Last weekend, I was having breakfast at Vic’s diner in Lowell with a friend.  When I left the restaurant, I found a note on my windshield with a phone number and a brief message: “Think I found something of yours – Alice.”  After a quick survey, my friend realized he’d lost his wallet and we called the number.  Alice met us at the diner, returning the wallet with over $150 in cash and all of its contents untouched and with no expectation or request for reward. 

This experience was in the forefront of my mind this week as I read news accounts that the firms responsible for some of the most reckless behavior during the financial boom plan to reward themselves with even more extravagant bonuses than the ones they took at the height of the bubble.  Among others, Goldman Sachs and JP Morgan Chase revealed that they would be awarding their employees average bonuses of $600,000 and $450,000 respectively, on top of base salaries of six and seven figures.  (For perspective, the average home price in Massachusetts is around $300,000.) 

Ordinarily, the American public and members of Congress shouldn't meddle with how privately-run institutions choose to pay their executives.  However, the circumstances by which these financial institutions find themselves able to furnish such lavish bonuses are anything but ordinary. 

Goldman Sachs, JP Morgan, and the other firms now set to break their previous record high for executive bonuses were recipients of billions of dollars of government loans from the Troubled Asset Relief Program (TARP), allocated to prevent our nation from economic collapse.  No one was happy to vote for TARP, but hindsight has confirmed that it was absolutely essential to avoiding another Great Depression.  Deeply-interconnected institutions on the brink of collapse were rescued through emergency steps like the TARP, cheap lending from the Federal Reserve and by government backing.

In return for such extraordinary measures, Wall Street was charged with keeping credit markets open for American businesses, yet a recent report by Treasury revealed that credit offered to small businesses actually decreased between April and November 2009.  After JP Morgan’s small business lending fell for the sixth straight month, CNN quoted a spokesman as saying that lending would increase when the economy improves.  Until then, they will apparently be spending that money on lavish bonuses for themselves.

While Goldman, JP Morgan, and others have paid back TARP funds with interest, their decision to doll out enormous bonuses yet again shows outright contempt for taxpayers who saved them from complete ruin.  Unemployment, foreclosure, and economic instability remain the reality for millions of average Americans, but the industry most responsible for the recession has been the first to recover.

Even more troubling than Wall Street’s inability to grasp a basic sense of fairness and accountability, these large bonuses serve as notice that Wall Street has learned little from the economic collapse it fueled over the past several years.  The bonus system on Wall Street rewards behavior that generates short term profits for companies, even if those short term gains run contrary to the long term interests of share holders and the broader economy.
 
I share the public’s enormous sense of disgust over these bonuses, not simply because they are unseemly during times of such deep national suffering, but because these companies survived thanks only to the American taxpayer.  Furthermore, they have been able to reap such heady profits this year only because the Fed has maneuvered to keep interest rates low. 

That is why I have cosponsored legislation that would institute a tax on Wall Street bonuses in excess of $50,000 in 2010 and use that money for direct small business lending.  I am also supporting a fee on the largest financial firms to pay back any taxpayer losses incurred in TARP.  

If Wall Street’s return to windfall profits had simply been the result of savvy business, we would applaud their ingenuity.  That, however, isn’t the case and it is time for them to recognize their moral responsibility to contribute to the recovery of our nation as a whole.  Alice could have kept the wallet, but she didn’t.  It is time for Wall Street to live by these same American values.

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