Bank of America CEO Kenneth Lewis testifies before a House Oversight and Government Reform Committee hearing on Bank of America's purchase of Merrill Lynch in Washington on June 11, 2009. (UPI Photo/Kevin Dietsch) | License Photo
The chorus of complaints about compensation at U.S. banks grew louder this week as White House officials said billions of dollars in bonuses were "offensive."
It is unclear whether or not there was any left-handed congratulations laced in the rhetoric, a sort of, "look, we saved the banks," message hidden in the growling about growing paychecks. But government officials are certainly proud, on one hand, that the banks survived the financial meltdown that accelerated a year ago. They're just mad the bankers are now eating caviar.
White House aide David Axelrod used the word "offensive." White House Chief of Staff Rahm Emanuel said bankers had gotten particularly boorish fighting the initiative to start a Consumer Finance Protection Agency so soon after -- and in some cases concurrent with -- accepting billions of dollars in taxpayer funding. Senior adviser Valerie Jarrett declared the situation a "conundrum," even if that means it is a riddle in which the answer is a pun. "You've got this huge national deficit; we've got to do what we can to bring that down. At the same time, it's important to stimulate the economy, and the federal government has to do its part," Jarrett said on NBC's "Meet the Press."
It took the National Coalition for the Homeless and six other non-profit agencies, however, to connect the dots. In a study of homelessness recently released, the coalition said foreclosures had suddenly arrived at their doorstep: The number of homeless persons now claiming foreclosure was the cause of their plight had risen from virtually zero three years ago to as high as 15 percent in the Midwest.
How many politicians have said banks should now fund homeless shelters?
The argument on bankers accepting billions of dollars in bonus pay is really, at its root, an argument about responsibility. The damage done through overzealous selling of easy mortgages has an effect now documented. Who takes responsibility for that?
In Britain, financial regulators took the argument to a new level, suggesting banks delve into borrowers personal spending in greater detail. The so-called "affordability tests" proposed by the Financial Services Authority would require bankers to stop lending based on "self-certified" borrower statements and document a perspective borrowers income and spending habits. Among the items mentioned in The Times of London, bankers would be required to verify spending on childcare, clothing, alcohol and tobacco. In theory, a daily double latte habit could wind up costing a consumer a loan.
In the real world, it appears a dubious achievement that Bank of America's departing Chief Executive Officer Kenneth Lewis has agreed, under pressure, to forgo his salary for 2009 -- about $1 million -- and find the controversy over the purchase of Merrill Lynch that hastened his departure gets him all the faster toward a retirement package worth in one report about $70 million.
Various reports say the U.S. Treasury's pay czar Kenneth Feinberg, expected to approve a $10.5 million pay package for American International Group CEO Robert Benmosche, pressured Lewis to take the $1 million pay cut -- not that anybody's keeping score.
In market movement Tuesday, the Nikkei 225 index in Japan gained 0.98 percent, while the Shanghai composite index in China rose 1.52 percent. The Hang Seng index in Hong Kong moved up 0.83 percent, while the Sensex in India fell 0.59 percent. The S&P/ASX in Australia rose 1.11 percent.
In midday trading in Europe, the FTSE 100 index fell 0.02 percent, while the DAX 30 in Germany rose 0.12 percent. The CAC 40 in France rose 0.08 percent. The pan-European DJ Stoxx 50 rose 0.02 percent.