Politics is a lot like TV wrestling.
There’s plenty of chest thumping and not very much real action.
The latest clash in this 15-round bout is over the subject of executive compensation.
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The President wants to put a cap on the pay received by execs at firms that get federal bailout monies. President Obama’s economic team has taken the temperature of the electorate, and Wall Street is beginning to feel the heat.
The math doesn’t bode well for Wall Street. New York banks and securities firms paid $18.4 billion in bonuses for 2008 while the six biggest financial companies lost a combined $42.4 billion and got $90 billion in government bailout funds.
In response to the public outcry, Obama announced yesterday that he’s imposing a cap of $500,000 on the compensation of top executives at companies that receive significant federal assistance in the future.
Five hundred thousand dollars a year sounds like a pretty hefty salary to most Americans. But, it’s chump change to most Wall Street execs.
Nobody comes to Wall Street to save the world.
Don’t Fret Over Their Next Meal
Wall Street won’t be forced to open soup kitchens in the basement of Trinity Church because of the President’s proposed salary cap. On the other hand, it could put a damper on the flow of talent that has been the lifeblood of the New York financial world.
The President is attempting to use his bully pulpit to stamp out greed and avarice. His posturing, however, is a diversion from the real fight – whether the federal government ought to assert greater direct supervision over the multitude of financial firms in which it now has an ownership interest.
In the past, Wall Street could count on moderate Democrats and free enterprise Republicans for support. This time, members of Congress are feeling the populist backlash on both sides of the aisle.
One Senator’s Creative Response
American voters are fuming. Republican and Democratic members of both the House and Senate have been inundated with letters and phone calls from constituents labeling the executive compensation as obscene.
Sen. Claire McCaskill of Missouri, a moderate Democrat, is preparing to introduce legislation that would block companies from paying executives more than the U.S. President’s $400,000 annual salary as long as the companies rely on federal aid. The compensation cap would cover salary, bonuses and stock options.
With unemployment climbing and the public seething, the President is channeling FDR. In his 1933 inaugural address, Roosevelt intoned, “Practices of the unscrupulous money changers stand indicted in the court of public opinion.”
Wall Street, however, is very creative. Even if the President and Congress successfully impose a compensation cap on the New York elite, they will find a way around it.
Wall Street is like the Yankees. They always find a way to win.
John Cohn is a senior partner in the Globe West Financial Group[ based in West Los Angeles. He may be contacted at www.globewestfinancial.com
