Wall Street, big bonuses, and the taxpayer

There's an interesting article in Bloomberg this morning about Wall Street bonuses and how they are viewed by the public.

The timing couldn't be worse for those looking to take home a few hundred grand in year-end cheer (or, in some cases, much, much more) at a time when the economic pain is mounting for many Americans with the consensus view being that a good deal of that pain has its origins in New York City.

In fact, many Americans seem to think there should be an entirely new standard set for Wall Street bonuses - zero.

Bonuses for Wall Street Should Go to Zero, U.S. Taxpayers Say
U.S. taxpayers, who feel they own a stake in Wall Street after funding a $700 billion bailout for the industry, don't want executives' bonuses reduced. They want them eliminated.

``I may not understand everything, but I do understand common sense, and when you lend money to someone, you don't want to see them at a new-car dealer the next day,'' said Ken Karlson, a 61-year-old Vietnam veteran and freelance marketer in Wheaton, Illinois. ``The bailout money shouldn't have been given to them in the first place.''

Compensation at Goldman Sachs Group Inc., Morgan Stanley, Citigroup Inc. and the six other banks that received the first $125 billion of the federal funds is under scrutiny by lawmakers, including Rep. Henry Waxman, a California Democrat, and New York Attorney General Andrew Cuomo, also a Democrat. President-elect Barack Obama cited the program at his first news conference on Nov. 7, saying it will be reviewed to make sure it's ``not unduly rewarding the management of financial firms receiving government assistance.''

While year-end rewards are likely to decline with a drop in revenue this year, industry veterans say that eliminating them risks driving away the firms' most productive workers.

``There are instances where bonuses are justified, deserved, and in the best interests of the investment bank involved,'' said Dan Lufkin, a co-founder of Donaldson Lufkin & Jenrette Inc., the investment bank acquired by Credit Suisse Group AG in 2000. ``Your very best people are people you want to hold, and your very best people will have opportunities even in this environment to transfer allegiance.''

The risk of "driving away the firms' most productive workers" is going to be a tough sell in other parts of the country.

Considering the fruits of their labor as things look today, maybe all the bright minds that have flocked to Wall Street over the last ten or fifteen years to become such productive workers should be driven away.

Jim Rogers probably had it right when he commented a few months ago about there being something fundamentally wrong with the idea of so many successful twenty-somethings on Wall Street buying Maseratis.

Later in the report, former SEC Chairman Arthur Levitt commented, "Bonuses and severance packages will obsess the American public'' and become "a humiliation and embarrassment".

He's got that right - from the sound of the comments in this story, before you know it, the American public will be ready to storm the castle.