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Telling Wall Street that "We want our money back, and we're going to get it," President proposes a fee on the the largest financial firms that will be in place until the American people are fully repaid for their assistance - - Jan 14, 2010
Big US banks and securities firms are set to pay their staffs a record $145 billion for 2009 according to The Wall Street Journal. An analysis by the Journal shows that executives, traders, investment bankers, money managers and others at 38 top financial companies can expect to earn nearly 18% more than they did last year - - and above the record year of 2007.
The newspaper's conclusions are based on an examination of securities filings for the first nine months of 2009 and revenue estimates through year-end.
On Thursday, President Obama anticipating Wall Street executives' reaction to his proposed new fees on major banks, delivered a simple message:"Instead of sending a phalanx of lobbyists to fight this proposal, or employing an army of lawyers and accountants to help evade the fee, I suggest you might want to consider simply meeting your responsibilities."
The President announced a 10-year $90 billion bank tax to be borne by the largest firms with more than $50 billion in assets - - 60% of the revenue will come from the 10 largest financial firms.
Analysts have estimated the tax could consume about 5% of this year's profits.
President Obama said: "We cannot go back to business as usual. And when we see reports of firms once again engaging in risky bets to reap quick rewards, when we see a return to compensation practices that seem not to reflect what the country has been through, all that looks like business as usual to me. The financial industry has even launched a massive lobbying campaign, locking arms with the opposition party, to stand in the way of reforms to prevent another crisis. That, too, unfortunately, is business as usual. And we're already hearing a hue and cry from Wall Street suggesting that this proposed fee is not only unwelcome but unfair -- that by some twisted logic it is more appropriate for the American people to bear the costs of the bailout, rather than the industry that benefited from it, even though these executives are out there giving themselves huge bonuses."
The Wall Street Journal says that the surge in bonuses comes barely a year after the government bailed out the US financial system amid the worst economic crisis in generations. This year major US banks and securities firms are poised to pay their employees a record amount in compensation and benefits - - about $145.54 billion, according to the Journal's analysis. The firms in the analysis are on pace to report $450 billion in revenue, a 25% increase from 2007. Overall, pay is on pace to be equivalent to about 32% of revenue, a decline from 40% in 2008.
Total compensation and benefits at the publicly traded firms analyzed by the Journal are on track to increase 18% from last year's $123.37 billion, and 6% from 2007's $137.23 billion payout. This year, employees at the companies will earn an estimated $148,877 on average, up almost $2,500 from 2007 levels.
President Obama's announcement:
The Journal said many firms reiterated that they need competitive pay packages to keep from losing employees to non-U.S. companies, private-equity firms and hedge funds.
While Wall Street firms such as Goldman and Morgan Stanley have historically set aside about 50% of revenue for compensation, the rate is lower at commercial banks, which include large numbers of less highly paid employees, such as tellers and other staff in bank branches that the Wall Street firms don't necessarily have.
Discussing the damage done to America's trust of the financial system, with David Goodfriend, former Clinton White House Staffer; Brian Gardner, Keefe, Bruyette & Woods; Mark Calabria, CATO and CNBC's John Harwood: