Sick of hearing about multimillion-dollar bonuses for the bankers who torpedoed the economy? Don't think that's a great use of government bailout money? Suspicious that there might be more of this nonsense to come?
If so, here are three concrete steps you can take to fight the greed -- rather than just complain about it.
This works on two levels. As a voter, you must tell your representatives in Washington, D.C., to support restrictions on bailout bonuses. As a shareholder, you hold influential voting power over the greedy bankers. Use it. Remember, you don't have to own bank or insurance company shares to act here. You can also tell your mutual funds that you'll pull your money unless they act the way you want on crucial shareholder votes that would limit the bonus madness.
Let's jump right in.
Make Washington work for youBonus buster No. 1: Tell your reps in Congress they must support -- and add teeth to -- a proposal to limit bonuses at companies getting government help.
Why you need to do this: You can't leave it up to Treasury Secretary Tim Geithner. On his watch,executives were lined up to receive $165 million in 2008 bonuses despite their miserable performance.
The back story: President Barack Obama says he has told the biggest banks getting government aid, including, and , that bonuses are a no-no as long as so many Americans struggle in this recession.
But given the lust for riches among bankers, a scolding by the president won't be enough. To stop outrageous bonuses at the banks coming from your tax dollars, we need clear-cut rules.
A bill from the House Financial Services Committee would outlaw bonuses at companies that get money under the Troubled Asset Relief Program or the Housing and Economic Recovery Act until the money is repaid.
The bill would also ban any compensation that is "unreasonable or excessive" and force the banks to tell us how many people are getting paid more than $500,000 a year.
All of this is a good start. But there are some shortfalls. "They're leaving it up to the Treasury secretary to decide what is unreasonable or excessive," says Sarah Anderson of the Institute for Policy Studies, a Washington think tank. "Geithner didn't seem to think that it was unreasonable for AIG to pay bonuses, so why are we relying on him to define these standards?"
Another problem: So far, there's no comparable bill on the Senate side.
As a voter, you can take steps to fix both problems:
- First, contact your representative in the House and urge him or her to support the anti-bonus bill, HR 1664. It could be voted on as early as this week.
- Next, tell your rep to give it more teeth by supporting an amendment to the bill proposed by Rep. Brad Sherman, D-Calif. It would limit pay for executives to $1 million a year plus options or restricted stock that can't be cashed out until the government gets paid back in full. "We have to give Geithner the standards," says Sherman. Anderson says "that would go much further to reassure taxpayers."
- Contact your senators and tell them you want them to get working on a similar bill.
- Any House-approved bill would likely get bounced to the Senate banking committee, run by Sen. Chris Dodd, D-Conn. Dodd's office tells me he is "working with colleagues to explore additional means to crack down on excessive compensation and guard against abuse of taxpayer dollars." But he's the one who wrote in an exemption in the stimulus plan that allowed those egregious AIG bonuses, so he needs your encouragement. Connecticut residents can e-mail him here. Everyone else can contact him via the U.S. mail: Office of Senator Chris Dodd, United States Senate, Washington, DC 20510.
Vote your sharesNext, tell your mutual fund companies or pension plan managers to vote against bonus greed at upcoming shareholder meetings. Fund companies don't typically have phone numbers or Web interfaces set aside for this. You have to call regular numbers or write letters using information you can find in the "contact us" sections of the companies' Web sites. You can also vote yourself, of course, if you own shares in the banks getting bailout money.
Bonus buster No. 2: Vote down, or tell your mutual fund company to vote down, the following Bank of America directors who are all up for election at the annual meeting on April 29. The ones you need to boot out are: Temple Sloan, Thomas Ryan, Ken Lewis and Virgis Colbert. Act now, because ballots are already circulating.
Why you should do this: All four failed shareholders by allowing the incredibly stupid $3.6 billion in bonus payouts that went to Merrill Lynch bankers last December.
- Video: How much should CEOs make?
The back story: In December, Merrill bankers were awarded $3.6 billion in bonus pay for 2008 -- even though it had been a dismal year for Merrill. "The pay for failure was enormous," says Michael Garland of CTW Investment Group, a division of a coalition of unions called Change to Win.
Merrill Lynch is now a part of Bank of America. But Lewis, the Bank of America chief, claimed his bank was not responsible for the payouts because Merrill was still independent when they were approved. The merger was closed Jan. 1 of this year. The Merrill board approved the bonus payments Dec. 8.
But that's not the full story, according to New York Attorney General Andrew Cuomo. In a secret section of the Sept. 15 merger proposal between the two banks, Bank of America gave Merrill the right to award bonuses of up to $5.8 billion for 2008, Cuomo says in court documents on the matter. Bank of America executives went along with this even though at the time "Merrill was teetering on the edge of bankruptcy," Cuomo says.
Here's the worst part: A week after the bonuses were awarded, Merrill Lynch booked billions more in additional losses for the fourth quarter of 2008. Some of these losses "may have been booked by Merrill employees who marked down their portfolios only after their 2008 bonuses were set," Cuomo says. Despite this turn of events, Bank of America failed to put any pressure on Merrill Lynch to reverse the bonuses.