With federal workers facing pay freeze, Wall Street should do its part, too

By Robert McCartney
Washington Post Staff Writer
Wednesday, December 1, 2010; 10:12 PM

Washington government workers and New York financial executives have one thing in common: The U.S. public despises them both.

But American society - led by President Obama and Congress - treats the two quite differently when it comes to paychecks.

Hard economic times mean the federal civilian workforce has to accept a pay freeze for the next two years, Obama said Monday. Some newly elected Republicans in Congress want to go further, urging 10 percent pay cuts across the board for U.S. government employees.

No such austerity is being forced on Wall Street. Pay there is on pace to break a record high for a second consecutive year, according to an October survey by the Wall Street Journal. Furthermore, Congress ducked the issue this summer when it passed the buck to regulators rather than require significant pay restrictions in a major financial regulatory bill.

This all means that annual Wall Street bonuses, which often exceed $500,000, are set to be even fatter in 2011. The average federal worker's pay of about $75,000 will remain the same.

The contrast is offensive because it highlights the extent to which the nation is not sharing the sacrifice equally as it struggles to recover from the slump. Nobody expects federal workers to be immune. They've got jobs, so they're already doing much better than the tenth of the country that's unemployed.

But lawmakers and regulators could surely insist on more frugality from investment bankers and securities traders whose firms were rescued by government bailout after their own greed and recklessness played the biggest single role in creating the 2008 financial crisis. Furthermore, without changes, the Wall Street pay structure will continue to reward the same kinds of short-term business strategies that helped cause the meltdown.

One deserving government employee who is stoic about the pay freeze but troubled by the inconsistency is Nicole Faison, who works as a program adviser at the headquarters of the Department of Housing and Urban Development.

Even the most vituperative critics of the federal workforce would have to concede that Faison is somebody whom the public should be happy to employ - and reward. She plays a leading role in identifying and blocking improper payments so low-income renters don't get excessive subsidies at taxpayers' expense.

In 2007, Faison's office won a President's Quality Award, the highest recognition for management excellence, after she developed a system that eliminated $2 billion in improper payments. In the last fiscal year, the total reduction was estimated at $38 million.

Like many federal employees, Faison was unsurprised and even accepting about the impending pay freeze.

"At the end of the day, no matter what my pay is, I'm going to do what's needed," said Faison, 39, who lives in Accokeek.

Her base salary is $136,000, and she received two performance awards this year totaling $2,745. She said she works 12 to 14 hours a day and could raise her pay to between $150,000 and $160,000 by leaving the government to work for a for-profit housing consulting firm.

"I've been approached by several folks, but I'm just not willing," Faison said. "I find greater satisfaction in impacting the government rather than the private sector."

However, Faison said she found it "really disturbing" how the banking industry has been coddled since the 2008 financial crisis.

"This is an example of a scenario where performance is really not in alignment with pay," she said. "The banking industry wrote a lot of bad loans that they knew were bad loans. They're still charging outrageous interest rates and cutting consumers' credit lines. And yet they've gotten money hand over fist from the government."

Faison's views were typical of those of other federal workers I interviewed.

"I think all Americans should be willing to sacrifice and not just some of us," said Tim Shamble, who represents about 800 broadcasters and journalists at Voice of America as president of Local 1812 of the American Federation of Government Employees.

"I'm sure the new Congress will be happy to go along with the pay freeze for us middle-class public service employees, but I bet you any money they don't go after corporate CEOs, or Wall Street bankers or hedge fund operators," Shamble said.

Average salary for workers in his unit is between $74,000 and $97,333, depending on experience.

Of course Wall Street pay depends on private companies' profitability, whereas government workers' salaries are affected by concern over the national debt. However, given that taxpayers anted up to save the financial industry, we have a right to insist that it adjust its incentives to encourage healthy, long-term growth rather than quickie profits. Congress didn't press the pay issue when it passed the Dodd-Frank Act but left it to regulators, who are studying how to proceed.

"Very little of any real import has changed; on balance, pay practices have worsened," said a study of the compensation practices at the six largest U.S. banks issued this week by the Council of Institutional Investors.

If Obama and Congress are going to force government workers to give up a few thousands dollars in raises to stanch the government's red ink, then they at least ought to make sure the high-fliers on Wall Street don't screw up the economy again in return for the hundreds of thousands that they're pulling in.

I discuss local issues at 8:51 a.m. Friday on WAMU (88.5 FM).

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