Banks poised to start fearmongering campaign about Obama's bailout fee
If you still needed statistical proof that the folks on Wall Street have become entirely detached from reality in the wake of the massive taxpayer-funded bailout of their colossal mistakes, here it is.
The 38 largest financial institutions on Wall Street will pay out a total of $145.85 billion in compensation for 2009, an 18 percent increase over 2008 and "slightly more than in the record year of 2007," the Wall Street Journal reports.
(By "slightly," the Journal means a 6 percent increase over 2007, amounting to some $8 billion.)
The Journal reports:
The surge in bonuses comes barely a year after the government bailed out the US financial system amid the worst economic crisis in generations...
The growth reflects a rebound in the banking industry's revenue to pre-crisis levels. The firms in the analysis are on pace to report $450 billion in revenue, a 25% increase from 2007. Overall, pay is on pace to be equivalent to about 32% of revenue, a decline from 40% in 2008.
The Journal's $145 billion number includes "salary, health benefits, retirement plans and stock awards as well as the money many firms set aside for bonuses at the end of the year."
While news of exorbitant bonuses at banks still sucking on the government teet has been around for months, having a solid figure to measure just how large that teet is will likely help President Barack Obama's effort to slap TARP bailout recipients with a fee to recoup the cost to taxpayers.
"We want our money back," Obama said at a brief press conference Thursday.
The president's plan would see the largest institutions bailed out under TARP pay out a total of $90 billion to the government. Only firms that took TARP money, and have more than $50 billion in assets, would be required to pay. That amounts to about 35 US-based companies, with the big-name investment banks, like JP Morgan and Goldman Sachs, paying the largest share of the fee.
But the banks targeted by the fee are already making sounds suggesting they will fight it tooth and nail. Politico reports that the banks plan to argue that the fee will cost the US economy $1 trillion in lost potential lending -- a questionable claim, given that the fee will at most represent 5 percent of profits at the banks (according to the Journal), and given the overall lack of bank lending since the start of the recession.
"We are already hearing a hue and cry from Wall Street, suggesting that this proposed fee is not only unwelcome but unfair, that by some twisted logic, it is more appropriate for the American people to bear the cost of the bailout rather than the industry that benefited from it, even though these executives are out there giving themselves huge bonuses," Obama said Thursday.