President Obama on Thursday scolded Wall Street bankers who received millions of dollars in bonuses last year, calling the payouts “shameful” and chiding the executives for a lack of personal responsibility at a precarious time for the nation's economy.
“There will be time for them to make profits, and there will be time for them to get bonuses,” Obama said. “Now's not that time. And that's a message that I intend to send directly to them.”
Obama's comments came on the same day the Democratic chairman of the Senate Banking Committee threatened to bring before his committee any Wall Street executives who take big bonuses after their firms are propped up with public money.
“Whether it was used directly or indirectly, this infuriates the American people and rightly so,” said Sen. Chris Dodd, D-Conn. “So I say to anyone else who does it: If you do it, I'm going to bring you before the committee.”
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The president said he was reacting to a report about Wall Street executives who had given themselves almost $20 billion in bonuses in 2008, the same amount they received collectively during the much more bullish 2004.
The article was based on a report by the New York state comptroller's office that said last year's total of Wall Street bonuses was the sixth-highest ever, despite the firms' poor economic performance.
Obama's comments also follow a report last week that former Merrill Lynch CEO John Thain speeded up bonuses before Bank of America bought the brokerage firm Jan. 1.
“Part of what we are going to need is for folks on Wall Street, who are asking for help, to show some restraint and show some discipline and show some sense of responsibility,” Obama said as he ended a private meeting with Treasury Secretary Timothy Geithner.
“The American people understand that we've got a big hole that we've got to dig ourselves out of,” Obama said. “But they don't like that people are digging a bigger hole even as they are being asked to fill it up.”
The president's strong words overshadowed the other part of his message, that he wants to roll out new plans to regulate Wall Street and get more credit flowing to consumers again. The president considers such steps to work in tandem with the economic stimulus measures unfolding in Congress.
One idea the administration is considering is the creation of a “bad bank” that could take over soured debt, like defaulting mortgages, that have corroded the balance sheets of banks and helped choke off lending. The president did not discuss that proposal or any others.
The administration may seek approval from Congress for another round of money, perhaps hundreds of billions of dollars, to help banks get out of trouble and get credit flowing again. But in a CNBC interview, Vice President Joe Biden said any moves depend first on how the remaining $350 billion in financial-sector bailout money is spent.
“It's got to be transparent, it's got to be accountable,” Biden said. “Once we do that and see whether or not we can get this system kick-started, the credit system flowing more, that's when we'll make the judgment whether or not anything else is necessary.”
Obama had already been critical of executives who take big bonuses and companies that make big purchases. Last week, he directed Geithner to call Citigroup to express the administration's displeasure at the struggling company's impending purchase of a $50 million jet.
“We shouldn't have to do that, because they should know better,” Obama said. “We will continue to send that message loud and clear.”
A day earlier, however, Obama passed up a chance to send that message publicly.
The president stood with 13 CEOs in the East Room of the White House on Wednesday to push for congressional passage of his stimulus package. He talked broadly about personal responsibility but did not specifically refer to excessive pay, even though several of the executives have made many millions of dollars a year.
Samuel Palmisano, chief executive of IBM, made $24.35 million in 2007, the last year for which numbers were compiled by Forbes magazine. That included $5.8 million in bonuses. David Cote, the CEO of Honeywell International, earned $6.23 million, including $4.2 million in bonuses.
“Part of what led our economy to this perilous moment was a sense of irresponsibility that prevailed from Wall Street to Washington,” he said after the closed-door meeting. “That's why I called for a new era of responsibility in my inaugural address last week.”
Obama aides said the president did mention the Citigroup jet purchase to the group and talked about the need for corporate responsibility.
“The president doesn't meet with CEOs where he doesn't talk about responsibility,” press secretary Robert Gibbs said in his daily briefing with reporters. “They specifically talked about the jet purchase.” The Associated Press contributed.