Lipinski Chastises Wall Street for Huge Bonuses Amid Record Unemployment01/15/2010
Cosponsors Bill to Impose 50 percent Tax on Big Bonuses at Major Banks
As big banks prepare to dole out seven- and eight-figure bonuses while millions of Americans struggle to find work, Congressman Dan Lipinski (IL-03) said today that Wall Street must repay in full the enormous debt it owes the American taxpayer.
“Frankly, I’m appalled by the prospect of Wall Street bankers receiving bonuses bigger than the lifetime earnings of many hard-working Americans,” Congressman Lipinski said. “These are the same banks and the same people that helped cause the implosion of the financial system and the worst recession in generations. And these are the same kinds of bonuses that inspired the quest for short-term profits without regard to the consequences. It’s partly thanks to the taxpayers that these institutions still exist, the people working there still have jobs, and they’re back to booking enormous profits.”
Congressman Lipinski is a cosponsor of The Wall Street Bonus Tax Act, H.R. 4426, which imposes a 50 percent tax on all bonus compensation over $50,000 at banks that were bailed out under the Troubled Asset Relief Program. Revenue from the tax would fund a low-interest lending program for healthy small businesses that are having trouble obtaining loans due to the credit crisis. The Small Business Administration would administer the program.
Today, The Wall Street Journal reported that pay at the top financial companies will be even higher for 2009 than for the record-setting year of 2007. Bloomberg News reports that analysts estimate Goldman Sachs, Morgan Stanley, and JPMorgan Chase’s investment bank may hand out $27.6 billion in bonuses. Average pay is expected to be $595,000 at Goldman Sachs, and we learned today the figure is $380,000 at JPMorgan Chase’s investment bank – with legions of bonuses expected to dwarf those figures. Even in 2008, more than 2,000 people at those two firms alone received bonuses of more than $1 million. Previously, Congressman Lipinski voted for bipartisan legislation to impose a 90 percent tax on bonuses for high earners at big banks receiving substantial bailout funds. Unfortunately, the bill died in the Senate.
On Thursday, President Obama proposed a fee on the biggest banks that would be collected until it has covered the total amount of the taxpayers’ losses under the Wall Street bailout, which Congressman Lipinski repeatedly voted against and has called for ending. Only banks with more than $50 billion in assets would be affected, and the fee would be based on banks’ liabilities, helping to discourage banks from becoming overleveraged and endangering the financial system. Congressman Lipinski is looking forward to learning more about this proposal, and is pleased to see the White House finally taking steps to make taxpayers whole. If big banks can afford to pay out billions in bonuses, they can afford to pay what they owe taxpayers for throwing them a lifeline when they were at risk of going under.
Some bailout recipients have repaid the taxpayer dollars that propped them up. But their debts go well beyond those sums because the loans helped them to survive the crisis and return to profitability now and in the future. In addition, big banks that require public assistance to weather financial storms of their own creation ought to face real consequences – otherwise they will have little incentive to avoid risky behavior.
“Every sign is that Wall Street banks have returned to business as usual, issuing multi-million dollar bonuses that encourage dangerous risk-taking, in the belief that they are too big to fail,” Congressman Lipinski said. “That puts our entire economy at risk, and it’s the middle class that winds up paying with lost jobs when traders’ massive bets go sour. We need to make sure the bankers understand something the rest of the country knows all too well, but that they seem to have forgotten: there’s no such thing as a free lunch.”
(January 15, 2010)