By Catherine Dodge
More than 70 percent of Americans say big bonuses should be banned this year at Wall Street firms that took taxpayer bailouts, a Bloomberg National Poll shows.
An additional one in six favors slapping a 50 percent tax on bonuses exceeding $400,000. Just 7 percent of U.S. adults say bonuses are an appropriate incentive reflecting Wall Street’s return to financial health.
A large majority also want to tax Wall Street profits to reduce the federal budget deficit. A levy on financial services firms is the top choice among more than a dozen deficit-cutting options presented to respondents.
With U.S. unemployment at 9.8 percent, resentment of bonuses and banking profits unites Americans across political, gender, age and income groups. Among Republicans, who generally are skeptical of business regulation, 76 percent support a government ban on big bonuses to bailout recipients, that’s higher than backing among Democrats or independents.
JPMorgan Chase & Co. Chairman and Chief Executive Officer Jamie Dimon got a bonus package for 2009 valued at $17 million and Goldman Sachs Group Inc.’s Chairman and CEO Lloyd Blankfein received a $9 million all-stock bonus for last year, down from his Wall Street record $67.9 million in 2007.
“The American people bailed them out and immediately they went and paid their employees very large bonuses,” says poll respondent Michael Robertson, 43, of Wayne, Michigan. “I don’t believe they should have a bonus at all for a while.”
‘Bitter About Wall Street’
Robertson lost his job in retail management in the auto parts industry three years ago when his company cut workers and is now in school studying computer electronics. “Of course I’m bitter about this Wall Street thing,” he says.
Cash bonuses to securities industry employees in New York City grew 17 percent, to $20.3 billion, for work in 2009, according to estimates in a report last month by the New York State Comptroller’s office. While the cash bonus pool for 2010 will probably be smaller, the average bonus may be bigger because after job losses the money will be divided among fewer employees, the report said.
As Wall Street managers prepare year-end compensation decisions, Morgan Stanley told employees at the sixth-largest U.S. bank by assets to expect investment banking bonuses to decline 10 percent to 30 percent. The Council of Institutional Investors last month said that, among the six largest U.S. banks, only New York-based Morgan Stanley and San Francisco- based Wells Fargo & Co. have changed compensation practices to institute bonuses based on long-term performance.
U.S. Senator Jim Webb, a Virginia Democrat, this year proposed a 50 percent tax on bonuses of more than $400,000, though it failed to win backing from Congress or the Obama administration.
The $700 billion Troubled Asset Relief Program, enacted in October 2008 to prevent a collapse of the U.S. financial system, provided money to shore up financial-services companies, including American International Group Inc. Some recipients, such as Goldman Sachs and Bank of America Corp., have since repaid the money.
The Bloomberg poll of 1,000 adults 18 and older reflects continuing public animosity toward the bailouts, which became a potent political issue that helped defeat dozens of lawmakers from both parties in congressional elections this year.
The TARP program’s unpopularity lingers even after a Congressional Budget Office report last month said the program would wind up costing taxpayers about $25 billion, far less than initial estimates.
Bailing Out Treasury
Seven of 10 Americans say it’s Wall Street’s turn to help bail out the government Treasury, supporting a tax on Wall Street profits as a way to reduce the $1.3 trillion deficit. By comparison, 43 percent favor a freeze on spending for items like education and medical research, 33 percent would cut farm subsidies, 25 percent back a new tax on gasoline, and 15 percent would reduce benefits in the Medicare health insurance program for the elderly.
“I know that some of the tax I pay when I buy gas for my car, and on my income, was somewhere written into a check to keep these companies from imploding,” says poll respondent Steven Previll, 33, a maintenance worker from Harrisonburg, Virginia. “There’s an amazing amount of money being made on Wall Street. It would be cool if we could take some of that money and reinvest it in the country.”
The poll by Des Moines, Iowa-based Selzer & Co. was conducted Dec. 4-7. It has a margin of error of plus or minus 3.1 percentage points.
Bolstered by bailouts, Wall Street earned $61.4 billion in 2009, almost three times more than in 2006, according to the New York State Comptroller’s office report. This year’s profit, projected at $19 billion, still would be the industry’s fourth largest, the report said.
The average securities industry wage in New York City fell more than 20 percent last year, to $311,000. That was still five times the average pay for other private-sector jobs in the largest U.S. city, the comptroller’s office said.
Compensation expenses at Goldman Sachs in the first nine months were 21 percent less than a year earlier, while the pay pool at JPMorgan’s investment bank was down 10 percent. The New York-based firms cut their compensation pools in the fourth quarter last year as banks faced pressure from lawmakers and shareholders over pay packages.
“We need to come down to a more equal level of people,” said Melba Northern, 62, of Red Bluff, California, who was laid off from her job as a nursing assistant. “The finance companies got bailed out and then they got bonuses. But the people who had loans through them still have to pay them back, and they are struggling to keep a roof over their head. No one is bailing them out.”
Congress, which in 2009 considered proposals designed to claw back bonus money paid out to executives, stopped short of a direct crackdown on Wall Street compensation practices.
President Barack Obama, in July, signed into law a sweeping financial-regulation package that aimed to give shareholders more of a say in the compensation of bank executives.
In Europe, bankers will face limits on cash payouts and the size of their bonus relative to salary from the start of next year, as European Union regulators this month approved laws to curb incentives for excessive risk-taking.