Guiliani Defends Giving Billions of (Taxpayer) Bailout Dollars in Exec. Bonuses

[Lunar]

Lunar's question -- does a $1,000,000 executive bonus really affect consumption THAT much?  Or is he looking for people to help bankroll a future campaign?

NEW YORK (CNN) -- Bonuses for Wall Street fat cats are easy political fodder in uncertain economic times, but former New York Mayor Rudy Giuliani said Friday cutting corporate bonuses means slashing jobs in the Big Apple.

"If you somehow take that bonus out of the economy, it really will create unemployment," he said on CNN's "American Morning." "It means less spending in restaurants, less spending in department stores, so everything has an impact."

President Obama admonished corporate America on Thursday after the New York comptroller reported that Wall Street bankers received $18.4 billion in bonuses in 2008.

"This is the height of irresponsibility. It is shameful," the president said.

These are the same institutions "teetering on collapse" and asking taxpayers to bail them out while taxpayers are dealing with their own tumultuous finances, he said.

Last year, Congress passed a $700 billion bailout for financial institutions, and an $819 billion economic stimulus package is presently making its way through the Senate after garnering House approval Wednesday.

"There will be time for [bankers] to make profits, and there will be time for them to get bonuses -- now is not that time," Obama said of the bonuses, which were about equal to those of 2004.

When Giuliani ran for the GOP presidential nomination, pundits said his stances on issues like abortion rights separated him from self-proclaimed Reagan Republicans in the field. Not up for debate is Giuliani's alignment with the 40th president on "trickle-down economics," the theory that keeping the rich wealthy creates jobs and solvency for the lower classes.

"Those bonuses, if they are reversed, are going to cause unemployment in New York," the self-described fiscal conservative said. "I remember when I was mayor, one of the ways in which you determine New York City's budget, tax revenue is Wall Street bonuses.

"Wall Street has $1 billion, $2 billion in bonuses, the city had a deficit. Wall Street has $15 billion to $20 billion, New York City had a $2 billion, $3 billion surplus, and it's because that money gets spent. That money goes directly into the economy. First of all, it gets taxed as income. Secondly, it gets taxes again when somebody buys something with it."

In announcing the Wall Street bonuses Wednesday, State Comptroller Thomas DiNapoli said the $18.4 billion represented a stark dip from 2007's bonuses, which totaled $32.9 billion

"A 44 percent decline in the bonus pool will ripple through the regional economy and the state and the city will lose major tax revenues," DiNapoli said in a statement. "The securities industry has already lost tens of thousands of jobs and the industry is still continuing to write off toxic assets. It's painfully obvious that 2009 will probably be another difficult year for the industry."

While city incomes taxes are common in Iowa, Indiana, Maryland, Michigan, Ohio and Pennsylvania, they are an anomaly in most parts of the country, according to a 2008 report by Tax Foundation, a Washington-based think tank. New York City and Yonkers are the only cities levying income taxes in New York state, the foundation said.

New York Mayor Michael Bloomberg said Friday the city needs to close a projected $4 billion budget gap in fiscal year 2010. Skyrocketing unemployment is partially to blame, he said, projecting that 300,000 jobs will be lost in the city by the second quarter of 2010.

Of those, 46,000 job losses are expected to have come from Wall Street, a particularly devastating blow to the economy because those in the financial community tend to pay double or triple the taxes paid by employees in other industries, he said.

"When Wall Street catches a cold, it's a very serious illness to us," Bloomberg said.

In 2008, New York had $41.2 billion in expenses and $42.8 billion in revenue, he said. Projections suggest that in 2010 the city will have $43.4 billion in expenses but only $37.1 billion in revenue.

Bloomberg proposed several measures, including an increase in the sales tax from 8.375 percent to 8.75 percent, in an effort to balance the budget. Bloomberg has already slashed $3.7 billion in spending since last year, an administration official said.

In recent months, the mayor has tried to shore up city finances by raising hotel taxes and pulling back a property tax cut set to expire this summer, the official said.

[cinyc]

Guiliani is absolutely correct.  And every politician who demagogues this issue should 1) take a 25% pay cut (like Wall Street workers, on average, did, since their bonuses are really deferred merit-based compensation and a substantial part of their yearly salary) and 2) return every single contribution received from Wall Street workers.  Otherwise, they are complete and utter hypocrites - 100% of their salary comes from public funds.

Despite the hype, the bonus money isn't really coming from bailout dollars anyway.

[Sam Spade]

Mathematically correct, though I certainly don't defend it or support it one bit (so we are in huge disagreement there).  Without the tax money from these people, NYC will suffer quite badly.

The same thing mathematically occurs wrt to the federal government, btw, which is actually more amusing.

[© tweed]

my current display name is relevant to this type of thing... not all (or maybe not even most) of CEO bonuses will necessarily be put back into the economy... Warren Buffett still buys groceries like we all do.  he might spend more on them than do we, but not that much more; he's just one man.  I doubt any CEOs would have decided to eat in a handful of times if the bailout(s) did more to regulate their salaries.  the extra whatever in disposable income isn't meaningful to (most of) them

[○∙◄☻¥tπ[╪AV┼cVê└]

Guiliani is a reverse Robin Hood.

[Nicodeme Depape]

So much for me supporting his gubernatorial bid.

[Lunar]

I mean, it's not THAT bad.  The money ends up in the stock market instead of spent.

The marginal propensity to consume at that level of income is obviously very low and I think Rudy's argument that somehow these bonuses are supporting the local restaurants and stuff is bogus.

What is *BAD* is the publicity and the company.  Companies that are struggling to survive probably shouldn't spend an aggregate ~20 billion of that on executive bonuses.  In addition, it ruins the image of the company and the government system for them to be so explicitly in-your-face in the public's eye.

[Nicodeme Depape]

How about auto workers take a 44% pay cut?

Are you kidding me? Oh excuse me! They may actually have to downgrade from weekly trips to their summer vacation homes in Bermuda, to every two weeks.

DEARY ME! I feel so bad for them.

[Lunar]

It doesn't mean much to take a pay cut if you still give out $18 billion in yearly bonuses

[Nicodeme Depape]

How about auto workers take a 44% pay cut?

Are you kidding me? Oh excuse me! They may actually have to downgrade from weekly trips to their summer vacation homes in Bermuda, to every two weeks.

DEARY ME! I feel so bad for them.

These pay cuts are for everybody on Wall Street, smartass, not just the handful of executives.  Why are other companies that are bailed out still expected to pay their employees in full, yet it's a travesty that some are still paying part of it?

It's really quite pitiful to see people with a negligible grasp of the economy or even simple issues affecting our society try to carry on meaningful conversation.  Word of advice, you come off sounding like a douchebag when you try to sound all cool hating on the Wall Street meanies.

I actually thought you meant that we should transfer it onto the auto workers, or that it was just as bad as cutting CEO pay.
Any way. I simply think that how much CEO's earn is insane, and am wildly in support of Claire McCaskill's bill to top the pay at the Presidents pay, or 400,000. CEO's hardly make the company, I remember watching a show about a business executive who was bashing high CEO pay, saying he brought in his own guys when he took over small businesses, paid them less, and they did just as good.

[cinyc]

How about auto workers take a 44% pay cut?

Are you kidding me? Oh excuse me! They may actually have to downgrade from weekly trips to their summer vacation homes in Bermuda, to every two weeks.

DEARY ME! I feel so bad for them.

If you think senior executives were the ones who were receiving these bonuses, you are sadly mistaken.  Many bank senior executives didn't take any bonus this year.   The bonuses in question are really deferred merit-based compensation for more junior people, including everyone from traders to secretaries.   Many of those people work for bank units that are still very profitable, despite losses elsewhere due to the mistakes of others.   And given that the year-end deferred merit-based compensation is a large part of their salary, many of them likely took a 25% or more pay cut.  When our politicians vote to cut their salaries by 25% and return any campaign contributions from Wall Street workers, they can criticize.  Until then, they can criticize all they want, but as far as I'm concerned, they are huge hypocrites.

Any cap on compensation will have unintended consequences.  For example, we have an employer-based health care insurance system in part because of the price and wage caps from World War II.  SUV's became big sellers because they were a way to skirt CAFE regulations and give consumers what they wanted - large vehicles.  And there will likely be a brain drain of top talent from banks to hedge and private equity funds if TARP-taking bank salaries are capped.  Be careful what you wish for in the name of class envy.

[○∙◄☻¥tπ[╪AV┼cVê└]

So much for me supporting his gubernatorial bid.

Why was someone as economically liberal as you considering supporting someone who refused to meet with some farmers because they weren't millionaires?

[2952-0-0]

Will the bonuses be reduced to $9.11?

[Lunar]

You must be logged in to read this quote.

Will the bonuses be reduced to $9.11?

maybe to the 9.11 to the 9.11 power (4.28987948 × 10^79)

[Filuwaúrdjan]

Giuliani defending the indefensible is hardly newsworthy.

[Brittain33]

Guiliani is absolutely correct.  And every politician who demagogues this issue should 1) take a 25% pay cut (like Wall Street workers, on average, did, since their bonuses are really deferred merit-based compensation and a substantial part of their yearly salary)

Many of us in the non-financial economy DID take pay cuts or lose our bonuses or lose our jobs, even when our companies remained profitable. If these guys' businesses made losses or went under, or took money from the Feds damn straight they should expect a pay cut! What kind of socialism do you espouse where their failure should be rewarded with more bonus money because "they're used to making that much money"?

If the companies structured their compensation to include bonuses, it was done for a reason. It is nonsensical to say the bonuses are really salary. If they were salary, they would have been made salary, but of course companies wanted the freedom to cut back. As they should have to now, having lost huge amounts of money.

[Brittain33]

These pay cuts are for everybody on Wall Street, smartass, not just the handful of executives.  Why are other companies that are bailed out still expected to pay their employees in full, yet it's a travesty that some are still paying part of it?

It's really quite pitiful to see people with a negligible grasp of the economy or even simple issues affecting our society try to carry on meaningful conversation.  Word of advice, you come off sounding like a douchebag when you try to sound all cool hating on the Wall Street meanies.

I really think that being in college, you may have been insulated from the effect this crisis has had on everyone even outside the financial industry. Every company is freezing salaries, cutting bonuses, or having layoffs. The low-ranking people in the financial industry may be like the rest of us in not earning eight-figure salaries--but they have no right to be immune from the same cuts hitting people in marketing, manufacturing, sales, or publishing.

[Brittain33]

And that's exactly what I'm saying.  They took their cuts, huge cuts, bigger cuts than anyone else.  And what happens?  They get crucified for not taking bigger cuts while the most absurd companies of all are still paying their employees in full.  I'm not insulated, my entire life revolves around the financial industry.  I'm fully aware of what's occurring.

But I don't think they took bigger cuts than anyone else, except in so far as the salaries for some of them were hugely inflated by the paper profits they made in the last few years through speculation and bubble-inflating. People who were in the financial industry in the last few years lucked into a lottery, the same way tech industry people did in the late 1990s. I understand that makes the comedown harder, but it doesn't mean they should be insulated from the cutbacks everyone has to deal with.

Yes, it's harder to go from $180,000 a year to $30,000 a year than it is to go from $70,000 to $30,000 a year. But if the employer of the first person not only isn't creating wealth, but is actively draining it away from the rest of the economy and made big losses this year, and the only reason they are still solvent is because the government has backed them up in a way it would never back up industries elsewhere, sorry, SUCK IT UP like the rest of us. The fact you used to be rich doesn't mean you get a pass on the same difficulties affecting everyone else.

The high pay those guys were making for so many years reflected the risk implied in their positions. People in the financial industry seem to have a really hard time accepting that the rewards of high risk also imply losses when the risk cuts you off. They're forcing the losses on us and taking their bonuses that they haven't earned.

I also have no patience for "I worked really hard, I deserve my $300,000 bonus." I work with a lot of good people in publishing who worked their asses off, completed their projects, and then got laid off because of business conditions. If you think the government owes you something for your labor that the market itself won't compensate, that's the definition of socialism.

[○∙◄☻¥tπ[╪AV┼cVê└]

You must be logged in to read this quote.

Will the bonuses be reduced to $9.11?

maybe to the 9.11 to the 9.11 power (4.28987948 × 10^79)

Incorrect math

[cinyc]

Guiliani is absolutely correct.  And every politician who demagogues this issue should 1) take a 25% pay cut (like Wall Street workers, on average, did, since their bonuses are really deferred merit-based compensation and a substantial part of their yearly salary)

Many of us in the non-financial economy DID take pay cuts or lose our bonuses or lose our jobs, even when our companies remained profitable. If these guys' businesses made losses or went under, or took money from the Feds damn straight they should expect a pay cut! What kind of socialism do you espouse where their failure should be rewarded with more bonus money because "they're used to making that much money"?

If the companies structured their compensation to include bonuses, it was done for a reason. It is nonsensical to say the bonuses are really salary. If they were salary, they would have been made salary, but of course companies wanted the freedom to cut back. As they should have to now, having lost huge amounts of money.

Yeah - it was done for a reason - to give workers incentive to make the bank money.  It's contingent salary - that in some cases might even be partially guaranteed.  Bonuses are usually partially based on how well a worker and his unit performed last year.  Many units within banks made profits last year.  And Wall Street workers DID take a pay cut and lose their jobs - infinitely more of a pay cut than the idiot politicians who demagogue this issue, and much more of a pay cut than UAW workers at car companies that are relying on government help.  Very few were rewarded with more bonus money than 2007. 

The idiot politicians are also falsely assuming that every dollar of the $18 bonuses went to workers at companies who took government money.  Not every Wall Street company is on the public dole.

[War on Want]

How about auto workers take a 44% pay cut?

Because it really wouldn't accomplish anything. I mean it might give our auto companies a chance of surviving but as of this point I really doubt they can compete with Japanese companies short of a huge restructuring. What I am saying is that worker pay and compensation doesn't have much to do with our auto companies failures, it is that our products are actually worse in quality in almost all areas.

[Matt Damon™]

The Financial industry is an industry of parasites, thugs and wreckers.

[True Federalist (진정한 연방 주의자)]

You must be logged in to read this quote.

Will the bonuses be reduced to $9.11?

maybe to the 9.11 to the 9.11 power (4.28987948 × 10^79)

Incorrect math

True.  That's (9.11^9.11)^9.11

[Filuwaúrdjan]

Yeah - it was done for a reason - to give workers incentive to make the bank money.

That worked out well!

[Lunar]

You must be logged in to read this quote.

Will the bonuses be reduced to $9.11?

maybe to the 9.11 to the 9.11 power (4.28987948 × 10^79)

Incorrect math

True.  That's (9.11^9.11)^9.11

That's what I was doing, hence the first "to"