Two national political figures recently made statements about the pay practices of the big banks that did so much to create the current economic crisis. Can you tell which one was made by Barack Obama and which came from the mouth of Sarah Palin at the recent Tea Party convention?
Comment A: “While people on main street look for jobs, people on Wall Street, they’re collecting billions and billions in your bailout bonuses. Among the top 17 companies that received your bailout money, 92 percent of the senior officers and directors, they still have their good jobs. And everyday Americans are wondering, where are the consequences for them helping to get us into this worst economic situation since the great depression? Where are the consequences?”
Comment B (responding to a question about the $9 million in compensation received by Lloyd Blankfein of Goldman Sachs and the $17 million received by Jamie Dimon of JPMorgan Chase): “I know both those guys. They are very savvy businessmen. And I, like most of the American people, don’t begrudge people success or wealth. That is part of the free-market system…$17 million is an extraordinary amount of money. Of course, there are some baseball players who are making more than that and don’t get to the World Series either, so I am shocked by that as well… I guess the main principle we want to promote is…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.”
Sad to say, the lame second statement, which sounds like something composed by a not particularly imaginative flack for the financial industry, was made by President Obama in an interview with Bloomberg BusinessWeek. His comments caused such an initial uproar that the Administration’s Deputy Communications Director Jen Psaki felt compelled to put up a post on the White House blog to try to clear up any “confusion” about what the standard bearer of the Democratic Party was saying.
If Psaki’s aim was to repair Obama’s progressive bona fides, she actually made matters worse by reiterating her boss’s previous comments about the glories of the free market and the wonders of individual wealth.
What is going on here? At a time when the public is outraged at the behavior of Big Finance — and when even a dunce such as Palin realizes she must condemn Wall Street greed — Obama decides to soft-pedal his criticism. Rather than acknowledging the damage done by the likes of Blankfein, he treats the matter as an intellectual exercise of fine-tuning pay to match performance. Wall Street pay is well-aligned with performance. The problem is that what’s been performed – the bad loans and toxic assets in the period leading up to the crisis and the stingy lending and bailout abuses in its aftermath – is good for the banks but disastrous for the economy as a whole.
Much of the Obama interview is an embarrassing obeisance to corporate power. The President seems to be apologizing for giving even the slightest the impression that he is anti-business. “Everything we have done over the last year,” he said, “and everything we intend to do over the next several years, I think is going to put American business on a stronger footing.” Asked why he does not have a “major CEO” in his cabinet, Obama replies: “We want and need more input from the corporate community.”
And he gushes over CEOs he admires. He lauds Fred Smith of FedEx as “thoughtful” and says that “sitting down and talking to him was incredibly productive and helps inform how we shape policy.” Hopefully, that does not include labor policy, given FedEx’s resistance to unionization and its abuse of the independent contractor classification. According to BusinessWeek, Obama had a staffer send a follow-up e-mail with a list of his other favorite CEOs, including Ivan Seidenberg of Verizon, another foe of unions.
A generous interpretation of Obama’s BusinessWeek interview is that he is simply trying to counteract overheated right-wing rhetoric depicting him as some kind of socialist. Yet he doesn’t seem to feel the same discomfort about the fact that, as Obama admits in the interview: “On the left we are perceived as being in the pockets of Big Business.”
He seems to regard that image, based on his mostly timorous approach to matters such as healthcare and financial reform, as a political benefit. During normal times in laissez-faire America, that might be the case. Yet this is an era in which an endless series of scandals and misbehavior have left the legitimacy of big business in tatters. Kowtowing to the corporate elite is bad politics and bad policy.
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