Was Criticism Of 2008 Wall Street Bonuses Justified?

On Thursday, January 29, news outlets reported that President Obama had called the bonuses that some Wall Street financial firm executives received for their 2008 performances "shameful" and the "height of irresponsibility". The bonuses totaled $18.4 billion. His concern was that those firms should not have accepted federal money when they obviously had plenty of cash for bonuses. President Obama's concern, as outlined in the hald dozen accounts I read, seemed more than justified. My initial title for this Friday's blog was "Obama's Criticism of 2008 Wall Street Bonuses Justified". Then, I dug further.

I learned that the source of Obama's criticism was a report by the New York State Comptroller. So I went to the source. Comptroller Thomas DiNapoli's report, DiNapoli: Wall Street Bonuses Fell 44% in 2008, did mention that $18.4 billion was paid in bonuses. The title of the report itself, however, suggests that its focus was on the decrease. What wasn't even mentioned in most other news articles was that this amount represented a 44% decrease as compared to the 2007 bonuses.

Does this excuse the $18.4 billion that was paid out? Depends. Was some of that money paid to executives of firms that were profitable in 2008? That detail is missing. Was some of that money paid out under obligatory, written pre-existing agreements in the executives contracts? That detail is missing. Where is the investigative reporting in the media that should have uncovered these facts?

What is shameful is if some of that money was paid out to executives by boards of directors of firms that incurred large losses, and then begged the federal government for money. In those cases, those boards clearly did not exercise their fiduciary responsibilities.

The federal money that was loaned to these firms should have had specific, legally binding wording that would have prevented use of the money to pay unwarranted bonuses. That no such wording was included is the fault of the politicians who wrote, amended, and scrutinized the legislation. There is blame aplenty to go around.

It's said that when a deal sounds too good to be true, it probably is. The same applies to headlines and reports. If it sounds as simple as black and white, it probably isn't. There is an almost infinite number of shades of gray into which the truth may fall.