Flashback to January 29, 2009:
President Obama on bank bonuses:
When I saw an article today indicating that Wall Street bankers had given themselves $20 billion worth of bonuses, the same amount of bonuses that 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 tax payers find themselves in the difficult position that if they don’t provide help that the entire system could come down on on top of our heads, that is the height of irresponsibility. It is shameful.
And part of what we’re 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.
Flash Forward to February 10, 2010:
President Obama in reference to the CEO’s of JP Morgan Chase and Goldman Sachs:
I know both of those guys; they are very savvy businessmen. And I, like most of the American people. don’t begrudge peoples’ success or wealth. That is part of the free market system.
President Obama is trying to be Ronald Reagan here as he invokes the free market argument in an attempt to save the butts of his democrat colleagues and himself in the run-up to the 2010/2012 elections. However, it is clear that he took exactly the opposite view the year before when he was clearly opposed to the free market taking its course as he signed on to trillions upon trillions in bailouts and stimulus.
While it is true that JP Morgan and Goldman have both officially paid back their TARP bailout funds, these organization would have been toast without the American taxpayer. The free market system Mr. Obama speaks of is non-existent in the banking sector and most of the American economy today.
MIT professor Simon Johnson discusses just this point:
Does the president truly not understand that Dimon and Blankfein run banks that are regarded by policymakers and hence by credit markets as “too big to fail”?
This is the antithesis of a free-market system. Not only were their banks saved by government action in 2008-09 but the overly generous nature of this bailout means that the playing field is now massively tilted in favor of these banks.
Not only that, but the incentives for the people running these megabanks is now to take on reckless amounts of risk. They get the upside and – when the downside materializes – this belongs to taxpayers and everyone who loses a job.
If the banks want to give large bonuses, then we’re all for it. However, they must give up all government guarantees that are backed by the US tax payer. They must also follow the rules laid down by the SEC, CFTC, FDIC and a host of other alphabet regulatory agencies in respect to how they run their businesses, maintain their reserves, sell financial products and trade securities. And, if they are found to have violated the law in any way, then the very same people who are eligible for these large bonuses should be held to account under the laws set forth by the people.
The CEO’s on down to the sellers and traders of bunk financial instruments have, essentially, a risk-free job, in that they stand to make millions of dollars in bonuses while ripping people off or using tax payer dollars to gamble in global financial markets, yet face no criminal penalties for doing so.
If we are operating in a free market, where all entities, including individuals and corporations are equal under the law, then everyone must be held accountable, otherwise the President’s statements on the matter are merely hot air.