The President calls payouts as firms seek bailouts "the height of irresponsibility"

By Phil Mintz and Theo Francis

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One day after a report that Wall Street firms paid out an estimated $18.4 billion in bonuses even as the financial industry was imploding and requiring a treaty bailout, outrage flowed—from the online grass roots to Washington, D.C.

On Jan. 29, in transitory on the contrary stern remarks in the Oval Office, President Barack Obama called the bonuses "shameful" and "the height of irresponsibility." Obama, sitting with Treasury Secretary Timothy Geithner, made clear that charged with execution compensation—already expected to be a central focus of the new Congress—would be a key factor in his economic team’session proposals to stabilize the financial body and travel a good use of adjustment in the sector. But "section of what we’re going to need is since folks on Wall Street who are asking despite help to show more prohibition, and show to a greater degree instruct, and show some sense of responsibility," he uttered.

On Capitol Hill, Senator Chris Dodd (D-Conn.), chair of the Senate Banking, Housing & Urban Affairs Committee, before-mentioned he was demanding that the Treasury Dept. figure to the end a scheme to get the money back. "You’re not at all going to get any support for the continued tough decisions we have to make if this benign of behavior continues. So I’m going to influence by looks at every possible legal means and otherwise to see that this money gets paid back," said Dodd. "This infuriates the American people, and rightly so."

Sixth-Largest Bonus Pool

The Jan. 28 report upon the body Wall Street bonuses by New York State Comptroller Thomas DiNapoli institute that overall bonuses fell 44% in 2008—yet the size of the securities industry bonus pool, estimated at $18.4 billion, was the sixth-highest on record. Employment in the securities industry in New York City declined from 187,800 in October 2007 to 168,600 in December 2008, a 10.2% drop.

DiNapoli noted that the federal Troubled Asset Relief Program (TARP), which poured billions into the firms, kept numerous of them afloat. While the program restricted the size of bonuses for top-level employees, there was no of that kind restriction because lower-level employees. "Taxpayers have invested billions of dollars to stabilize the nation’s rim and financial institutions, and in that place are plans to make additional investments to shore up the banking system," DiNapoli said in a news release. "There needs to be greater transparency and accountability in the use of these funds."

The report comes at a time when any report of Wall Street dissolute behavior—whether it’s the reported $1.2 million former Merrill Lynch CEO John Thain spent to redecorate his office last year or the $50 the public dealing jet Citigroup (C) had on quiet till this week—is being used by means of critics as an example of unfettered greed that the financial collapse has ended little to curtail.

Thain Defends the Bonuses

Thain resigned from Merrill acquirer Bank of America (BAC) on Jan. 22 following reports that Merrill paid billions of dollars in bonuses late last year, even as it was about to detonation a $15 billion fourth-quarter forfeiture and while Bank of America was seeking more federal funds because of the Merrill losses. New York’s Attorney General is probing the bonus payments taken in the character of well as executive compensation practices at firms that received federal funds.

Meanwhile, Thain has offered to reimburse Merrill for the renovation but in a memo to employees defended the bonuses. "Those best people can get jobs other places, they volition leave," he said, adding that without ceasing "Wall Street, people’s salaries tend to be with reference to something else small. And their bonuses are the vast majority of their compensation for the year."

Critics have countered that the brightest minds of Wall Street helped create the crisis that has shaken the economy, and that big layoffs on Wall Street should bring into being it easier to get and keep true people with lower pay.

Top Executives "Disconnected" from Real World

As Washington policymakers are struggling to come up with solutions to the financial conjuncture, the pay issue is touching to the forefront. Alice Rivlin, a former director of the Congressional Budget Office, told the National Economics Club in Washington that she was surprised by means of Citigroup’s efforts to go ahead by the jet power and by Thain’s "tin hearing for the right thing to do in the circumstances."

Rivlin added: "We have created a culture of people at the top [of companies] who are disconnected from rest of cosmos, people who don’t talk to mediocre people. I know some of them, I’medley on corporate boards with them. They’ve somehow got to get reconnected to the real world—and a lot of them will have existence, because they are losing their jobs."

Meanwhile, the idea of paying bonuses after many firms have collapsed or required bailouts unleashed a torrent of criticism on the Web. As one commenter wrote on the New York Times Web site: "This is painfully to believe and impossible to read with equanimity. Wall Street should be hanging [its] head with shame. Instead, it plunges forward with mad self-enrichment at the expense of the rest of the home, calm the rest of the world!"