Today, The New Bottom Line releases “Pulling Back the Curtain,” a report exposing the one percent behind big bank bonuses. While 99% of Americans struggle to make ends meet in this financial crisis, this report details how the one percent work together to ensure further concentration of wealth.
In a functioning democracy, we, the people, make the decisions that shape our society, either directly or through elected representatives that are accountable to us. We decide whether it’s more important to properly fund public schools or to give tax breaks to trillion-dollar corporations so that they can write bigger bonus checks to their executives.
But in our democracy right now, the richest one percent is making decisions about the fate of the country behind closed doors in corporate boardrooms.
Today, multinational corporations that buy off politicians put their own interests and profits above all else. It is unconscionable that they award bonuses to a small group of bankers with seven-figure incomes, even though our elected leaders seem to believe there is a moral imperative to cut off benefits for millions of unemployed workers without any income. This is the America we live in.
Wall Street bankers and the one percent have subverted our democracy to fatten their own paychecks, and the result is jarring. While the rest of us continue to struggle to put food on the table and keep a roof over our head, Wall Street has once again handed out mammoth bonuses in 2011. The nation’s top six banks—Bank of America, JP Morgan Chase, Wells Fargo, Citigroup, Morgan Stanley and Goldman Sachs—paid out $144 billion in bonuses and compensation this year, making 2011’s payday the second highest on record for these six firms.
Even though top bank executives have claimed that bonuses are down as much as 30% for 2011, total compensation has not decreased at all.1
How have the big banks executives, who have overseen the decimation of our housing market and the crash of our economy, gotten away with this deception? There are a few prime examples. While actual bonus numbers may be slightly lower at some firms, several big banks have raised base salaries, partially or fully offsetting the potential decline in bonuses. And while they lament their losses, many executives are taking their bonuses home in stock. Because stock prices at some of these banks are extremely low, as the companies’ stocks recover, these top executives have the potential to become billionaires. And added to the mix, when industry layoffs are taken into account, the result is fewer people taking home higher average pay.
The notion that these top Wall Street executives are hurting is even more ironic when compared to the rest of the county. The average employee salary at the six biggest banks was $121,209 in 2011, more than twice the national median household income of $49,445. At pure investment banks, such as Morgan Stanley and Goldman Sachs, average bonuses and compensation in 2011 doubled and tripled that $123,551.
The cycle of reward for the one percent is put into sharp perspective when examining the board members of these top Wall Street banks. The boards of directors of publicly traded corporations are responsible for overseeing executive management, holding top executives accountable and making decisions about executive compensation, like how big the CEO’s bonus check will be. Unluckily for us, these boards are full of industry insiders and other members of the 1% that look out for each other.
By laying out their web of connections in the government, corporate and public sectors as well as their financial rewards, the report demonstrates how they are putting their corporate buddies’ pocketbooks above the public interest.
Take Monica C. Lozano, a Bank of America board member.
Lozano is the CEO of ImpreMedia, the largest Latino news and information company in the United States, and the publisher and CEO of La Opinión newspaper. She also sits on the Board of Regents for the University of California, the Board of Trustees for the University of Southern California, and President Obama’s Council on Jobs and Competitiveness.2
Bank of America is one of the biggest culprits in the foreclosure crisis in California, which has devastated the state’s tax base and has wreaked havoc on the state budget. But in July 2011, Lozano voted to raise tuition at the University of California by 9.6%, on top of a previously-approved 8% hike. The regents also voted to give pay raises to three university executives at the same meeting.3 Bank of America pays her $240,000 a year for her service on its board.4
Instead of rewarding themselves and their fellow one percenters, big bank board members and executives could take the first major steps in taking responsibility for the housing and economic crash. For example:
- Just half of the banks’ bonus and compensation pools would be enough to write down the principal on all underwater mortgages in the country.
- If the six banks took half of their bonus and compensation pools and put it directly into a jobs fund, they could create 1.8 million jobs and still have enough money left over to pay the average employee $60,605.
- Just 72% of the $144 billion in bonuses and compensation at the top six banks would have been enough money to plug the $102.9 billion in budget holes for all 50 states for the current fiscal year.
But instead, big banks continue to profit off our loss. When the Chicago Public School system was forced to lay off teachers because it had to pay banks $36 million a year on toxic interest rate swap deals,5 $14 million of that was earmarked for banker pay.
Board members should rein in banker bonuses and force banks to find other productive uses for all the money they have at their disposal.
For example, Missouri’s FY 2012 budget cut $14 million from the state’s Medicaid system,6 and another $21 million from mental health programs.7 Just two hours of banker pay at Bank of America could have prevented these cuts. In Ohio, Governor John Kasich proposed cutting K-12 education, higher education, the state workforce, and local government payments by $3.6 billion in the FY 2013 budget, costing the state more than 51,000 jobs. Just seven days of bonuses and compensation for executives at the top six banks could stop these cuts and save those jobs.
Instead of paying out billions in bonuses to millionaire bankers, the top six Wall Street banks could start investing back in the 99% by:
- writing down principal on underwater mortgages,
- making fair and sustainable loan modifications to prevent foreclosures,
- increasing lending to small businesses,
- making affordable loans to families, states, and local governments, and
- paying their fair share of taxes.
This would allow us create an economy that works for 100% of Americans.
Full report below…