Isn't that rich? The bonus controversy of 2009

By Frank Ahrens

Probably no issue in the business world raised more anger in 2009 than Wall Street bonuses. Things such as bailouts to banks and automakers, the budget-busting stimulus package, and programs including "Cash for Clunkers" made many unhappy, but each had its defenders. It's harder to find anyone who favored continuing the long-held Wall Street practice of giving big end-of-year bonuses -- especially at banks that received government handouts.

The issue was emotionally loaded because it struck at the heart of broader debates over wealth, fairness, the role of government and the nature of capitalism. And what probably infuriated people most was their deep-down belief that, in the end, Wall Street wins. That seemed confirmed by an October report in the Wall Street Journal that said compensation at banks and securities firms was on pace to hit a record high in 2009, despite government rhetoric to the contrary.

There was also a bit of kabuki -- politicians beating up on bankers, but only to a point, knowing they would have to turn to them in the future for campaign donations.

So now, during bonus season, we look back at some of the key statements from the Great Bonus Controversy of 2009. The gap between what was said and what was meant was often pretty big -- as big as a Wall Street bonus.

Larry Summers

President Obama's top economic adviser, speaking to ABC News on March 15 about bonuses to AIG's Financial Products division:

What he said: "We are a country of law. There are contracts. The government cannot just abrogate contracts."

What he meant: "I am an appointed official, not a politician who can be voted out of office by people angry over the AIG bonuses."

Rep. Barney Frank (D-Mass.)

March 16, about AIG management:

What he said: "The federal government now is the 80 percent owner [of AIG]. These bonuses are going to people who screwed this thing up enormously. . . . Since the federal government . . . now essentially owns that company, maybe it's time to fire some people."

What he meant: "No translation necessary (as with anything Frank says)."

President Obama

March 18, as public ire over AIG bonuses grew:

What he said: "People are right to be angry. I'm angry."

What he meant: "I can be voted out of office by people angry over the AIG bonuses. Think about that the next time you open your mouth, Larry."

Kenneth Feinberg

Pay czar, on denying bonuses to AIG's Financial Products division, on Oct. 23 :

What he said: "The performance of AIG Financial Products has contributed significantly to the deterioration in AIG's financial health. Accordingly, [I have] determined that AIG's proposed compensation structures for these employees are inconsistent with the public interest."

What he meant: "AIG's Financial Products division nearly brought down the global economy, and you were seriously asking for bonuses? Are you high?"

Lloyd Blankfein

Goldman Sachs chief executive, responding to the Times of London about criticism of the firm's big bonuses, on Nov. 8

What he said: "He's "doing God's work."

What he meant: "It's a joke. Get it?"

Blankfein, days later, when announcing a multimillion-dollar PR program to help small businesses:

What he said: "I apologize."

What he meant: "Yeah, not so funny. My bad. [Pause.] By the way: We're still giving out bonuses."

Alistair Darling

British Chancellor of the Exchequer, announcing a 50 percent tax on bonuses over $40,000, on Dec. 9:

What he said: "There are some banks who still believe their priority is to pay substantial bonuses to their already highly paid staff."

What he meant: "There are some banks who still believe they are operating outside of government control. What ninnies!"

John Konstantinidis

Wall Street insurance broker, in the New York Times, on Jan. 30:

What he said: "My bonus is 'shameful' -- but I worked hard to get it. I'm a HENRY: High Earner but Not Rich Yet."

What he meant: "Come and get me, coppers! Bwahahahahaha!"

Frank Ahrens is a Washington Post business reporter. He blogs at washingtonpost.com/economywatch.

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