"Barney Frank Leaves Wall Street Defenders Speechless: Why Are Bankers ‘Paying Themselves So Much Money?’"
As his fellow panelists sought to sidestep criticisms of the financial industry on the five-year anniversary of the bank failure that kicked the financial crisis and Great Recession into full swing, former congressman Barney Frank asked a simple question that brought Wall Street’s defenders up short. “To your question about those poor beleaguered bankers who have been forced to do so much,” Frank said, “why are they paying themselves so much money? Where did these enormous salaries come from if they were in fact in such serious trouble?”
Frank was responding to CNBC host Maria Bartiromo’s call to “get beyond the conversation of is Wall Street evil, are the bankers evil and causing pain” and instead look to economic growth as a cure-all for the vast inequality in income and wealth that has been exacerbated since the end of the recession. (Nevermind that the deregulation of the financial sector is a primary driver of inequality in the U.S.) His question produced several seconds of silence as Bartiromo and former Treasury Secretary Hank Paulson laughed nervously and looked to Meet The Press host David Gregory for help. As Bartiromo seemed about to respond to Frank, Gregory stepped in to change the subject.
Watch the exchange below:
BARTIROMO: We need to get beyond the conversation of is Wall Street evil? Are the bankers evil and causing pain? And toward the conversation of, how do you create sustainable economic growth? That will answer the issue of inequality. Because with growth comes jobs.
BARNEY FRANK: I do want to add one thing, though, to your question about those poor beleaguered bankers who have been forced to do so much to keep from not being able to pay their debts they can’t lend money. if they really are running businesses that are so stressed that they can’t do their basic work, why are they paying themselves so much money? Where did these enormous salaries come from if they were in fact in such serious trouble?
BARTIROMO: (laughing) Thank you for giving me that one. Okay.
GREGORY (Host): But your point is to get beyond — to get beyond some of the resentment of the bankers and get to a place where we actually have more hiring going on, more investment going on and washington plays a more constructive role beyond whether it was the bailout of the banks which changed our politics.
It would have been interesting to hear Bartiromo’s response had Gregory not intervened to prevent anyone answering Frank’s question. Wall Street executive pay seems difficult to defend five years on from the crisis. It isn’t just that banker bonuses and bank profits have returned to or even surpassed pre-crisis highs. It’s that a third of the highest-paid executives of the past 20 years have been failures or frauds. It’s that companies routinely manipulate performance-based compensation schemes to effectively guarantee executive payouts. It’s that taxpayers subsidize payments in the form of stock, which also give executives incentive to the sorts of fraud and risk-taking that created the financial crisis.
The financial reform law that Frank co-authored with then-Sen. Chris Dodd (D-CT) included rules meant to change executive compensation. Those changes have yet to materialize. Five years on from the Lehman Brothers bankruptcy, former Lehman chief Dick Fuld is far from the only former executive to have retained hundreds of millions of dollars in pay and bonuses for their work that contributed to the crisis. Efforts to change the culture of the financial industry appear to have failed, as traders still report a high willingness to break the rules for personal gain.