By now, you might have heard about the growing outrage that bankers at banks receiving bailout money are drawing bonuses. It’s reached the point where Sen. Claire McCaskill has proposed capping bankers’ income at a salary equivalent to that of the president of the U.S. I didn’t really have much to add about how ridiculous the arguments for paying the bankers bonuses when their firms have been nationalized (if, nothing else, most employees, who through no fault of their own, working in dying businesses are getting laid off–that is, no salary at all). But a quotes from a NY Times article that interviewed bankers about bonuses was incredible:
Of course, many Wall Street employees never expected the good times to end. They lived large, believing bonuses would always arrive, so they are ill prepared, both emotionally and financially, to cope with a sudden drop in income.
“Without a doubt, $18 billion is a lot of money, but it’s a drop in the bucket on Wall Street,” said Gustavo Dolfino, president of the WhiteRock Group, a headhunter for the banks. “These bonuses are down, and the salaries are not enough for these people. They can’t live on $150 to $180,000, so they haven’t saved any money. They put it on credit lines and at bonus time, they thought they’d pay it off.”
After you pick your jaw up off the floor, re-read it, and then consider:
- They never expected a downturn.
- They never saved any money for a rainy day (or a monsoon).
- Even if they didn’t save, they compounded the problem by not spending last year’s bonus (i.e., money that they actually had), but, instead, by going into debt.
Before I get to the “They can’t live on $150 to $180,000” statement [cough], isn’t the list above the exact thinking that created the crisis in the first place? Maha is right: greed does make you incredibly stupid. And have no doubt, they were incredibly stupid–one might even call them fucking morons.
One more point before getting to the salary. My family has been both working poor and very comfortable. Based on that experience, I was always taught that the best thing about having money is that you don’t have to worry about housing, healthcare, or education. Everything else is, by definition, a luxury. For instance, if you want to buy a luxury car, as opposed to a car that you need to get around, you should only do so if you can douse it with gasoline, light it on fire, and walk away (I’m not recommending this, mind you). The point is that it’s not a necessity, but a luxury that you can do without. Which brings us to the salaries:
“They can’t live on $150 to $180,000.”
I’ve spent the last decade of my life doing research related to infectious disease. It is safe to say that career will never net me $150,000 annual salary, and certainly not double or triple that. And keep in mind, I live in Boston, so the arguments that New York is expensive don’t mean a damn thing. I would love to ‘squeak by’ on $150,000. The fact is these guys aren’t worth hundreds of thousands of dollars:
The idea seems to be that because they work very, very hard, they deserve enormous amounts of money. The thing is, normally the economy doesn’t reward a person based on how hard he works. It rewards people for producing something that has value to other people. The fact is that America is full of people who work very, very hard and who are not paid well at all for it.
I can understand a financial industry executive receiving a bonus for bringing more money into the company than the other executives. But these guys seem to think they are entitled to bonuses for breathing. They argue that if they don’t make so much money, New York doesn’t collect as much in income taxes. However, as James Ledbetter points out in Slate, “Paying pedophiles billions of dollars in bonuses would also have ancillary economic benefits–that doesn’t make it a good idea.”
Like I said, that last paragraph of the Times article says so much about how we got to where we are today.
Related: Joe Nocera–“You can make a pretty convincing argument that that culture — and the bonuses that flowed from it — had a lot to do with creating the financial crisis.”