Bonus time is looming for Wall Street, and rumors are that a few firms on Wall Street are going to give out fat bonuses in December. The pundits are screaming for blood. The left is ticked off that Wall Street execs get bonuses the size of the GNP of a small Latin American nation. The libertarians are holding their tea party things and are suddenly cool about government interference in private industry. Everyone wants the government to put caps on the bonus money even on firms that have returned all their stimulus money with interest.
It is insane that some people receive outrageous salaries every year. But why pick on Wall Street? You know Derek Jeter made $21 million last year. Jay-Z made $35 million. I say instead of putting caps on Wall Street bonuses, which would affect the secretaries as much as the CEOs in these companies. Let them give out their bonuses and then jack up taxes on everyone, not just on Wall Street, who makes more than $200,000 per year. Wouldn't that be the most fair solution?
Apt. 11d 
I think we should keep the “pitchfork option” open. The stimulus money was hardly paid back with interest at a rate that even comes close to approximating the risk taken in making the loans. And the direct loan portion to firms was hardly the extent of the taxpayers contribution to returning to profitability.
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I don’t think Jay-Z or Derek Jeter took government bailout money last year to keep themselves afloat.
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I don’t think Jay-Z or Derek Jeter took government bailout money last year to keep themselves afloat.
All of Pittsburgh’s pro sports have gotten huge subsidies from state and local government. These things have always pissed me off. Especially the Pirates, since they don’t even have the decency not to suck.
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I’m sort of hoping for a Ralph Nader/Ron Paul ticket in 2012. They could start a “We make as much sense as the other guy” party.
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Didn’t we already do this discussion? My personal favorite target is university presidents, and universities did take stimulus funds. Shouldn’t we cap their salary, too?
But, I’ll admit that I have no desire to capping the salaries at Apple. There might be some scheme through which we can argue that they took bailout funds.
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This is why I think we should be sharpening our pitchforks: http://kottke.org/09/10/those-big-bank-earnings-explained However, I might be convinced that a tax is more fair if there were more widespread support of it.
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Pitchfork wielding mobs could solve many problems. First, it would encourage domestic industry because you really don’t want to be seen with an imported pitchfork when the mob gets all angry. Second, forming a mob is a communal activity of the sort that Robert Putnam feels society is currently lacking. Third, this is the sort of activity that really requires marching (sticking a pitchfork out the window of an SUV really doesn’t work), so it would both encourage physical activity and avoid pollution. Fourth, tea bags are a stupid prop, so anything is an improvement.
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Just in case somebody isn’t bothering to click christina’s Kottke link:
http://blogs.law.harvard.edu/philg/2009/10/17/how-wall-street-is-making-its-billions/
“Wall Street banks have had profitable quarters. JPMorgan Chase reported $3.6 billion in profit (more than $1 billion per month). Goldman Sachs was only slightly behind, at $3.2 billion. These profits supposedly came from “trading.” I asked a friend who has worked in the money business how this was possible. “For someone to make money trading, there has to be someone on the other side of every trade who is losing money. Where does each bank find someone who can lose $1 billion every month?”
He explained that “carry trade” would be a more accurate description of what they’re doing. Because of the Collapse of 2008 financial reforms, the big investment banks are able to borrow money from the U.S. government at 0 percent interest. Then they can turn around and buy short-term bonds that pay 2 or 3 percent annual interest. Now they’re making 2 percent on whatever they borrowed. They can use leverage to increase this number, by pledging some of the bonds that they’ve already bought as collateral on additional bonds.”
That’s not money creatively being put at risk, that’s welfare for Goldman. And, I’m happy to pay people for having been smart and found/financed Google, Stirling engines for solar electricity, etc., but I am not happy paying taxes for churn.
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MH, pro sports in most cities/areas get ongoing subsidies– I don’t see those as analogous to bailouts. For example, in my own state, I know both Baltimore’s teams have gotten subsidies, but I think you can argue that the city knew that was part of the cost of having those teams and lured them here anyway, agreeing to pay those costs, which is certainly not the case with Wall Street.
Plus, from Laura’s original example, there’s still Jay-Z to contend with :).
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It’s still a public subsidy for private gain justified on unproven assertions of larger public gain.
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I think taxes are a fair and quiet way to deal with this issue.
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My guess would be that there is no quiet way to deal with this issue. Fortunately.
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If the carry trade is so simple, why isn’t everyone here starting a bank and making gazillions of dollars? I infer that it isn’t so easy, or everyone would do it. Maybe it’s just as hard, mutatis mutandis, as hitting .334.
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“If the carry trade is so simple, why isn’t everyone here starting a bank and making gazillions of dollars? ”
Because first you need a gazillion dollars (or alternatively, you have to convince the government to give you a gazillion dollars).
I *like* paying taxes, but I don’t agree that the executive compensation issues being discussed here can be resolved by higher taxes. In particular, I think there is something different about the carry/wash trading, money churning fee raising activities that seem to be bringing the investment banks into profitability right now and the creation of goods (i.e. Apple, even with its rather minor new releases).
I’m willing to be taught why the compicated financial instruments/middle men/efficiency are in fact creating a good of value, but I’m pretty unconvinced right now. Securitization, for example, seems to have been a method of *hiding* rather than *distributing* risk, engaged in because it generated high immediate fees, but shunted the risk into the future. I fear that much of the current recovery involves similar shell games.
Hence, we need to figure out ways for people *not* to be incented into the behavior.
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Hey! George Soros agrees with me! http://www.ft.com/cms/s/0/79edee04-c00a-11de-aed2-00144feab49a.html
“The big profits made by some of Wall Street’s leading banks are “hidden gifts” from the state, and taxpayer resentment of such companies is “justified”, George Soros, the fund manager, said in an interview with the Financial Times.
“Those earnings are not the achievement of risk-takers,” Mr Soros said. “These are gifts, hidden gifts, from the government, so I don’t think that those monies should be used to pay bonuses. There’s a resentment which I think is justified.””
(dave.s. engages in preening)
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