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Economic crisis

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From: The Socialist issue 573, 31 March 2009: Youth Fight For Jobs

Search site for keywords: USA - Bonuses - US - Socialist Alternative - Fat cats - Socialist - CWI - Pay - Economic crisis - Banks - Capitalism

Bail out workers, not Wall Street!

Taxpayers foot the bill for CEO bonuses

THERE HAS been a tidal wave of outrage generated by the bonus payments paid to top bankers after their bankrupt corporations were bailed out with public funds. In the US, for instance, the insurance giant AIG paid out $218 million in bonuses, with five executives receiving $4 million each. Patrick Ayers, (Socialist Alternative - CWI, USA) demands that these fat cats shouldn't receive one cent.

Youth Fight for Jobs and NO2EU on the 'Put People First' demo, photo Paul Mattsson

THE WALL Street 'banksters' have had it their own way for too long. After receiving trillions of dollars in government handouts, they still have the gall to lavish themselves with huge bonuses.

According to the New York state comptroller, Wall Street bonuses for 2008 were the sixth largest payout on record at $18.4 billion, although the Wall Street Journal reports this is "probably an underestimate (20/2/09)."

For what did they get $18 billion in bonuses (on top of huge salaries)? For losing trillions of dollars? For triggering the worst economic crisis since the 1930s? The politicians complain the bonuses were "excessive." But, why should they get any bonus at all?

Money that could have been spent on jobs, stopping foreclosures, providing healthcare, or preventing cuts in education instead went straight into the hands of some of the richest men in America - the last people who needed it.

These same executives gorged on $33 billion in bonuses in 2007. According to an Associated Press (AP) study: "The total amount given to nearly 600 executives [in 2007] would cover bailout costs for 53 of the 116 banks that have so far accepted tax dollars to boost their bottom lines (22/12/08)."

While a handful of Wall Street CEOs reluctantly declined a 2008 bonus, hundreds of executives took a big payout and thousands more professional speculators were handsomely rewarded.

Morgan Stanley doled out more than $3 billion in bonuses to 6,500 of their top brokers, an average of more than $460,000 each. How many homes could be saved with that money?

Merrill Lynch's CEO John Thain rushed out $4 billion in executive "entitlement programmes" a month early and two days before his bankrupt company was bought with bailout dollars by Bank of America.

Of course, bonuses are not the only Wall Street perk. Thain spent more than $1 million renovating his office in 2008, buying chairs at the cost of a year's income for the average worker.

Citigroup received $345 billion in government guarantees, and then, like a kid with birthday money, bought a new $50 million corporate jet. AIG executives spent $440,000 at a swanky beach resort a week after receiving an $85 billion handout.

We are told 'we all must share the pain' during this recession. But, in reality, we're paying the whole hog for the crisis of their system.

Parasitic role

Wall Street is even milking the unemployed. New direct deposit agreements with many states force the jobless to pay bank fees to access benefits. "Thirty states have struck such deals with banks that include Citigroup Inc., Bank of America Corp., JPMorgan Chase, and US Bancorp.... All the programmes carry fees, and in several states the unemployed have no choice but to use the debit cards (AP, 20/2/09)."

What a cruel, parasitic role these "banksters" play!

With anger mounting against Wall Street, President Obama denounced the bonuses as "shameful" and endorsed legislation to cap pay at $500,000 for bailed-out executives. However, this will only apply to future bailouts.

Democracy Now! explained other loopholes: "Firms could still pay out higher salaries by changing executives' titles, restructuring pay packages, or simply putting it to a shareholder vote. Executives and managers could also get more money because the plan doesn't limit awards of restricted stock (9/2/09)."

Inevitably, politicians will blame Wall Street for the crisis, and these crooks certainly deserve scorn. But, at root, the economic crisis is not just a result of some greedy bankers. It is systemic. Nassim Nicholas Taleb, commenting in the Financial Times, explained that "incentives" such as executive bonuses "are the heart of capitalism and free markets (24/2/09)."

Indeed, "incentives" - massive profits, obscene greed, and vile corruption - are endemic to capitalism. But what incentive do workers have in supporting a system that rewards the 'banksters' with bailed-out profits and bonuses while we pay with layoffs, cutbacks, lost retirement, and foreclosed homes? This system is rotten to the core and must be replaced.

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