Belling the Cat

I read with great amusement – the nasty, cynical sort of amusement I always experience at times like these – the stories in the news about taxpayer outrage regarding the bonus structures some of the largest surviving financial institutions (including several of those bailed out with public money last year) are currently implementing. According to this story from ABC News six of the largest US banks have are planning to give their top managers $112 billion (or possibly even more) in year-end bonuses. This is causing a great deal of consternation in Washington, where Administration officials have been quoted as saying that it’s outrageous that the banks are going right back to business as usual after the buyout, and a great deal of anger and resentment across the country as people struggling to find work react to the story. So why am I laughing? Because it was obvious all along that this was going to happen…

The first thing to keep in mind about this story is that all of the banks in question have repaid their bailout money, and are therefore no longer under Federal control. So it’s not actually your money they are paying their chief executives, unless you’re one of the stockholders. The other thing to keep in mind is that while this may be tone-deaf, arrogant, or downright disgusting, it isn’t actually illegal. There are Federal laws about HOW a corporation can go about compensating its people, but not about how much; so long as the stockholders of these companies are okay with the use of those funds, there isn’t anything our government can do about it (a fact that several Administration officials seem to have forgotten). Perhaps even more to the point, there’s no clear evidence that these corporations are actually doing anything wrong…

Consider, for a moment, the possibility that these companies may be right when they say that these top officials are the best talent available, and that the companies’ performance will be even worse without those individuals running things. Personally, I can’t help thinking that a chimp, two hedgehogs and a slug could run a bank better than some of the idiots who are shortly to be receiving billion-dollar paydays, but I’ve been wrong before, and it’s certainly possible that these allegations are correct. In that case, allowing these key personnel to be snapped up by foreign financial institutions would be foolish, and using the $112 billion to pay bonuses with is only responsible management practice. Here again, it would be my preference to take the same funds and put them into small business loans, thus stimulating the economy, creating millions of new jobs, creating tens of millions of new banking customers who would then be able to pay the bank interest on car loans, credit cards bills and mortgages, and not making the rest of America angry enough to get out the pitchforks OR giving the banks’ political enemies the capital to permanently hamstring the entire industry with new regulations…

But that’s just me, and in any case it’s not important. The reason that none of this outrage or outcry is going to matter in the slightest is that none of the people crying out to express their outrage has any control whatsoever over the banks in question. As previously noted, none of these institutions are beholden to the Federal government any longer, so Administration officials can say whatever they want; the banks don’t have to listen. The same goes for the “person-on-the-street” out there in America. Unless you’re a stockholder, Bank of America and Goldman don’t care what you think of them; you can take your business elsewhere, but you’ll have trouble finding a bank that isn’t run exactly the same way. For the amount of good any of this is going to do, it might as well be a group of mice demanding that the cat wear a bell for their safety…

And even that doesn’t consider how closely this situation resembles the original Aesop’s Fable…