It's not the bonuses, it's the principle

The Washington Post reports that the Obama administration has finished drafting the central elements of the plan, and that it is not likely to impose tougher restrictions on executive pay. Treasury Secretary Timothy F. Geithner is supposed to make some kind of statement next week.

Wall Street has already shown they cannot be trusted to do what is right. I am in strong favor of regulation to prevent their continued abuse of taxpayers.

Sen. Claire McCaskill (D-Mo) gave one of her Harry Truman like or former Prosecuting Attorney speeches on the Senate floor on Friday. Although she was one of Obama's best surrogates, she is very independent and will not hesitate to propose bills he might not want. She is a moderate Democrat and a government accountability advocate.

McCaskill has submitted a bill titled, ‘‘Cap Executive Officer Pay Act of 2009"

"SEC. 2. LIMIT ON EXECUTIVE COMPENSATION. (a) IN GENERAL.—Notwithstanding any other provision of law or agreement to the contrary, no person who is an officer, director, executive, or other employee of a financial institution or other entity that receives or has received funds under the Troubled Asset Relief Program (or ‘‘TARP’’), established under section 101 of the Emergency Economic Stabilization Act of 2008, may receive annual compensation in excess of the amount of compensation paid to the President of the United States.

...

SEC. 4. COMPENSATION. 19
As used in this Act, the term ‘‘compensation’’ includes wages, salary, deferred compensation, retirement contributions, options, bonuses, property, and any other form of compensation or bonus that the Secretary of the Treasury determines is appropriate."

She said $400,000 is 8 times the medium annual salary.

The speech and the text of her bill in her website. On the right side of the screen click on watch video. At the bottom of the video page there is a link to the entire bill, which is only two pages.

http://mccaskill.senate.gov/

I do not trust the independence of Larry Summers and some of Obama's other financial team. They do not want to cut off connections to future jobs.

I recommend contacting your members of Congress to support Sen. McCaskill's bill.

In addition to being the first woman prosecuting attorney in Kansas City, Sen. McCaskill was also Missouri's State Auditor.

On January 7, 2009, McCaskill wrote Majority Leader Reid, Minority Leader McConnell, Chairman Byrd, and Ranking Member Cochran calling for oversight and accountability in stimulus bill. She specifies several recommendations, including no earmarks.

For the longest time, Republicans defended outsized executive pay. It was needed to encourage performance. I am a strong believer in incentives, but at some point the risk exceeds any possible benefit. Also, it became very unclear to me if those big bonuses were market driven or a result of packing boards with friends. I found it difficult to believe that people would not be motivated by only $3 million. They had to have $10 million. The possibility of huge checks encouraged huge risks. When this is done with people's own capital, be it time or money, the market works. When done with other's money, it seems inevitable we would see this behavior.

Steve

Wall Street traders are also extremely reluctant to give up the "eat what you kill" mentality that has dominated their profession these past two decades. There is no sense of shared enterprise at most firms, and no belief among the rank and file that they should have to pay a price if the firm is drowning in losses and needs government support. That is why they are so blind to how they appear to the rest of us. They just want theirs. That is the culture they have created.

That is the operational definition of narcissistic personality disorder. It should come as no surprise that we have created a culture of narcissism at the very top of our economic system as for 30 years it has been an article of faith that self-interest explains all human behavior.

And who is more self-interested than a narcissist?

Jon, to be fair to everyone else, most salaried jobs I know now have mandatory overtime (my husband works well more than forty hours a week) with no paid overtime and no bonuses.

Japanese papers last Friday reported the government forecast for the fiscal year ending 31 March: a 33% decrease in industrial output ... back to mid-1980s levels.

East Asia is burning, folks.

If we did not bail these people out with tax dollars, then we would not have to care about their stupid, destructive behavior. Let them live the consequences of their own actions. That's been a very effective way to handle just about any bad behavior in any situation. This new government "no one should suffer" the consequences of their behavior thing IS part of the problem.

Jon,

The AP reported "Both Morgan Stanley and Citigroup said late last year they plan to tie compensation for employees eligible for bonuses more closely to performance, and allow for clawbacks." Same article reported others were considering doing the same thing.

So the $112,000 average bonus (which we are told can account for up to a third of an employees annual income, they're already making nearly $250,000) isn't really tied to performance at all. It's not "overtime" and it's not "performance." It's a perk.

In a year in which their businesses had to turn to the taxpayer to bail them out of the whole they dug using other people's money, in a year in which the market lost nearly 50% of its value for investors, how is it that anyone connected with Wall Street should be getting a bonus? WarnerBros just had its most profitable year ever, and cut 800 jobs. Wall Street just had its worst year ever, and paid out more than $18,000,000,000 in bonuses. It's not only indefensible, it's irrational.

Because Wall Streeters have a culture of living beyond their rather healthy means and depending upon their year-end bonus to bail them out, we're supposed to go all mushy and say they deserve it. Wrong. It's a pile of steaming horse manure, and the fact that "everyone on the Street does it" just doesn't make it right.

What might that price be, I wonder? Here's a suggestion: Confiscate all the bonus money and award it to the working/laid off people who really need it. Then, borrowing from Mao, make them work in the fields or factories at minimum wage for a few years as punishment for their greediness and exploitation of the people who make the world work for everyone's good, not just their own.

Jon
The real solution of course is to restore overtime laws to their original strength and purpose so that they apply to just about everyone in the workforce, save a handful of true professionals (doctors, lawyers etc.), actual business owners, and corporate officers. Just because there's a computer on your desk doesn't mean you be classedd as "exempt."

Why should doctors and lawyers be exempt?

I don't know what you mean by 'lawyers' or 'doctors' anyway. Most of them bill for their time, so laws about wages are not particularly relevant to them, anymore than they are relevant to someone selling stuff at a flea market. They make as much as they can get other people to pay them for goods and services. You can't legally require that random customers pay them overtime. Same with small business owners...even if you could require that they pay themselves a set wage per hour, at that point you'll just end with them lying about the hours they work.

The grunts, who work under other lawyers or doctors, shouldn't be exempt, though, nor should doctors at hospitals or businesses they don't own.

WRT to formerly exempt workers....I wouldn't be adverse to some sort of 'flex time' possible for people who are expected to 'reach goals' instead of working 9-5, but overtime should still be paid for an average over the standard time. We need to make sure that the laws allow workers staying two hours late Monday-Thursday so they can head out of town on Friday. (I'm not talking about businesses being required to allow that, I'm saying that business should have the option of letting them do that without paying two hours of overtime every day.)

So the thing to do would be to set a daily and weekly average, and a daily and weekly maximum. Any exceeding of the maximum, under any circumstances, would be overtime, as would any exceeding of the daily average over a week, or the weekly average over a month. (A running average of some sort would probably be better, although more complicated.)

And the only people who should be exempt from overtime are people who are functionally 'on-call' 24 hours a day. Like corporate executives, like politicians, etc, where you've stopped punching any sort of clock. When normally you can work whenever, and in a crisis you work 22 hours a day with a 2 hour nap.

If anyone can call you out on 'working whenever', if you have a boss requiring you to show up at work at a specific time, you're not one of the people I am describing.

The easiest way to decide this is to simply make it function of pay. Simply require that overtime-exempt people make $75,000 a year, or even more. Anyone who is a decision-making and on-call 24/7 should be worth that.

BTW, I think Nell really cuts to the heart of the issue with her common-sense, rational approach.

Jon, I get the difference between average and median, and I'm here to tell you that if the median is "a few thousand dollars" then the guys skewing the average all the way up should be getting NOTHING.

To put it another way: Hollywood just had it's best January ever, WarnerBros just had it's best year ever, and yet WarnerBros just laid off 800, Disney is laying off, Paramount is laying off, while Wall Street gets $18 Billion in bonuses.

Explain that in any way that makes sense.