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Wall Street pay?

New York City securities industry firms paid out a total of $137 billion in employee bonuses from 2002 to 2007, according to figures compiled by the New York State Office of the Comptroller. Let's break that down: Wall Street honchos earned a bonus of $9.8 billion in 2002, $15.8 billion in 2003, $18.6 billion in 2004, $25.7 billion in 2005, $33.9 billion in 2006, and $33.2 billion in 2007.

Those years were the heyday of the hedge fund pirate, the private equity buccaneer, the 9-and 10-figure-salary quant jock, and other financial creatures who created all kinds of complex securities and highly leveraged transactions, many of which are now coming a cropper, from LBOs to CDOs. What a deal. Financiers preached the free-market gospel and pocketed unheard-of sums of money--yet when times got tough, they called for a government bailout. So my question is: Why shouldn't the taxpayer, now that they are bailing out Wall Street, ask for the $137 billion back?

Now, the bigger right now is about limits on future compensation. The financial services industry opposes any limits. Here's the money quote from today's New York Times:

But Wall Street, its lobbyists and trade groups are waging a feverish lobbying campaign to try to fight compensation curbs. Pay restrictions, they say, would sap incentives to hard work and innovation, and hurt the financial sector and the American economy.

"We support the bill, but we are opposed to provisions on executive pay," said Scott Talbott, senior vice president for government affairs at the Financial Services Roundtable, a trade group. "It is not appropriate for government to be setting the salaries of executives."

That's fine if that's the industry's position. But then it's "not appropriate" for the taxpayer to fund a $700 billion bail out, either.

About the author

Chris Farrell is the economics editor of Marketplace Money.
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Why can't Washington pass tax legislation to greatly increase taxes on income and capital gains for those earning over 7 figures in 2007? That would seem to be the most fair and democratic way for taxpayers to foot the bill for this bailout. Those who benefitted most from the actions of Wall Street would be paying back some, if not most, of their gains.

I'm a neophyte on the economics front, but this whole bailout/taxpayer loan seems disingenuous at best. Maybe it's time we swallowed the bitter pill that our economy will only be healthy once our household budgets themselves are healthy. The average American carries somewhere in the neighborhood of $8500 debt? Ouch. Wasn't the Government complicit in the mortgage industry's complex loan schemes? I think there's enough blame to go around and that by allowing the market to "bottom out" may be the adjustment we need to deflate some egos on Wall Street and on Capitol Hill.

I totally agree with Troy's comments on household debt. But I also find it hard to pass blame on those in debt since they are just following the government's lead.

I would argue that until Washington cleans up their national debt and budget deficit issues, we can't expect the average citizen to.

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