In an interview with Bloomberg BusinessWeek, President Obama, who had been characterizing Wall Street bonuses as “obscene” and the “height of irresponsibility,” took a different tone, lauding Goldman Sachs CEO Lloyd Blankfein and JP Morgan Chase CEO Jamie Dimon as “very savvy businessmen,” and saying that he doesn’t “begrudge” their recent success:
QUESTION: Let’s talk bonuses for a minute: Lloyd Blankfein, $9 million; Jamie Dimon, $17 million. Now, granted, those were in stock and less than what some had expected. But are those numbers okay?
THE PRESIDENT: Well, look, first of all, I know both those guys. They’re very savvy businessmen. And I, like most of the American people, don’t begrudge people success or wealth. That’s part of the free market system. I do think that the compensation packages that we’ve seen over the last decade at least have not matched up always to performance.
“$17 million is an extraordinary amount of money. Of course, there are some baseball players who are making more than that who don’t get to the World Series either. So I’m shocked by that as well,” Obama added. He also pushed for some specific reforms to compensation practices, including institutionalizing say-on-pay, where shareholders vote on their company’s pay packages. “I guess the main principle we want to promote is a simple principle of ‘say on pay,’ that shareholders have a chance to actually scrutinize what CEOs are getting paid. And I think that serves as a restraint and helps align performance with pay,” he said.
Of course, one big difference here is that baseball players didn’t contribute to the near collapse of the financial system. And while say on pay is a good idea, and should definitely be implemented, the problem with the latest round of Wall Street bonuses is that they came after banks were able to make sky-high profits courtesy of their access to government support. As Paul Krugman put it, “these bank executives are not free agents who are earning big bucks in fair competition; they run companies that are essentially wards of the state. There’s good reason to feel outraged at the growing appearance that we’re running a system of lemon socialism, in which losses are public but gains are private.”
And compare Obama’s stance to that of former Treasury Secretary and Goldman Sachs CEO Hank Paulson, who is vilified for having been too close to Wall Street during his tenure at Treasury, but who is now criticizing “out of whack” bank pay and calling for restraint on the part of executives:
“Today, restraint is very much in order by the top people,” Paulson, 63, said yesterday…“If you have losses, you are supposed to bear responsibility”…“During benign periods, I think compensation levels on Wall Street are out of whack.”
Obama has been making a lot of right moves with regard to the banks recently — like pushing for a bank tax and proposing the “Volcker rule” to break proprietary trading away from commercial banking — but there’s no reason to act as if the banks are seeing booming profits due solely to the business acumen of their CEOs.