30 January 2009

"Bonus's Shamefull" Obama says

NEW YORK (MarketWatch) - President Barack Obama blasted Wall Street on Thursday for shameful and irresponsible behavior after reports that Wall Street paid $18.4 billion in bonuses in 2008, even as the industry collapsed, costing taxpayers billions of dollars and tens of thousand of job cuts.
Despite the collapse of the financial system, the shuttering of several major firms and the elimination of thousands of jobs, the securities industry managed to scratch together about $18 billion of shareholder and investor cash to pay bonuses in 2008, according to New York state comptroller Thomas DiNapoli.
"The decline is the largest on record in absolute dollars and the largest percentage decline in more than 30 years, but the size of the bonus pool is still the sixth largest on record," DiNapoli said in a press release. See press release. See bonus data since 1985.
"...that is the height of irresponsibility. It is shameful," Obama said in an exchange with reporters Thursday afternoon.
The New York state comptroller's office said late Wednesday that total Wall Street bonuses paid fell 44% in 2008, to $18.4 billion, while the average bonus fell 36.7%, to $112,020.

'It's painfully obvious that 2009 will probably be another difficult year for the industry.'

— Thomas DiNapoli, New York state comptroller
Total bonuses paid in 2007 were $32.9 billion, and the average last year was $177,010.
The decline in the average bonus was smaller than the decline in the bonus pool because the pool was shared among fewer workers as the industry shed jobs, according to a press release from DiNapoli's office.
Obama was clearly disturbed by news of the bonuses.
"There will be time for them to make profits, and there will be time for them to get bonuses -- now is not that time. And that's a message that I intend to send directly to them, I expect Secretary Geithner to send to them -- and Secretary Geithner already had to pull back one institution that had gone forward with a multimillion dollar jet plane purchase at the same time as they're receiving TARP money," the president said.
"We shouldn't have to do that because they should know better. And we will continue to send that message loud and clear," Obama concluded.
Employment in the securities industry in New York City declined from 187,800 in October 2007 to 168,600 in December 2008, a loss of 19,200 jobs, or 10.2%, the agency reported.
The decline in the bonus pool "will ripple through the regional economy and the state and the city will lose major tax revenues," DiNapoli said.
"The securities industry has already lost tens of thousands of jobs and the industry is still continuing to write off toxic assets. It's painfully obvious that 2009 will probably be another difficult year for the industry."
The comptroller also estimated that losses incurred by the traditional securities broker/dealer businesses of the New York Stock Exchange's member firms totaled more than $35 billion in 2008 -- more than triple the previous record loss, which he said was posted in 2007.
However, to keep those figures in perspective, the comptroller's office said that those losses earned the firms as a whole a $31.3 billion tax credit and that this "will reduce the firms' future tax payments for years to come."

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