Hey, look who decided to use her real name to write a column for which she’ll be absolutely shellacked. It’s Liz Peek, wife of CIT (CIT) CEO Jeff Peek, who was also Portfolio.com’s TARP Wife.
This time she’s taken to HuffPo to defend the indefensible — the fat bonus.
As Chris Dodd and his cronies have massed on the ridge, prepared to mow down the reckless “culture of greed” that got us into this recession mess, few have ventured to champion the industry that increasingly fed the coffers of New York. Privately, though, those responsible for keeping the lights burning on Fifth Avenue and for shoveling up after the mounted police have watched in horror at the meltdown of investment banking profitability. Consider that fully 20% of New York State tax revenues and 12% of the city’s income stemmed from the securities industry. Governor Paterson has noted that Wall Street has “bailed us out for a number of years” while state legislators spent beyond their means. Baldly put, New York thrives on a healthy Wall Street.
Not only are banking profits essential to the well being of New York, those pesky bonuses play a vital role as well. Wall Street payouts peaked at more than $30 billion in 2006, generating billions in revenues for New York, New Jersey and – yes! – even Chris Dodd’s home state of Connecticut. Not only did those banking employees trundle home with mountains of bacon, but they were joined by legions of hedge fund and private equity types who also cashed in big time in recent years. Last year’s drop in banking bonuses cost New York State almost $1 billion in tax revenues, while the city saw $275 million go up in smoke.
Look, we have no problem with successful bankers getting paid a lot of money for making a lot of money. And we certainly appreciate that they shoulder a lot of the tax burden for the state, and that they donate to the arts, and that they frequent other establishments, keeping people employed and all that good stuff. So in that sense, Peek is correct.
But this idea that we have to make sure the rich stay well-fed so that we can get crumbs from them is an obnoxious suggestion to most people. What we really want is for people who are well-paid to actually create a lot of value. If the banks are mere sponges, sopping up money where they can without creating much, then let’s start today on moving the New York economy to something more productive — because that won’t last. And if they are creating value, and the bonuses aren’t encouraging undue risks, then that’s fine too, and the problem will take care of itself.
This focus on the bonus in isolation is what’s silly.
That being said, where’s CIT’s PR on this one?
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