Banker bonuses hit $145 billion: Here comes the fury
The eye-popping compensation will almost certainly raise cries for a federal bonus tax.
The banking industry clearly does not care about the outcry from Congress, the president and taxpayers regarding the extravagant bonuses being paid on the heels of the greatest credit crisis in four generations.
The Wall Street Journal has put together research showing that bankers will earn $145 billion this year -- even higher than the phenomenal amount that they made in 2007.
Most of the money will be paid to the top managers and traders at blue chips like Goldman Sachs (GS), Morgan Stanley (MS) and JPMorgan Chase (JPM). JPM posted a huge increase in fourth-quarter net income early today. Earnings per share rose to 74 cents from 6 cents in the same period a year ago.
It is clear that the culture clash between Wall Street and Main Street is becoming more violent.
A number of financial company CEOs objected to a new tax proposed by the White House to raise $90 billion over 10 years by placing a 0.15% tax on balance sheet liabilities. The top 50 financial companies will bear almost the entire burden. JP Morgan CEO Jamie Dimon reacted by saying the taxes should not be used as punishment.
Politicians, on the other hand, will seize on the $145 billion number as a sign that bailed-out banks used federal TARP money to survive the crisis and then prosper shortly thereafter. The eye-popping compensation will almost certainly raise cries for a bonus tax similar to the one instituted in the U.K. this year.
Wall Street executives will counter by saying that they already pay high income taxes on their bonuses and that their companies pay high corporate taxes. The Treasury will do just fine by its levies on the financial industry. But that is a sign that the financial community has a tin ear. The populist reaction to the $145 billion number will drive new legislation to tax Wall Street pay or cap it at levels well below where it was last year.
By ignoring the anger of the average man, Wall Street has put itself in a position to be the government's whipping boy as it prepares the budget for next year.
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