Wall Street executive pay and bonuses are enormous by comparison to the wages paid to the average worker on the street. These people seem to live in a world apart from the rest of us.
Let's take a walk back in history. The titans on Wall Street have always been paid extraordinarily well, as compared to the average population. Even before the Great depression of the 1930s, the executives of the biggest most profitable companies were earning huge salaries and bonuses in the millions. Of course then, the titans weren't bankers, but industry giants. We saw Steel manufacturers, and Railroad executives making vast sums of money.
When the stock market crashed then, citizens and government alike were outraged to learn of their bonuses, and Congress did cap those excessive bonuses in the 1930s. Again, one huge difference between then and now is that those executives were managing industries that produced products everyone could understand, rather than trading paper that almost no one understands.
Scrolling forward in time to the 1970s when rules were loosened for the Wall Street giants... According to an article in the Huffington Post, the rule changes were supposed to "1) unleash the free-market, especially the financial sector, from its New Deal constraints, so that it can "innovate," and 2) change the tax code so that wealth could accumulate at the top in order to spur entrepreneurial incentive. The economy was supposed to boom and all boats were supposed to rise."
It seemed that all was going well, and almost no one was paying much attention to the compensation these Wall Street executives were taking home. The economy was prospering, and even those who weren't millionaires still thought that dream was an obtainable goal. But then, these same "innovators" got too creative, and the end result was the economic meltdown of 2007.
Those on Wall Street just weren't making enough money doing normal business, helping new businesses go public, trading securities, and collateralized debt. They came up with new, much riskier products to sell, products with no real collateral, and these products were bundled and sold, then rebundled and sold again. All the while, almost no one really understood these products, so they were not being regulated.
The day of hundred million and multi-billion dollar bonuses emerged, and the giants of Wall Street believed they had earned them because they were so innovative.
Wall Street giants are outraged that the administration wants to regulate their activities more now, and that there is a pay czar who can cap their salaries. They are fighting reform as though they were fighting for their lives.
So, here's a question that requires an answer - just how can Goldman Sachs and Blankfein justify to the international public, annual bonuses in the billions when people the world over are struggling to put food on their tables.
Are you outraged? Goldman Sachs recently reported profits of $3 billion last quarter. That's fantastic, but then, where does a $70 million bonus come from? Even if annual profits for the business ultimately top $20 billion, does that $20 billion exclude Blankfein's bonus? Is that how they make the math work?
Written by Shelby Bateson