On Saturday, the New York Times reported that the “bank bonus season” that begins this week “will be one of the largest and most controversial blowouts the industry has ever seen.” “Despite calls for restraint from Washington and a chafed public, resurgent banks are preparing to pay out bonuses that rival those of the boom years. The haul, in cash and stock, will run into many billions of dollars,” reported the Times.
Even some industry veterans warn that such paydays could further tarnish the financial industry’s sullied reputation. John S. Reed, a founder of Citigroup, said Wall Street would not fully regain the public’s trust until banks scaled back bonuses for good — something that, to many, seems a distant prospect.
“There is nothing I’ve seen that gives me the slightest feeling that these people have learned anything from the crisis,” Mr. Reed said. “They just don’t get it. They are off in a different world.”
But some prominent New Yorkers are defending Wall Street’s compensation packages. On Don Imus’ radio show this morning, former New York City mayor Rudy Giuliani declared that from his point of view giant Wall Street bonuses are “wonderful”:
GIULIANI: I have to tell you. You’re going to get annoyed. I have a different view of bonuses than you do.
GIULIANI: And this comes from my experience as mayor of New York. They balance my budget. They were wonderful from the point of view of getting the money you need to run New York City. Particularly when they were paid in cash rather than stock because in stock you don’t get the benefit until somebody sells the stock. And but when they get it in cash, all of a sudden a deficit can turn into a surplus. So, I mean, I have somewhat of a warped view of this because it used to help me balance by big 30, 40 billion dollar budget.
Giuliani added that the big banks “should do a better job of explaining their compensation system and they should do a better job of explaining what they contribute, which is really the life blood that makes our economy work.” Watch it:
This isn’t the first time Giuliani has made this argument. About this time last year, he defended Wall Streets practices by saying that “one of the ways in which you determined New York City’s budget, tax revenues, was Wall Street bonuses.” He added that it has “a reverse effect on the economy, if you somehow take that bonus out of the economy. It really will create unemployment.”
As the Wonk Room’s Pat Garofalo has pointed out but Giuliani neglects to mention, “the banks are returning to huge paydays when their profits have come courtesy of the government programs that kept them from collapsing.” “Investment firms should be looking at ways to alter their pay packages to appropriately acknowledge how they were able to make so much money,” writes Garofalo.