Workers Laid Off, Execs Paid Off

The global financial crisis deepens, with
more than 10 million in the U.S. out of work, according to the
Department of Labor.

Unemployment hit 6.7 percent in November. Add
the 7.3 million "involuntary part-time workers," who want to work
full time but can't find a position. Jobless claims have reached a
26-year high, while 30 states reportedly face potential shortfalls
in their unemployment insurance pools.

The stunning failure of regulators like the Securities and Exchange
Commission was again highlighted, as former NASDAQ head Bernard
Madoff (you got it, pronounced "made off") was arrested for
allegedly running the world's largest criminal pyramid scheme, with
losses expected at $50 billion, dwarfing those from the Enron
scandal. The picture is grim - unless, that is, you are a
corporate executive.

The $700 billion financial bailout package,
TARP (Troubled Assets Relief Program), was supposed to mandate the
elimination of exorbitant executive compensation and "golden
parachutes." As U.S. taxpayers pony up their hard-earned dollars,
highflying executives and corporate boards are now considering
whether to give themselves multimillion-dollar bonuses.

According to The Washington Post, the
specific language in the TARP law that forbade such payouts was
changed at the last minute, with a small but significant
one-sentence edit made by the Bush administration. The Post
reported, "The change stipulated that the penalty would apply only
to firms that received bailout funds by selling troubled assets to
the government in an auction."

Read the fine print. Of the TARP bailout
funds to be disbursed, only those that were technically spent "in
an auction" would have limits imposed on executive pay. But
Treasury Secretary Henry Paulson and his former Goldman Sachs
colleague Neel Kashkari (yes, pronounced "cash carry"), who is
running the program, aren't inclined to spend the funds in
auctions. They prefer their Capital Purchase Program, handing over
cash directly. Recall Paulson's curriculum vitae: He began as a
special assistant to John Ehrlichman in the Nixon White House and
then went on to work for a quarter-century at Goldman Sachs, one of
the largest recipients of bailout funds and chief competitor to
Lehman Brothers, the firm that Paulson let fail.

The Government Accountability Office issued a
report on TARP Dec. 10, expressing concerns about the lack of
oversight of the companies receiving bailout funds. The report
states that "without a strong oversight and monitoring function,
Treasury's ability to ensure an appropriate level of accountability
and transparency will be limited." The nonprofit news organization
ProPublica has been tracking the bailout program, reporting details
that remain shrouded by the Treasury. As of Tuesday, 202
institutions had obtained bailout funds totaling close to $250
billion.

House Speaker Nancy Pelosi said recently,
"The Treasury Department's implementation of the TARP is
insufficiently transparent and is not accountable to American
taxpayers." Barney Frank, D-Mass., chair of the House Financial
Services Committee, said earlier, "Use of these funds ... for
bonuses, for severance pay, for dividends, for acquisitions of
other institutions, etc. - is a violation of the terms of the
act."

Republican Sen. Charles Grassley of Iowa said
of the loophole, "The flimsy executive compensation restrictions in
the original bill are now all but gone."

Put aside for the moment that these three all
voted for the legislation - the law clearly needs to be
corrected before additional funds are granted.

The sums these titans of Wall Street are
walking away with are staggering. In their annual "Executive
Excess" report, the groups United for a Fair Economy and the
Institute for Policy Studies reported 2007 compensation for Lloyd
Blankfein, CEO of Goldman Sachs (Paulson's replacement), of $54
million, and that of John Thain, CEO of Merrill Lynch, a whopping
$83 million. Merrill has since been sold to Bank of America, after
losing more than $11 billion this year - yet Thain still
wants a $10 million bonus.

Paulson, Kashkari and their boss, President
George W. Bush, might not be the best people to spend the next $350
billion tranche of U.S. taxpayer money, with just weeks to go
before the new Congress convenes Jan. 6, and Barack Obama assumes
the presidency Jan. 20. As Watergate leaker Deep Throat was said to
have told Bob Woodward, back when Paulson was just starting out,
"Follow the money." The U.S. populace, its representatives in
Congress and the new Obama administration need to follow the money,
close the executive pay loophole and demand accountability from the
banks that the public has bailed out.

Denis Moynihan contributed research to
this column.