Wall Street exec pay cuts: boon or bust for taxpayers?
The Obama administration plans to announce -- as early as today -- new 90% pay cuts for 175 Wall Street executives at the seven firms bailed out by the government amid the economy's collapse earlier this year.
Many are applauding.
“It’s about time that somebody stands up to these folks we bailed out,” Maryland Democrat Elijah Cummings, told Bloomberg. “They seem to have forgotten that they would not have jobs in many instances if it were not for taxpayers.”
Republicans agree. “Politically it’s a slam dunk for the administration,” said Dan Schnur, communications director for Arizona Republican John McCain’s presidential campaign against George W. Bush in 2000.
But others are cautioning that the pay curbs could lead to a brain drain at the seven companies, making it less likely that taxpayers will ever be reimbursed for their "too big to fail" TARP investment. Steven Hall, a New York compensation consultant, put it this way, “The fear is, will this make people throw up their hands and say, ‘I have to leave?’ ”
Even more concerning, some critics worry that the pay cuts, authored by pay czar Kenneth Feinberg, won't make a dent in the Wall Street culture of greed. And chief among these critics is billionaire Warren Buffett, who pays himself $100,000 a year in salary for running Berkshire Hathaway.
There has to be "a downside to people who really mess up large institutions," Buffett said in an interview with Berkshire subsidiary Business Wire. "Too many people have walked away from the troubles they have created for society, not just for their own institution, and they have walked away rich."
Let us know what you think.
-- Johanna Neuman
Photo Credit: Reuters