Subject: [big campaign] New Huff Post from Creamer -- More on Wall Street
From: [email-masked]
To: [email-masked], [email-masked]
Date: Fri, 16 Oct 2009 09:28:29 EDT
List-Id: <bigcampaign.googlegroups.com>

Bailed-Out Wall Street Firms Plan Additional Billions in  Bonuses for 
Executives and Traders Who Helped Sink  Economy 

Prepare for a new firestorm of completely justified populist  outrage.  
Some of the country’s  largest Wall Street firms have set aside billions of 
dollars for bonuses to  executives and traders – many of whom are the same 
people whose reckless  risk-taking led to the current recession.  
Amazingly, giant insurance conglomerate AIG, is currently scheduled to  pay 
another $198 million in bonuses next March.   
Remember that AIG’s sale of unregulated “credit default swaps” helped  
trigger the financial collapse that led to the recession. “Credit default swaps”
  were essentially insurance policies that, if the underlying financial 
instrument  fell below a certain price, AIG would insure the loss.  Only 
problem was, that since the “credit  default” business was completely 
unregulated, AIG had no capital requirements to  guarantee that they could pay off.   
To prevent what they thought might be a world-wide systemic meltdown, the  
Government was ultimately forced to invest $180 billion of taxpayer money, 
and  now owns 80% of the company.  
But earlier this year AIG actually paid $168 million in bonuses to  
executives and traders in the company’s Financial Products Division that had run  
the “credit default swap” program, causing universal outrage.  
Does it make any sense at all to give even more financial rewards to the  
very people who have helped put millions of Americans out of work and caused 
the  worst economic downturn since the Great Depression?  Of course not, but 
that is exactly what  AIG management is poised to do.   
One of the problems the company’s management says it confronts is that  
they are “contractually bound” to make these payments.  Apparently contractual 
obligations mean  more when it comes to stock speculators than it does when 
it comes to labor  agreements where companies constantly demand changes if “
economic circumstances”  warrant.  At the very least, they  should make the 
people who helped bring us the recession sue the company in open  court and 
tell a jury why they deserve millions of dollars in bonus money for  the 
brilliant job they  did. 
Kenneth Feinberg, the U.S. Treasury’s point man on compensation for  bailed 
out firms, has advised the company to scale back its payments to avoid  
another public firestorm.  He is  dead on.   
But AIG is only the tip of the iceberg.  According to the Washington Post, 
J.P. Morgan Chase has  set aside $2.78 billion in compensation for its 
investment bankers for the third  quarter – a 28% increase over the same period 
last year. 
J.P. Morgan Chase is able to pay those kinds of bonuses because the  
financial bailout by the taxpayers has put it – and the other big Wall Street  
Banks -- in a position where they will generate very strong profits in the 
third  quarter.  J.P. Morgan Chase itself  will generate profits of $3.59 
billion – the strongest results in two  years.   
Community and Regional banks, on the other hand, are in deep trouble. The  
difference is that the Wall Street banks are making money on investment 
banking  activities – on underwriting equity plays and speculative trades – 
exactly the  activities that sent the financial sector into a tailspin.  The 
Community and Regional banks, on the  other hand, are restricted to 
traditional banking activities – receiving  deposits and making loans.  But the  
recession has caused demand for loans to drop and delinquencies on loans to  
increase.  
So the Community and Regional  banks that didn’t have anything to do with 
causing the recession are paying the  price -- along with the rest of 
America.  But the big Wall Street banks that  actually caused this catastrophe are 
rolling in money and handing it out in huge  chunks to the brilliant young 
speculators that drove the process.    
That ain’t right.  It’s not  right morally and it certainly isn’t right 
economically.  If the economic incentives continue to  encourage reckless 
speculation and penalize sound banking, we’re going to get  reckless 
speculation. 
The Obama Administration has made regulatory reform proposals that are  the 
first step down the road to changing these economic incentives – and 
reining  in the massive power of the financial sector as a whole. This package 
includes  regulation of so called "derivatives" -- essentially bets on the 
direction of  underlying investment instruments -- including the "credit default 
swaps" that  sunk AIG.  Their passage is not just  a matter of “good policy”
 – it is a matter of national economic  security.. 
If our economic system continues to be dominated by an outsized financial  
sector – if world-class reckless risk-taking continues to receive massive  
economic rewards – then we are headed to another financial collapse in two  
years, or five years or fifteen years.   
Just as surely as America had to change the policies  that had made it 
vulnerable to terrorist attacks on September 11, 2001, we have  to change the 
policies that made us vulnerable to the attack of the Wall Street  speculators 
that culminated in the collapse of Lehman Brothers on September 15,  2008.  
Robert Creamer is  a long-time political organizer and strategist, and 
author of the recent book:  “Stand Up Straight: How Progressives Can Win,” 
available on _amazon.com_ 
(http://www.amazon.com/Listen-Your-Mother-Straight-Progressives/dp/0979585295/ref=pd_bbs_sr_1?ie=UTF8&s=books&qid=1206567141&sr=8-1
) . 

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