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Wall Street Bonuses Could Mean Headache for Obama

The American economy continues to struggle, but these are flush times for the employees of Wall Street giant Goldman Sachs.

The company this week posted a $3.2 billion third-quarter profit, well above Wall Street estimates. In the second quarter of this year, Goldman made even more: a record $3.44 billion. On an average single day this quarter, according to the Guardian, the company made about $35 million.

And with Goldman, like other Wall Street banks, setting aside roughly half its revenue for employees, that means massive bonuses for the 31,700 people who work there. Goldman's bonus pool through September 30th now stands at 16.7 billion; the average employee compensation this year is expected to approach $700,000. Top executives will each make millions.

There was a time, not too long ago, when this sort of news was greeted with a collective shrug. But that was before the economic collapse and the taxpayer bailout of many the very Wall Street companies that were partially responsible for it.

The Obama administration got a taste of the populist backlash to outsize Wall Street pay earlier this year, when a firestorm erupted following revelations that employees of the division that imperiled insurance giant AIG, a company that received a massive $170 billion government bailout, were being paid $165 million in bonuses.

To fend off a new round of criticism, Goldman can point to the fact that it has paid back the $10 billion bailout it got from the federal government last year, with interest. But the company was also a major beneficiary of the AIG bailout, as government funds were used to pay billions to Goldman and other companies that had taken out insurance with the company on their failed investments. And it has benefitted from support from the Federal Reserve and government backing on $30 billion of debt.

That's not good news for the Obama administration, which, like the Bush administration before it, has insisted that the Wall Street bailouts were ultimately about propping up Main Street. The ties between the administration and the firms is a close one: The Associated Press reported last week that Treasury Secretary Timothy Geithner (left) is regularly on the phone with Goldman representatives, as well as executives from JPMorgan Chase (which took in $3.6 billion this quarter) and Citigroup (which managed a $101 million profit despite heavy losses in its consumer business). He reportedly has been known to speak to officials from those three banks several times a day.

And in a decision that will further convince critics that Washington's ties to Goldman are too close, on Friday it was revealed that the Securities and Exchange Commission had tapped a young Goldman executive, Adam Storch, to be chief operating officer of its enforcement division.

Meanwhile, administration officials continue to struggle in their efforts to bring more regulation to a Wall Street they have said publicly is prone to encourage profit- and compensation-driven decisions that imperil the economy. Though President Obama appointed a so-called "pay czar," Kenneth Feinberg, to address compensation at bailed out companies, he has limited authority – and may well be powerless to stop AIG from paying out another $198 million in bonuses next March.

Laura Berry, executive director of the Interfaith Council on Corporate Responsibility, has a somewhat different take. In a statement this week, she said, "we have a responsibility here to act as the conscience of Wall Street, especially when it fails to do so on its own."

"How is it possible that the year after billions of taxpayer's dollars helped companies like Goldman Sachs return to financial health, this company shows absolutely no restraint?" she asked. "Goldman Sachs is poised to become the poster child of the company that drives income disparity in the United States."

www.cbsnews.com/blogs/2009/10/16/politics/politicalhotsheet/entry53901
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At least the gubmit will save money by eliminiating the cost of living increase for my $6,000/year in Social Security Disability pension, which hasn't paid me a penny in 12 years, same payout as my wife's Veterans pension.

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