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Washington wary of opposing Wall Street bonuses: experts
2009-10-19
WASHINGTON (AFP) - In the wake of landmark profits posted by the US banking industry last week, Washington will seek to strike a delicate balance toward massive bonuses expected to be paid out by Wall Street, experts said. If President Barack Obama's administration helps "to make this a bigger issue politically, they will be pushed to do things they don't want to," said Douglas Elliott of the Brookings Institution, referring to previous calls to cap compensation that were roundly rejected by Wall Street. In a bid to simultaneously support financial firms' innovation and not enrage a downtrodden public facing a tough economy, the administration "would prefer not to spend much time on this topic," Elliott told AFP. Wall Street investment leader Goldman Sachs surmounted profit forecasts on Thursday with a 3.19-billion-dollar gain in the third quarter -- more than triple the amount posted for the same period last year. Fellow industry giant JPMorgan Chase similarly saw its quarterly gains soar to 3.6 billion dollars. Even struggling banker Citigroup topped expectations with 101 million dollars in profit. Meanwhile, The Wall Street Journal estimated that the top 23 US banks and securities firms are planning to pay out 140 billion dollars in bonuses to their staff -- a record high that surpasses the peak year of 2007. "The compensation issue is one of the few remaining things that can get people very angry," Elliott said, noting that financial groups and government officials alike are seeking to ensure "they can pay their people to keep them motivated" without arousing public anger. White House chief of staff Rahm Emanuel said Sunday that he understood the anger at large bonuses, and said the banks had a key role to play in restoring confidence in the financial system. "They have a responsibility to the whole system. And it starts with not fighting the financial regulatory system and the reforms that are necessary to protect consumers, homeowners, and others," he told CNN. "They have a responsibility to be part of the solution, not part of being the obstacle" and the forces Obama is fighting, he added. Goldman Sachs chief financial officer David Viniar was keen to demonstrate a degree of humility when peppered with questions on compensation, with the latest government figures showing US unemployment hovering just below 10 percent -- the highest in 26 years. "We are very focused on what is going on in the world," Viniar insisted on Thursday. "We are focused on the economic climate. We are focused on what is going on with other people." Wall Street is "mocking" the American people with their expected record bonuses, said Robert Weissman, president of the nonprofit consumer advocacy group Public Citizen. The firms that would have imploded without government bailouts are offering the bonuses after "resuming exactly the same speculative gambling... that crashed the financial system in the first place," he added. A week after taking office on January 20, Obama rebuked Wall Street titans who raked in millions in bonuses while being bailed out by taxpayers as "shameful" and guilty of acute "irresponsibility." The sentiments were echoed throughout the administration as wider disgust became evident with public protests erupting in the following months -- notably over compensation to staff of insurance giant AIG, a bailout recipient. But financial industry insider Don Lindner, executive compensation chief at the non-profit human resources group Worldat Work, pointed to a worrisome trend with a company like Goldman Sachs that is "fairing well in a very difficult economy... is getting criticized for the way (it is) paying." How such firms compensate their workforce, he insisted, "is one of the reasons they have all the best people, and they are doing so well." If the government goes too far in trying to put brakes on bonus payments, he argued, it will stifle innovation because financial firms will not be able to retain the personnel they need. "Imposing strict rules on how you can pay people is a very slippery slope because in (this industry), such a move could be devastating," said Lindner.
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