One year after the global banking system collapsed the Institute forPolicy Studies (IPS) 16th Annual Executive Excess report — “America’s Bailout Barons” — shows that the perverse system of executive compensation whichcontributed to the financial meltdown is still thriving for top bailout recipients.
President Obama had it right in April when he delivered his “economicSermon on the Mount ” and said, “We cannot rebuild this economy on the same pile of sand. Wemust build our house upon a rock.” And, as the IPS report notes, evenearlier in the year Obama spoke out against excessive executivecompensation, saying, “In order to restore our financial system, we’ve got to restore trust. And in order to restore trust, we’ve got to make certain that taxpayer funds are not subsidizing excessive compensation packages on WallStreet.”
But the fact is we haven’t learned — or haven’t acted on — the lessonswe must heed if we’re going to build a more just, sustainable economythat works for the real economy rather than Wall Street. The IPSreport focuses on the twenty banks that have received the most bailout moneyfrom the federal government and shows that the banks and bankers arestill acting and being rewarded as if they are Masters of the universe — abetted by a government that is failing to take on the status quo.
Sure, some steps have been taken to rein in compensation for TARPrecipients — but they are timid ones. And IPS’s valuable report makesclear, “Lobbying armies from corporate and financial trade associationsare energetically doing battle behind the scenes to keep even modestchanges in pay rules off the legislative table.”
As a result historic inequality in pay is still prevalent and theneo-Gilded Age tycoons are raking it in. According to the report, ageneration ago top execs rarely earned more than thirty to forty times the payof the average American worker. But now top execs make an average of319 times more than the typical worker. For the top twenty financialindustry execs the divide is even greater — 436 times more than theaverage worker in 2008. In the past three years, the top five execs at the twenty US financial firms receiving the most Bailout Bucks took home paypackages worth a staggering $3.2 billion — an average of $32 millioneach. In 2008 those cats averaged nearly $14 million each–eventhough their twenty firms laid off more than 160,000 people since January ofthat year.
While a new and smart economic populism has fueled plenty of talk aboutcompensation reform, good proposals haven’t been seized. SenatorsBernie Sanders and Claire McCaskill tried to cap compensation foremployees of bailed-out firms so that it wouldn’t exceed that of thePresident of the US, $400,000. The amendment was passed but thenstripped in conference committee. In April, Progressive Caucus memberand Chief Deputy Whip Jan Schakowsky introduced the Patriot CorporationsAct to extend tax breaks and contracting preferences to companies thatmeet certain benchmarks, including not compensating any executive atmore than 100 times the income of the company’s lowest-paid worker. That bill has been referred to committee. Hedge fund managers arestill only paying 15 percent capital gains rate on the profit share they get for managing investment funds rather than the 35 percent income tax they should pay. And unlimited amounts of executive compensation are still shielded in deferredaccounts–at an annual cost of $80.6 billion to taxpayers–incontrast to the limits placed on income deferred by normal taxpayers via401(k) plans.
There is no shortage of opportunities to curb this unjust andunproductive growth in unequal pay. As IPS senior scholar andNation contributor Chuck Collins put it, “Public officials in Congress and the White House hold the pinthat could pop the executive pay bubble. They have so far failed to useit.” It’s time to use it.