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Who Should Pay?

Cartoon from the Universal Press Syndicate

Auto Industry bailouts, TARP, the stimulus package, and bank bonuses all have something very important in common. The American people would like to never hear about them again. Unfortunately, it looks like this won’t happen for a long time. The last couple years have been a roller coaster (mostly downhill). First, we listened to “experts” argue about whether the U.S. had entered a recession, then the severity of the recession, and then the blame game began.

As the Congressional investigation and hearings continue, the subject of bank bonuses remains an emotional topic. The banking industry waits with bated breath for the outcome of Obama’s threats of taxation and fees. Who should pay for the bailout? Skip past the populist protests and tearful anecdotes from “Joe” on Main Street, now what? The banks whine that they’ve already paid back the TARP money, with interest. Why should they be punished for the behavior of poorly-run banks who failed? They remind us that they were the ones who didn’t fail.

I have no problem with big banks using their profits to pay large bonuses to retain employees . There have been some changes made to compensation structure, although it is unclear if UBS’s malus (opposite of bonus- thank you Latin) or Morgan Stanley’s clawbacks have been used. I can’t understand how the banks can  be so out of touch  with public opinion. Like the Detroit auto CEO’s who took private jets to Washington, these bank CEOs are living on another planet. With all the money the banks use to paint themselves as advocates of CSR and client-focused firms, you would expect better public relations. A few banks have already announced revised, lower bonuses after public outrage and media criticism last month. I have an idea…

Let’s imagine that a few weeks ago one of the banks came forward with a nominal sum and presented a check to the government for assistance in their time of need (beyond the amount that was paid back with interest).  Shareholders might be pissed, but the bank would definitely get a gold star from the government and cement the image of being a socially-considerate, bank with a heart. No marketing campaign or message from a CEO could buy that.

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