Too Big to Fail

On a recent overseas trip, I read most of Andrew Sorkin’s Too Big to Fail. Despite its length, the book is a page-turner and is worth reading to understand the background of the financial crisis.

The more I read, the more it became clear to me that the crisis was not just about bad banking and poor judgments; it’s also about greed and self-interest.

As President Obama said in his biting criticism of the bankers last week, in light of the fact that the government (i.e., U.S. taxpayers) shelled out $700 billion for the Troubled Asset Relief Program that was launched to bail out foundering firms like AIG at the height of the financial crisis, the profits and bonuses bankers are paying to themselves are “obscene.”

A few figures help drive this home:

Goldman and other large financial firms will hand out an estimated $140 billion in 2009 bonuses. Goldman alone is expected to enrich its employees by $18 billion. The large bonuses have drawn scrutiny because they are being paid at a time when the unemployment rate is 10% and many Americans are suffering financially. What’s more, many Americans believe Goldman and others only survived because of taxpayer support, and now are unfairly profiting from the government bailouts.

The news from JP Morgan looks much the same:

JPMorgan’s cheery figures for 2009 were accompanied by news that it had earmarked $26.9 billion to compensate its workers, much of which will be paid out as bonuses. That is up about 18 percent, with employees, on average, earning about $129,000. Workers in JPMorgan’s investment bank, on average, earned roughly $380,000 each. Top producers, however, expect to collect multimillion-dollar paychecks.

Meanwhile, Goldman, worried about its public image, restructured the way top executives receive bonuses. But even if top Goldman executives forgo immediate cash bonuses, they are still profiting from the failures they ultimately caused and that have ruined the livelihood of many thousands.

Here’s some food for thought: According to John Vandeventer, the entire GDP of Haiti is less than half of JP Morgan’s bonus payout this year. Vandeventer muses about some alternatives for all that cash:

  • JP Morgan executives could give $9,000.00 in aid to every single man, woman, and child affected by the earthquake in Haiti.
  • As an alternative, they could provide an entire month’s severance pay for 847,860 laid-off workers.
  • Less than half of their bonuses could fund an in-state college education for every single student in the state of California.
  • They could use the other half to fund health insurance coverage for every uninsured person in the state of New York.

Or what about helping to foot the bill for the massive relief in Haiti? What do you think?

 

Irene Lagan

By

Irene Lagan is the general manager of Guadalupe Radio in Washington, DC. She is a former collaborator for the English language section of Vatican Radio, has written for several publications, and holds a Masters degree in philosophy. She served as managing editor at the National Catholic Bioethics Center while in Boston, and has been published in Ethics & Medics, the National Catholic Register, Zenit, Franciscan Way, the Arlington Catholic Herald, and The Boston Globe. In addition, she has taught university students as an adjunct professor and has consulted in the area of communications and development for non-profit organizations.

Crisis Magazine Comments Policy

This is a Catholic forum. As such:

  1. All comments must directly address the article. “I tell you, on the day of judgment men will render account for every careless word they utter.” (Matthew 12:36)
  2. No profanity, ad hominems, hot tempers, or racial or religious invectives. “And be kind to one another, tenderhearted, forgiving one another, as God in Christ forgave you.” (Ephesians 4:32)
  3. We will not tolerate heresy, calumny, or attacks upon our Holy Mother Church or Holy Father. “And I tell you, you are Peter, and on this rock I will build my church, and the powers of death shall not prevail against it.” (Matthew 16:18)
  4. Keep it brief. No lengthy rants or block quotes. “For you are a mist that appears for a little time and then vanishes.” (James 4:14)
  5. If you see a comment that doesn’t meet our standards, please flag it so a moderator may remove it. “Brethren, if a man is overtaken in any trespass, you who are spiritual should restore him in a spirit of gentleness.” (Galatians 6:1)
  6. All comments may be removed at the moderators’ discretion. “But of that day and hour no one knows…” (Matthew 24:36)
  7. Crisis isn’t responsible for the content of the comments box. Comments do not represent the views of Crisis magazine, its editors, authors, or publishers. “Why do you pass judgment on your brother? Or you, why do you despise your brother? For we shall all stand before the judgment seat of God… So each of us shall give account of himself to God.” (Romans 14:10, 12)
MENU