By Michael A. Fletcher and Zachary A. Goldfarb
Monday, October 19, 2009
Top Obama administration officials sharply criticized Wall Street firms planning to pay big bonuses, pointedly contrasting the soaring profits some financial companies have recorded in recent days with continuing high jobless rates across the country.
The firms are benefiting from government efforts, some initiated by the Obama administration, to stabilize and restore confidence to the capital markets after a global financial crisis that began last year. With their fortunes rebounding, the Wall Street firms plan to pay tens of billions of dollars to executives.
"The bonuses are offensive," Obama senior adviser David Axelrod said Sunday on ABC's "This Week," adding that banks must do more to support lending across the country and should stop their lobbying efforts aimed at blocking the passage of new financial regulations that are being prepared in Congress.
"They ought to think through what they are doing, and they ought to understand that a year ago a lot of these institutions were teetering on the brink, and the United States government and taxpayers came to their defense," Axelrod said. "They have responsibilities, and they ought to meet those responsibilities."
The Obama administration has defied popular opinion in backing huge government bailouts to try to rescue much of the nation's auto industry and stabilize the financial system, steps it saw as critical to fostering an economic recovery. At the same time, it has attempted to tap into popular anger at corporate America with outspoken criticism of bonuses, perks and other practices that have long been staples of big business.
Many banks and other firms have been enjoying fat profits this year in their trading and investment arms. But much of this success has come as a result of new government policies that have kept interest rates low -- on debt and mortgages, for example.
The White House has been taking an increasingly confrontational tone against Wall Street bonuses and lobbying efforts to prevent its broad plan for new financial regulations. Obama has given at least two high-profile speeches in recent weeks urging the financial industry to stop lobbying Congress not to pass laws that would, among other things, create a new agency to police credit card and mortgage lending.
White House Chief of Staff Rahm Emanuel chided Wall Street firms for neglecting their responsibilities "in the short period of time where they have a level of normalcy because of what the government did to help them."
"Not only do they come for a bailout . . . they're now back trying to fight a consumer office and the type of protections that will prevent another type of situation where the economy is taken over the cliff by the actions taken on Wall Street and financial market," he said on CNN's "State of the Union."
Recent news of a pay package for Bank of America's outgoing chief executive, Kenneth D. Lewis, illustrates the challenge facing the White House and Treasury. The Treasury's pay czar, Kenneth Feinberg, persuaded Lewis not to take any compensation for his work this year after the bank received $45 billion in government aid.
But because of Lewis's contract with the bank, he is still on track to receive nearly $70 million in retirement money, something Feinberg can't prevent.A fiscal predicament
The administration's criticism of corporate bonuses highlights the quandary it faces as the nation slowly emerges from the steepest economic downturn since the Great Depression. While Wall Street has regained some of its old swagger as profits have returned and other parts of the economy show signs of new life, unemployment continues to rise despite the huge economic stimulus plan enacted in February.
With unemployment at 9.8 percent and projected to go higher, Obama is facing mounting political pressure to take further government action to create jobs, but at the same time he is confronted by a near-record budget deficit that cries out for fiscal austerity.
Aides called joblessness a daily concern for Obama but added that the administration is constrained by the ballooning budget deficit, which hit a post-World War II record of $1.4 trillion in the fiscal year that ended last month.
"There is this conundrum -- you've got this huge national deficit; we've got to do what we can to bring that down. At the same time, it's important to stimulate the economy, and the federal government has to do its part," said senior adviser Valerie Jarrett on NBC's "Meet the Press." ". . . So let's wait and see. Let the recovery bill do its job, and then we'll see."
Administration officials have stressed that the $787 billion economic stimulus package is only about half spent, and they are counting on coming expenditures to boost the job market over the next year.
With midterm elections looming in just over a year, Obama is coming under pressure from congressional Democrats to do more to create jobs. While the pace of job losses has slowed considerably since Obama took office, unemployment has crept up to a 26-year high, and about half those out of work have been jobless for six months or more.Dismal figures
Labor Department statistics show that there are about six unemployed people for every available job. Many Democrats are concerned that voters will punish them at the polls for the continued problems in the job market.
Last week, Obama approved $250 payments to Social Security recipients who otherwise would have seen their payments remain flat. His administration also is backing legislation pending in Congress to extend unemployment benefits. Obama's economic advisers also are weighing a range of other measures that would save or create jobs or help those out of work, including another round of aid to fiscally strapped states, tax credits for small businesses that hire new workers and extension of federal help for jobless workers who buy health insurance.
"Everything is on the table," Jarrett said.