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Obama defends CEO bonuses he once called ‘obscene’

By Ron Brynaert
Wednesday, February 10, 2010 10:26 EDT
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Update at bottom: Nobel-winning NY Times columnist Krugman blasts Obama as ‘clueless’

Millions of Americans bestow lavish attention on major league baseball, sports agents often argue, so it’s only fair that ballplayers get to share in the wealth.

Apparently, some feel that CEOs of “embattled” banks that received $25 billion in government bailout funds have been getting a raw deal from the media and pandering politicians, because they deserve to be excessively compensated for their “savvy” skills.

“President Barack Obama said he doesn’t ‘begrudge’ the $17 million bonus awarded to JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon or the $9 million issued to Goldman Sachs Group Inc. CEO Lloyd Blankfein, noting that some athletes take home more pay,” Bloomberg News reports.

The article by Julianna Goldman and Ian Katz continues, “The president, speaking in an interview, said in response to a question that while $17 million is ‘an extraordinary amount of money’ for Main Street, ‘there are some baseball players who are making more than that and don’t get to the World Series either, so I’m shocked by that as well.’”

“I know both those guys; they are very savvy businessmen,” Obama told Bloomberg BusinessWeek. “I, like most of the American people, don’t begrudge people success or wealth. That is part of the free- market system.”

ABC News Senior White House correspondent Jake Tapper notes, “As recently as just a few weeks ago, President Obama called massive Wall Street bonuses ‘obscene,’ language that fit right in with his previous descriptions for them such as ‘the height of irresponsibility’ and ‘shameful,’ an ‘outrage’ and a violation ‘our fundamental values.’”

“I do think that the compensation packages that we’ve seen over the last decade at least have not matched up always to performance,” Obama said, which Tapper labels “a rather serene response relative to some of his previous language on the matter.”

Bloomberg adds,

Obama sought to combat perceptions that his administration is anti-business and trumpeted the influence corporate leaders have had on his economic policies. He plans to reiterate that message when he speaks to the Business Roundtable, which represents the heads of many of the biggest U.S. companies, on Feb. 24 in Washington.

Blankfein and Dimon took their bonuses in stock rather than cash, which Obama encouraged other corporations to do. Such compensation, he said, “requires proven performance over a certain period of time as opposed to quarterly earnings.” He said that’s a “fairer way of measuring CEO success and ultimately will make the performance of American businesses better.”

Tapper’s story continues, “White House press secretary Robert Gibbs denied that President Obama had changed his tone at all, pointing out that the president has said ‘countless times’ that he doesn’t begrudge wealth or success. Gibbs insisted that the president was not saying he doesn’t begrudge the bonuses.”

At Huffington Post, MIT Professor Simon Johnson blogs that “the White House has a major public relations disaster on its hands.”

“Does the president truly not understand that Dimon and Blankfein run banks that are regarded by policymakers and hence by credit markets as ‘too big to fail’?” Johnson writes. “This is the antithesis of a free-market system. Not only were their banks saved by government action in 2008-09 but the overly generous nature of this bailout (details here) means that the playing field is now massively tilted in favor of these banks.”

Johnson continues, “What we have now is not a free market. It is rather one of the most complete (and awful) instances ever of savvy businessmen capturing a state and the minds of the people who run it. Is this really what the president seeks to endorse?”

At his New York Times blog, Paul Krugman, who won the Nobel prize for economics in 2008, blasts President Obama as “clueless.”

“I’m with Simon Johnson here: how is it possible, at this late date, for Obama to be this clueless?” Krugman rhetorically asks.

After quoting from the Bloomberg interview, Krugman writes, “Oh. My. God.”

“The point is that these bank executives are not free agents who are earning big bucks in fair competition; they run companies that are essentially wards of the state,” Krugman writes. “There’s good reason to feel outraged at the growing appearance that we’re running a system of lemon socialism, in which losses are public but gains are private. And at the very least, you would think that Obama would understand the importance of acknowledging public anger over what’s happening.”

If “Obama thinks his key to electoral success is to trumpet ‘the influence corporate leaders have had on his economic policies,’” Krugman concludes: “We’re doomed.”

 
 
 
 
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