Maybe it was the $53 million parachute departing Bank of American CEO Ken Lewis was granted. Maybe it was the six figure perks that banking executives at bailed out firms gave themselves. Maybe it was the $140 billion Wall Street bankers planned to give themselves this year–before they took care of the pressing need to lend to American small businesses. Or maybe it was a big shot banker claiming that big banks using taxpayer funds to pay out massive bonuses and create massive inequality is actually a good thing for the economy.
I’m not sure which item was the straw which broke the camel’s back, but it appears that the administration is finally going to take on arrogant, out of touch, and elitist Wall Street bankers. Today, in a long overdue move, the President ordered a steep salary cut at bailed out banks. While far from perfect–this plan doesn’t address stock options strongly enough–this is a solid start in making sure that taxpayer funds aren’t used to subsidize the outlandish lifestyles of Wall Street’s elite. Simply put, a banker who ultimately draws their salary from the taxpaying public shouldn’t be spending $3,000–an amount which could feed a family of four for several months–on a single brunch.
But the President’s attack on the arrogance of Wall Street didn’t end with measures aimed at curbing excessive salaries. The President told the big banks that they had a chance to use TARP funds properly, and lend to American small businesses. Since these bailed out firms have utterly failed to extend credit to small businesses–the engine of the American economy–the President took matters into his own hands. The President ordered that the $374 billion which remains in the TARP fund be used to extend loans to small businesses.
This is a solid plan. It will help millions of small businesses meet their payroll. And it’ll enable American entrepreneurs to start new businesses and create new jobs. Ultimately, this will help build a solid foundation for a period of sustained economic growth.
That doesn’t mean that there aren’t continued problems. A report released today by the administration’s bank watchdog says that the Treasury Department has failed to be transparent about exactly where the public largess is going. And over the counter derivatives, the vehicle which was the direct cause of this crisis, are still not regulated at all.
An excellent program on PBS last night showed that the people who created this mess–namely Larry Summers and Tim Geithner–are still at the heart of power. While the woman who foresaw the disaster, and stood up to the very powerful in a strong, but ultimately failed, attempt to avert the disaster is still on the sidelines. Brooksley Born may be a loyalist to Hillary Clinton, but her stellar performance in the Clinton administration as Chairwoman of the Commodities Futures Trading Commission, and her willingness to stand up to–instead of kiss up to–big Wall Street power brokers would make her a fantastic Secretary of the Treasury.
Still, the administration–which, it should be noted, still includes Secretary Geithner–should be commended for its strong actions to reign in Wall Street greed and jump start American small businesses. This is the proper economic policy, and one that will ultimately help millions of Americans build better futures.
But Wall Street doesn’t like being asked to do things for the good of the country. They still want to live in an America where buying a fifth house and going out to eat every night defines patriotism. In this morning’s Politico, a banker claimed that the pay cut the administration pushed through gives him an excuse not to lend to small businesses::
But Camden Fine, president of the Independent Community Bankers of America who attended the event with Obama, says the paymaster’s decision could doom the idea. That’s because community bankers will be loath to take TARP funds if they think Feinberg will set their pay.
“They’ll say, ‘I’m not going to touch the TARP, or the government’s going to come down on my pay,’” Fine said.
Once again, Wall Street doesn’t think about what is good for the country–increasing lending to small businesses, even if it means forgoing those $3,000 brunches, ultimately helps everyone. The creation of new jobs means people can meet their mortgages, buy new cars, and pay off past debts. Unfortunately, Wall Street is so focused on itself that it cannot see the forrest through the government-funded money tree.