who makes 70K a year might get half in a bonus. I wonder how much of the $20 billion actually went to the guys at the top?

Posted by: RealChoices | January 29, 2009 8:41 PM | Report abuse


Do you know what the rich do with their money in general? Some rich people are wasteful and/or horde their money, but many rich people are rich because they have given enormous contributions to our economy, including starting business that provide jobs for the middle and poor class. If they no longer have the incentive to start those businesses (because they know that it will not make them any richer) then they won't start those businesses. As you pointed out, the banks and poor have a harder time parting with their money because they are "maxed out."

I find it ironic that people who would never swipe a rich man's silverware, would feel no qualms about a party taking it to buy their constituency. Democrats want half of the nation to not pay any income taxes. Now I'm no friend of taxes, but every working person ought to pay a small amount (even if it's less than 1%) if any of us have to pay any.

Posted by: sakalava47 | January 29, 2009 8:54 PM | Report abuse


"Wall Street never changes. The pockets change, the suckers change, the stocks change, but Wall Street never changes because human nature never changes." Jesse Livermore

The noxious news spewing from the marble cesspools of Wall Street continues to get more incredible by the day. In less than a year American's have witnessed a historic melt down in the financial markets, the humbling of the Wall Street Investment banks, a mega housing bust, a mega Ponzi scheme, the mother of all government funded bailouts, compensation greed and excess run amuck, mega regulatory ineptitude, mega layoffs and record unemployment...the list goes on and on.

Those Wall Street scions who figured at the center of this this fiasco have inflicted immeasurable pain and suffering on ordinary Americans. They have sabotaged the engine that drives the American economy and jeopardized the global preeminence of the United States.

Now we are witnessing the complete breakdown of civility amongst these modern day robber baron thieves and their bagmen. The shameless public display of "cover your ass" by the likes of Gramm, Cox, Thain, Lewis, Fuld, Greenspan and company is too nauseating to behold. This week's cat fight between John "Complain" and Ken "Screwless" is the latest example. All who are implicated in this sorry mother of all financial meltdowns refuse to take responsibility.

Comically some expect us to take pity on people like Dick (the "Gorilla") Fuld or the thousands of financial spinners the pied pipers of greed led into the financial vortex.

Wait with bated breath for the culprits to be held duly accountable. In the meantime, it is the duty of every right thinking American to hold these scoundrels up to public scorn and ridicule. They deserve to be verbally tarred and feathered. All who exercise their right of free speech by holding these conniving rascals up to the light and exposing them as the despicable Ivy League con men that they are to be congratulated for fulfilling their civic duty.

In 1902, Franklin Keyes, a prominent Wall Street lawyer once said: Wall Street speculation "fosters a ring of idle gamblers, parasites upon society, who prey upon the fortunes of the honest and industrious; such people are a menace to the legitimate business interests of the country and an element of danger to the republic."

Some things never change.


Posted by: williambanzai7 | January 29, 2009 9:10 PM | Report abuse

(*Sigh*) Mr. Froomkin's columns just aren't the same since the end of the Bush Administration. I guess I had gotten used to my morning cup of righteous indignation. Better than a Jolt cola. Now it feels like caffeine withdrawl. =8`0

Posted by: qwert34 | January 30, 2009 11:09 AM | Report abuse

"SHAMEFUL"? How about an audit or a federal investication? RICCO? Do something! "Throw them in the brig"? Sounds good to me. I want to see some perp walks.

Posted by: JD538 | January 30, 2009 11:14 AM | Report abuse

..."We shouldn't have to do that, because they should know better. And we will continue to send that message loud and clear."... uhhh, and that's supposed to do it? What exactly IS 'oversight'? Errant banks get yelled at? Maybe Im blind- I just don't see any TEETH here...

Posted by: ssue1 | January 30, 2009 12:30 PM | Report abuse

The comments to this entry are closed.

RSS Feed
Subscribe to The Post

© 2010 The Washington Post Company