In an interview
with Bloomberg News, President Obama made a comment that some are
construing as a defense of bank bonuses. When asked about the
multi-million-dollar pay packages of Lloyd Blankfein and Jamie Dimon, CEOs of Goldman Sachs and J.P. Morgan respectively, Obama replied:
look, first of all, I know both those guys. They're very savvy
businessmen. And I, like most of the American people, don't begrudge
people success or wealth. That's part of the free market system. I do
think that the compensation packages that we've seen over the last
decade at least have not matched up always to performance. I think that
shareholders oftentimes have not had any significant say in the pay
structures for CEOs. ...
Listen, $17 million [the size of Jamie Dimon's bonus] is an
extraordinary amount of money. Of course, there are some baseball
players who are making more than that who don’t get to the World Series
either. So I’m shocked by that as well. I guess the main principle we
want to promote is a simple principle of "say on pay," that
shareholders have a chance to actually scrutinize what CEOs are getting
paid. And I think that serves as a restraint and helps align
performance with pay. The other thing we do think is the more that pay
comes in the form of stock that requires proven performance over a
certain period of time as opposed to quarterly earnings is a fairer way
of measuring CEOs' success and ultimately will make the performance of
American businesses better.
Paul Krugman and others sees these these comments as an outrageous defense of wild bank bonuses. Whether they're right or not they've spurred
debate about Obama's approach to financial reform
and the sincerity of his populism
. So is the president a bank-busting populist or friend to Wall Street? Or maybe somewhere between?
- 'Oh. My. God.' That's New York Times Nobel-winner Paul Krugman's outraged response.
"[B]ank executives are not free agents who are earning big bucks in
fair competition; they run companies that are essentially wards of the
state. There's good reason to feel outraged at the growing appearance
that we're running a system of lemon socialism, in which losses are
public but gains are private. And at the very least, you would think
that Obama would understand the importance of acknowledging public
anger over what’s happening."
- Comments Overblown, But... Politics blogger Greg Sargent reads
Obama's comments as more about checking bonuses than supporting
bonuses. "That said, that substance was bound to be overshadowed by
Obama's praise for the businessmen as 'savvy,' his general
unwillingness to 'begrudge' wealth, and his discussion of their
outsized bonuses in the context of the 'free market system,' which
seems off key, given the massive taxpayer bailouts of the financial
- Obama Just Isn't a Populist So assesses liberal blogger Digby.
"The only thing you can conclude is that this is a matter of principle
for him and that he truly believes that these people are worth that
kind of money despite the fact that they nearly destroyed the world
financial system and are benefiting from its chaos and failure. And it
clarifies once and for all that he doesn't understand the very real
angst out in the country and the desperate need to hold someone,
somewhere, accountable for what's gone wrong."
- Bonuses Not 'Free Market' at All Economist Simon Johnson notes
that the banks whose CEOs receive huge bonuses are protected as "too
big to fail," making them not so much "part of the free market system"
as Obama said. Johnson writes, "The president's only political chance
is to take on the too big to fail banks directly and clearly. He needs
to explain where they came from (answer: the Reagan Revolution, gone
wrong), how the problem became much worse during the last
administration, and how - in credible detail - he will end their reign."
- White House Needs Bankers National Review's Daniel Foster thinks
Obama doesn't want to alienate them. "Perhaps the president's softening
toward capitalism has something to do with the fact that
fewer Wall Street CEOs are flocking to his $30,000-a-head steak and
lobster dinners ever since the phrase 'fat cat' gained currency in
Washington. But in any event, the president's praise of the free market
is about as bland and uncontroversial as it gets."
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