Wednesday, September 23, 2009

Krugman, The Nation Call On Obama To Confront Financial Industry Rewards

Nobel Prize-winning economist Paul Krugman (left) and the editorial board of The Nation questioned whether President Obama is taking a strong enough stance against financial industry executives who are granting themselves bloated rewards despite being bailed out by the taxpayers. This issue could cause populist anger among all political sectors. From Krugman's "Reform or Bust" (9/20/09): that we’ve stepped back a few paces from the brink — thanks, let’s not forget, to immense, taxpayer-financed rescue packages — the financial sector is rapidly returning to business as usual. Even as the rest of the nation continues to suffer from rising unemployment and severe hardship, Wall Street paychecks are heading back to pre-crisis levels. And the industry is deploying its political clout to block even the most minimal reforms.

...I was startled last week when Mr. Obama, in an interview with Bloomberg News, questioned the case for limiting financial-sector pay: “Why is it,” he asked, “that we’re going to cap executive compensation for Wall Street bankers but not Silicon Valley entrepreneurs or N.F.L. football players?”

That’s an astonishing remark — and not just because the National Football League does, in fact, have pay caps. Tech firms don’t crash the whole world’s operating system when they go bankrupt; quarterbacks who make too many risky passes don’t have to be rescued with hundred-billion-dollar bailouts. Banking is a special case — and the president is surely smart enough to know that.

All I can think is that this was another example of something we’ve seen before: Mr. Obama’s visceral reluctance to engage in anything that resembles populist rhetoric. And that’s something he needs to get over.

The Nation, in "Tackling the Titans" (9/20/09) calls upon Obama to take decisive action:

To understand the dimensions of what's happening, check out the new survey from the Institute for Policy Studies, America's Bailout Barons. It documents a correlation that most people already understand: the very institutions that collected the most in government assistance are converting their good fortune into personal rewards while the rest of the nation sinks deeper into the mire of unemployment, bankruptcy and loss of homes. Common sense tells citizens this is morally wrong. It is also bad for the economy.

...President Obama can put a swift stop to these excesses--not in the name of vengeance but to create a better banking system. An executive order, for instance, could forbid any compensation at rescued institutions exceeding the $400,000 earned by the US president. Violators could be banished from enjoying any of the continuing subsidies provided by the Treasury and Federal Reserve.

Is this legal? If the bankers don't think so, let them sue. Meanwhile, the president can demand immediate passage of legislation authorizing the cap. In February the Senate approved such a measure, sponsored by Claire McCaskill and Bernie Sanders, but it was dropped in conference. If Obama revived the legislation, people who are enraged that banks are making out like bandits while they lose jobs and homes would know the president is too. If Obama leads, they will rally to his side.

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