To the rich go the spoils

By BJ

One of the reasons that I'm highly skeptical that the economic downturn sparked by the credit crisis will be easily or quickly reversed is how poorly focused government rescue efforts have been to date. The US government has already shoveled out half of the $700 billion dollar TARP funds it's been allocated to various financial institutions, while putting taxpayers on the hook for trillions more in far-less-than-certain loan-backed assets. Just where that money has gone is apparently none of our business, though we do know where at least $1.6 billion went that the executives won't be feeling too bad:

Banks that are getting taxpayer bailouts awarded their top executives nearly $1.6 billion in salaries, bonuses, and other benefits last year, an Associated Press analysis reveals.

The rewards came even at banks where poor results last year foretold the economic crisis that sent them to Washington for a government rescue. Some trimmed their executive compensation due to lagging bank performance, but still forked over multimillion-dollar executive pay packages.

Benefits included cash bonuses, stock options, personal use of company jets and chauffeurs, home security, country club memberships and professional money management, the AP review of federal securities documents found.

The total amount given to nearly 600 executives would cover bailout costs for many of the 116 banks that have so far accepted tax dollars to boost their bottom lines.

Let's see, $1.6 billion divided by 600 works out to an average of over $2.6 million a piece in bonuses and benefits. And remember that this is for taxpayer money given to companies that were performing so badly that they threatened to take down the entire financial system. Clearly I've picked the wrong line of work.

Contrast the nearly complete lack of oversight and ideological resistance to even the most rudimentary of regulations to be placed on these companies receiving the benefit of Uncle Sam's largess with the battle over giving the automakers a fortieth of that sum. And note too that even there, despite some questions about the mode of transport used to come begging, there seems to be little concern regarding executive pay at the automakers, but the blue-collar assembly-line workers wages are suddenly of great import.

Almost too much has been written about the double standards of the bailouts, but it is worth reiterating. In the main, the bailout money is going to the very people who caused the crisis in the first place, produce little of value beyond now-toxic paper, and whose bank accounts are already quite well-padded indeed.

Meanwhile, consumer spending is dropping like a stone as the great unwashed who actually drive the larger economy and build products of real value continue to get short shrift in Washington. If a recovery is to come, it will be through the middle class, as it always has been, and that is where the stimulus funding should be directed, but it remains to be seen if that will actually happen.

Yesterday, a new group was looking for a bailout; commercial real estate investors. As the folks at Calculated Risk note:

Although the headline says "developers" this is really about property investors who bought commercial buildings at the price peak and are now underwater. But say the owners default and the properties are transferred to the bondholders - what is the risk to the economy? None.

With the automakers there was a concern that a large number of jobs would be lost without a bailout. How many jobs will be lost if the ownership of an office building or mall changes? Very few.

The argument for a bailout may not stand up to an analysis, but based on where the government has been spending the money so far, these investors probably don't have much to worry about. They would seem to fit right into the mould of rich people making stupid decisions that the feds just have to save them from the consequences of. And of course the money they use for that won't be available to be used for the kind of spending that would actually affect the economy as a whole.

I have some hope that the incoming administration will realize that, and at least be more competent and rational about how it spends the borrowed bailout and stimulus funds, but it remains to be seen if the spending will go to help the folks who build and buy the goods that make the economy hum along rather than to those whose only benefit to the economy as a whole is to ensure that their chauffeur gets paid.

Update: Edited to correct my piss-poor reading comprehension.

Comments

[Hyperion]

I'm a bit disappointed at this post.
Sure all us peons are outraged.
But in fact these assholes got bonuses LAST year.
(Which you do note, thanks.)
So 1.6 billion of TARP money did not go to them.

You can do better.
You usually do.

[BJ Bjornson]

Frak!

This is what happens when I get up too early. Thanks for the catch, Hyperion