Big Bucks for Bailout Barons

One year after the global banking system collapsed the Institute for
Policy Studies (IPS) 16th Annual Executive Excess report --
"America's Bailout Barons" -- shows that the perverse system of executive compensation which
contributed to the financial meltdown is still thriving for top bailout recipients.

President Obama had it right in April when he delivered his "economic
Sermon on the Mount " and said, "We cannot rebuild this economy on the same pile of sand. We
must build our house upon a rock." And, as the IPS report notes, even
earlier in the year Obama spoke out
against excessive executive
compensation, saying, "In order to restore our financial system, we've
got to restore trust. And in order to restore trust, we've got to make
certain that taxpayer funds are not subsidizing excessive compensation
packages on Wall
Street."

But the fact is we haven't learned -- or haven't acted on -- the lessons
we must heed if we're going to build a more just, sustainable economy
that works for the real economy rather than the Wall Street. The IPS
report focuses on the twenty banks that have received the most bailout money
from the federal government and shows that the banks and bankers are
still acting and being rewarded as if they are Masters of the universe
-- abetted by a government that is failing to take on the status quo.

Sure, some steps have been taken to rein in compensation for TARP
recipients -- but they are timid ones. And IPS's valuable report makes
clear, "Lobbying armies from corporate and financial trade associations
are energetically doing battle behind the scenes to keep even modest
changes in pay rules off the legislative table."

As a result historic inequality in pay is still prevalent and
the
neo-Gilded Age tycoons are raking it in. According to the report, a
generation ago top execs rarely earned more than thirty to forty times
the pay
of the average American worker. But now top execs make an average of
319 times more than the typical worker. For the top twenty financial
industry execs the divide is even greater -- 436 times more than the
average worker in 2008. In the past three years, the top five execs at
the twenty US financial firms receiving the most Bailout Bucks took
home pay
packages worth a staggering $3.2 billion -- an average of $32 million
each. In 2008 those cats averaged nearly $14 million each--even
though their twenty firms laid off more than 160,000 people since
January of
that year.

While a new and smart economic populism has fueled plenty of talk about
compensation reform, good proposals haven't been seized. Senators
Bernie Sanders and Claire McCaskill tried to cap compensation for
employees of bailed-out firms so that it wouldn't exceed that of the
President of the US, $400,000. The amendment was passed but then
stripped in conference committee. In April, Progressive Caucus member
and Chief Deputy Whip Jan Schakowsky introduced the Patriot Corporations
Act to extend tax breaks and contracting preferences to companies that
meet certain benchmarks, including not compensating any executive at
more than 100 times the income of the company's lowest-paid worker.
That bill has been referred to committee. Hedge fund managers are
still only paying 15 percent
capital gains rate on the profit share they get for managing investment
funds rather than the 35 percent income tax they should pay. And
unlimited amounts of executive compensation are still shielded in
deferred
accounts--at an annual cost of $80.6 billion to taxpayers--in
contrast to the limits placed on income deferred by normal taxpayers
via
401(k) plans.

There is no shortage of opportunities to curb this unjust and
unproductive growth in unequal pay. As IPS senior scholar and
Nation contributor Chuck Collins put it, "Public officials in Congress and the White House hold the pin
that could pop the executive pay bubble. They have so far failed to use
it." It's time to use it.