Wall Street is slowly learning that it's a new era in Washington.
In the wake of a report showing $18.4 billion in bonuses will be paid to Wall Street employees this year, President Obama slammed the behavior of the financial industry as the "height of irresponsibility" on Thursday. The $18.4 billion figure is down by almost half from last year, but still represents the sixth-highest bonus total on record. The bonuses were granted despite the fact that Obama just went to Congress to beg for the second $350 billion installation in TARP funding that will be used to bail out Wall Street.
In a move the previous administration never would have dreamed of, the President lit into Wall Street when asked for comment:
"Part of what we are going to need is for the folks on Wall Street who are asking for help is to show some restraint and to show discipline and to show some financial responsibility," he said.
"The American people understand that we've got a big hole that we've got to dig ourselves out of but they don't like the idea that people are digging a bigger hole even as they are beginning to fill it up."
"So we are going to be having conversations directly with these folks on Wall Street, underscoring that they have to start acting in a more responsible manner."
Obama added that "now is not that time" for bonuses and that Wall Street "should know better." Considering that bonuses are technically rewards for positive performance, it seems obvious that "now is not the time." In a apocalyptic year for the financial industry in which banks failed left and right, who on Wall Street deserves a pat on the back?
Obama's decision to come down hard on Wall Street is a departure from the previous president. Asked for an opinion on the $440,000 coastal retreat AIG execs threw for themselves just days after getting approved for bailout funds, Bush spokeswoman Dana Perino called it "pretty despicable." But Bush himself said nothing. And while the then-president did address Wall Street bonuses weakly in January 2007 — saying, "You need to pay attention to the executive compensation packages that you approve. You need to show the world that America's businesses are a model of transparency and good corporate governance." — he never lashed out like Obama did this week. Indeed, it would have been difficult — his treasury secretary, Hank Paulson, was paid a whopping $38 million as the head of Goldman Sachs the year before he transitioned to Bush's cabinet.
The less Wall Street-friendly regime is pairing its rhetoric with action. President Obama announced a Middle Class Task Force on Friday, which will be headed by Vice President Joe Biden and will have the following goals, according to the White House:
Expanding education and lifelong training opportunities Improving work and family balanceRestoring labor standards, including workplace safetyHelping to protect middle-class and working-family incomesProtecting retirement security
The task force will have a ton of firepower. Its members include the Secretaries of Labor, Health and Human Services, Education, and Commerce, as well as the Directors of the National Economic Council, the Office of Management and Budget, the Domestic Policy Council, and the Chair of the Council of Economic Advisors. The President announced it by saying, "The recession is deepening and the urgency of our economic crisis is growing. Yesterday we reached a new threshold: the highest number of Americans receiving unemployment benefits on record. Every day it seems there's another round of layoffs, another round of jobs lost and families' lives turned upside down." He then turned the microphone over to the Vice President, who said, "To this, the great American middle class, you have simply said, we're on your side again." And suggesting where the task force's sympathies will lie, he said, "It's good to see so many of my friends from... organized labor, as well. Welcome back to the White House."
Labor gets a warm embrace while Wall Street gets the lash. Change has come to Washington.
Update: Chris Bowers is not so pleased with Obama. He suggests Obama could have stopped these bonuses before they happened.