My Administration Is All That Is Standing Between You And The Pitchforks

If the Politico report is to be believed, some of the bank CEOs who met with President Obama last week actually used some of their scarce time to defend -- yes, defend rather than apologize for -- the compensation practices of the banks since they all received TARP funds. After all this time, are these people still in denial to this degree?

So permit NewMajority to attempt to pierce through this fog. The banks have put trillions of taxpayer dollars at risk as a consequence of their own mistakes. Many of the institutions at that meeting would currently not exist but for the kind graces of Messrs. Bush and Obama. Moreover -- and more to the point -- the entire equity value built up over the years by bank CEOs and thousands of rank-and-file senior employees would have evaporated. Gone. Zeroed out. Lehmaned. To the tune of billions of dollars of personal savings now being preserved by the kindness of taxpayer strangers. If (as we have said before) these people had happened to work for airlines or telecommunications companies or railroads or real casinos (as opposed to the de facto casinos the banks became) their billions would have long since disappeared.

To enable this wealth of the perpetrators of the greatest financial incompetence of the previous 70 years, we have had to resort to multiple bailouts, for each bank has benefited not just from the injection of public funds onto its own balance sheet, not just favorable terms for that money, not just unprecedented short selling bans and government bad-asset backstops and short-term debt guarantees and long-term debt guarantees and the rest. Each bank in that meeting has also benefited tangibly from bailouts that aided counterparties and avoided panic (Bear Stearns, AIG and the forced Bank of America closing of the questionable Merrill transaction) in order to stabilize whatever was left of the "system" these overly leveraged institutions and overpaid executives helped put in place. Since banks are in the business of being creditors their employees and shareholders understand this even if they don't want to admit it.

Let's not be populist about this. Let's be capitalist. The proper attitude in that meeting with Obama might have gone something like this:

Mr. President, we are grateful your forbearance and we get it. We apologize for our mistakes and appreciate your willingness to look forward. Hence we have decided that all performance-related bonus compensation for our senior executives who currently own more than $2 million of our bank's stock will consist of restricted common shares that will (a) be junior to the government's preferred and (b) be deferred in such a way that no cash will be realizable for those employees until the taxpayers have been paid back. We may lose some talent as a consequence and are happy to see those who do not wish to work on these terms retire and forfeit any other unvested stock they currently own. That will be a benefit to those who remain as well as to the government. And that will give us the moral authority to defend our fiduciary interests elsewhere -- to act as creditors rather than the instruments of government policy. Rest assured we will work day and night to get you back the taxpayer money we have received.

There. Was that so difficult?