As unemployment soars across the country and ordinary workers struggle to make ends meet, Wall Street bosses are continuing to gorge themselves on taxpayer dollars.
The cost of the financial bailout has reached close to $13 trillion, Bloomberg News estimates – or more than $42,000 for every person in the U.S. But rather than funding loans for low-income borrowers and homeowners, much of that money has gone towards obscene profits and bonuses for the very financial speculators responsible for the economy’s collapse.
Insurance giant AIG became the poster child for corporate greed when it revealed in March that it planned to pay executives in the department that helped start the mortgage meltdown $165 million in retention bonuses, with some top employees receiving up to $1 million each. The news came after AIG had received $180 billion in government bailout funds. AIG recently confessed to Congress that total bonuses at the company reached a whopping $454 million in 2008, according to Politico.com.
AIG isn’t alone in rewarding incompetent execs: Mortgage companies Fannie Mae and Freddie Mac, who together have received $200 billion in government money, plan to give out $210 million in bonuses in 2009 and 2010.
The taxpayer-funded payout reflects a nationwide trend of companies preserving perks for management while workers bear the brunt of the economic crisis. Median CEO salary rose 7% last year, according to the AFL-CIO, while executive perks (including stock options) rose 13%. Vikram Pandit, CEO of Citigroup – which received $45 billion in bailout money – earned $38 million in 2008.
AIG came under fire in April for denying medical care for injured military contractors covered under their insurance policies. The biggest insurance provider for contractors in Iraq and Afghanistan, the company disputes close to half of claims for serious injuries, according to an investigation by ProPublica.org.
“It’s been a constant grinding struggle to get the smallest amounts of anything, just prescriptions filled,” John Woodson, a contractor who lost his left leg and vision in his left eye when his convoy was ambushed in Iraq, told Democracy Now!. “And then you see this money just being thrown away, and these people have no care in the world at all.”
Banks have also spent their newfound cash on lobbyists to help them avoid further government regulation. The top bailed-out firms paid $22 million for lobbying over the last six months, according to the Washington Post.
President Obama and congressional Democrats have criticized abuse of the bailout system but have failed to take effective action against it. After public outcry grew over AIG’s bonuses, the White House called on executives who had received bonuses to return the money. The House of Representatives even passed a bill requiring a 90% tax on bonuses paid at companies that had received over $5 billion in bailout cash.
But Obama weighed in against the bill, saying he didn’t want to alienate the financial industry. Congress then passed a milder version giving the Treasury secretary authority to decide if bonuses are “unreasonable” or “unnecessary” – a vague provision unlikely to be enforced.
Even these limited consequences seem to be too much for the banking industry. Goldman Sachs and other firms are now seeking permission to return their bailout assistance so they can avoid any restrictions on executive pay.
The banking industry wants an influx of government money without any accountability. So far, this is exactly what they have gotten from the Obama administration. The government takes the risk, but private investors and bank executives reap the rewards. This is corporate welfare.
We need real nationalization of banks so that democratically-elected representatives can direct investment to urgent social needs such as job creation, healthcare, and education. And we should extend this approach to other industries in crisis, like autos and airlines. We can then create living-wage jobs and ensure that society’s wealth is used to benefit the many, not the few.