|If you listen very, very closely, you can almost hear the sound of Wall Street profiteers weeping into their silken pillows...
A quickly assembled House bill was approved 328 to 93. It struck hard at Wall Street's compensation system, which has come under fire because of the $165 million in bonuses distributed last week by American International Group to executives of the troubled unit that helped lead the insurance giant to the brink of collapse. Under the legislation, those who received bonuses of more than $125,000 would surrender 90 percent of their payments to a special income tax.
But the bill's reach would extend to bonuses paid to tens of thousands of employees at the nation's nine largest institutions that have received at least $5 billion in assistance under the $700 billion financial rescue package Congress approved last year. The measure also applies to Fannie Mae and Freddie Mac, the mortgage giants the federal government took over in September.
Half the GOP House crossed over to vote for the bill ... after they voted against it... And now, the bankers respond!
Although leading Democrats thought the bill's chances were threatened when House Minority Leader John A. Boehner (R-Ohio) condemned it, about half of the GOP House members backed the measure. The lopsided House tally sent shock waves across the financial sector. Officials predicted dire results, saying the brightest talent could flee institutions that remain wobbly as the firms themselves leave the rescue program prematurely.
"It will have a chilling effect on participation in any government recovery effort," warned Scott Talbott, senior vice president of government affairs for the Financial Services Roundtable, an industry group. "It harms middle management and the rank-and-file sales force, thereby weakening the very firms we are working to strengthen."
Lawmakers said they are aware of the potential consequences, but are unfazed. "Frankly, bonuses for what?" said Sen. Olympia J. Snowe (R-Maine), a co-sponsor of the Senate bill. "They have to engage in more financially prudent behavior."
So flee, already. More weeping:
"We're all going to lose on this thing," said an executive at a large bank that took federal aid. He and other bankers expressed shock at the rapid progress of legislation that could impose large pay cuts on thousands of worker, and dismay that the industry is at the mercy of an angry Congress.Exactly. And how was that end of year performance at AIG looking last year?
... While most American workers are compensated primarily by a fixed annual salary or through regular commission payments, people who work in the capital markets receive the majority of their annual income in a lump-sum payment based on their performance, the success of their unit and company profits. Paying bonuses allows firms to tie employee compensation to performance in a given year, something management experts have long regarded as a good practice. But some experts believe that tying bonuses to short-term results encourages employees to take risks with long-term consequences.
Labels: AIG, bailouts, the Bush bailout, U.S. Congress, Wall Street vs Main Street