The Bonus Culture

One of the most egregious Wall Street practices that should have been stopped during the bailout was that of the bonus culture. Investment bankers made ridiculously large bonuses regardless of whether they or their firm actually made their clients any money. I’m not suggesting this practice should be illegal for any business that lives or dies by its own bottom line. America is the home of free enterprise. If a company’s board of directors wants to throw good money away on poor performance, one can only hope it spells that company’s eventual doom. What I am suggesting is that any company that accepted taxpayer dollars to bail it out from its own greed and stupidity should be barred from giving out these types of bonuses. Taxpayers can barely pay their own bills while the government is handing over their income to these white collar thieves to ensure they remain comfortably coddled in their Manhattan mansions and country clubs.

I’ve already written about John Thain and the $4 billion he gave away to his cronies at Merrill Lynch in bonuses just before his firm was sold to Bank of America in 2009 and led to that bank’s near collapse and subsequent $45 billion bailout. That’s hardly the only example.

In 2010, BOA paid out over $4.4 billion in bonuses to investment banking employees for that 2009 performance that required the bailout loan from taxpayers. While seven top executives at Goldman Sachs refused 2008 bonuses based on receiving $10 billion in TARP bailout funds, it still paid almost that same amount in bonuses to its remaining bankers. Citigroup paid $5.3 billion in bonuses in 2008 and nearly the same amount in 2009 despite receiving $45 billion in TARP money over that same period. Similar stories can be told about the other TARP beneficiaries including AIG, JPMorgan Chase, Wells Fargo, Morgan Stanley, and more.

So why go on about offenses that are now two and three years old?

Earlier this week it was learned that Fannie Mae and Freddie Mac, the giant mortgage companies that have already received over $141 billion in taxpayer aid, gave out over $13 million in 2010 bonuses to ten executives. At the same time, Freddie is reporting a third quarter loss of $4.4 billion and asking for an additional $6 billion loan from the Treasury.

Clearly our government still isn’t listening. We cannot continue to support this greed and ineptitude. If a company performs poorly, it and its executives must suffer the financial consequences.

Just like the rest of us.

That’s how free enterprise works.