Monday, January 18, 2010


What a headline. January 15, 2010, the Wall Street Journal, above the fold, front page. A WSJ study finds that the top 38 financial companies in the US will raise compensation by 18%, to new record highs. This, in the face of the most massive subsidies in the history of the world over the last 18 months to the financial sector.

Meanwhile, look at the chart to the right. I have posted this statistic before. It is the civilian employment ratio. To me it is a bottom line number on the employment situation, because it is not limited only to the short term unemployed like the headline number--it is a broader view. It shows that the employment reality is still worsening and is plumbing new lows. Our nation cannot service its heavy debt load if our people are not employed.

But let's face it--no one on Wall Street cares. They are going to take the money and run while the running is good and the cash keeps flowing. They do not care about next quarter much less next year. The only question is how much cash can stuff into their stash today. And apparently that is a very large number.


  1. It is extremely sad that people are continuously losing jobs. There seems to be so much hope that employment rates are going to rise; however, the reality is that more and more people are losing jobs everyday. With families not gaining consistent and sufficient incomes, the economy on a whole hurts. Hence, the businesses are not able to hire those that are unemployed. It is such a vicious cycle. Unfortunately, those that are able to work their way around the recession are not sharing the key to economic success during this period with the rest of the country. People are struggling and finding anyway possible to make ends meet. The extremes range from people remaining in unsatisfying jobs (because at least they have a job) to people seeking and accepting jobs that they are overqualified for to seeking illegal means to feed families. America has got to do better!

  2. I agree with Tara completely. The job market is in shambles. I believe that it is a selfish act for the top financial companies to receive an increase in compensation when so many Americans are struggling to survive on a day to day basis. The national unemployment rate in December 2009 was 10%. Gas and food prices are steady climbing while working class Americans are losing their jobs...and we are moving away from the Working class American families are sacrificing so much to have so little, while these high end financial companies are taking in so much with little sacrifice to their employees. The economic gap only continues to widen!

  3. I agree with the article for the most part. This unfortunately is a product of Congress in conjunction with multi national corporations and lobbyists choice to deregulate banking and economic standards of the post Cold War era. With all the deregulation over the past 20 years or so, this allowed for NGOs and MNCs to dictate how the American economy would go. This recession of the past 2+ years is just a product of it.
    I do not feel as though the change back to a highly regulated economic system of the 70s will be in place for quite some time because political upheaval and change in our nation is a slow process.
    I also believe that part of the greed on "Wall St" (which is really a reference to big corporations in general and not just those companies that sit on a street in Manhattan) is the fact that many board members are not heavily vested into the company they oversee. Many of the executive board members are paid based on quick turnarounds in profit and not heavily in stock. If they were, they would do what is best for the company in the long haul rather than sell the company short in order to raise the stock price for quarterly outlooks.

  4. I share the author's sentiments about these bonuses, although from an academic and legal standpoint I don't see anything wrong with them. These firms control most of the world's capital and it should not be a surprise that the bankers that run them are making an astronomical amount of money. If the firm has not received bailout money then I think there is even less to be outraged about. However even firms that have received bailout money should still be able to pay these bonuses. I am not sure about the specifics of the bailout package but, I believe the money was a loan from the US government to the banks. As we learned in our first few days of BA, a creditor does not get to have a say in how the business functions. If the taxpayers want to be mad, they should be upset with their representatives for not attaching conditions to this money. Alternatively, if the money was not a loan, then the taxpayers should still be furious with our government for not exacting concessions from these companies. These people do not live in the world of middle income so it is no surprise that they seem to have no concern for the rest of the nation.
    As far as the job numbers, I am afraid that this downward trend is to continue for sometime. When and if the economy makes a full rebound, I still see unemployment being a problem. Advances in technology have decreased the number of available manufacturing jobs. Combine this with companies sending jobs overseas, and the emergence of China as a major manufacturing power, I don't see where the jobs will come from. I believe that our only hope is to invest heavily in technology and education. In this way we can stay on the cutting edge of technology and stand ready to be the world's leading manufacturer of the next big innovation.

  5. I understand the outrage and do agree to an extent. Anytime there is a disparity as large as the one in question (compensation vs. unemployment) there ought to be inquiry. However, I will issue an argument for the opposition to balance the conversation sightly.

    First, the rights of private (sector) organizations and our country's notion of capitalism should be considered. We should be careful to inquire into the private strategies and decision-making of these private entities. Capitalism is an integral part of the richly successful history of the United States, and we are extremely fortunate to live in a country where we can, as private business owners, strategize without overreaching government intrusion.

    Secondly, when looking at the original WSJ article, there could arise the question of the actual correlation of the two issues. I understand that the timing could be better, however given the recent overall performance of the financial industry it may be too great of a leap to assume that not implementing the "increased compensation" would save future jobs or could have prevented previous layoffs. There was a substantial amount of shifting and restructuring that took place following the collapse, and this could be a way to incentivize individuals who can help ensure that a similar tragedy does not take place in the future. I am not in favor of rewarding the same people that played a substantial part in the collapse, however: (1) these are not all the same people and (2) I don't get a vote either way.

    There are a broad range of benefits (economically, socially, politically) both directly and indirectly that should be considered in the final determination of "outrage." Again, it doesn't make me happy, but there are other factors to consider. If we would not be upset with bank bonuses during the 90's, I would be hesitant to be critical now. I agree with the post of David Strauss that the outrage has more merit with Congress that with the corporations.

  6. I never thought I would live during an economic crisis of this magnitude. Unfortunately, the state of our economy is worsening, as the author suggests, in large part because of the greed that those in Wall Street possess. This is an absolute disgrace and a slap in the face to many Americans who are otherwise qualified and yet remain unemployed. However, nothing lasts forever so those on Wall Street may run but they can't hide.

  7. I agree that this is disturbing news, and I can't help but wonder why these companies are increasing their wages. Are they worried that their "indispensible" executives will walk out on them if they don't get their raises? Because they won't. These executives are sitting pretty, at the top of their money towers, and they have no intention of going anywhere, and neither do the lower level employees who are also reaping the rewards.
    I read a book once that suggested maybe there should be maximum wages just as there are minimum wages, and I've always thought that was an excellent idea; although I do realize it would be difficult to implement, and there will be many ways to get around it. Regardless, maybe it is still something that should be taken into consideration, otherwise we might end up with an even braoder gap than we currently have.