Obama: Wall Street 'Arrogance and Greed' Won't Be Tolerated

Says administration will crack down on banks' executive bonuses.

January 31, 2009, 8:19 PM

WASHINGTON, Jan. 31, 2009— -- President Obama, usually cool, was visibly angry in his weekly address, chastising corporate bankers for the second time this week for accepting taxpayer bailout money and then doling out $18 billion in bonuses.

"The American people will not excuse or tolerate such arrogance and greed," Obama said in the video and radio message released today. "Even as they petitioned for taxpayer assistance, Wall Street firms shamefully paid out nearly $20 billion in bonuses for 2008."

Administration officials challenged a report in The Washington Post that suggested Obama was unlikely to tighten restrictions on compensation for banks that accept bailout funds, saying the report was "simply untrue."

White House and Treasury officials said the president will soon crack down on those big bonuses, shareholder enrichment and overall accountability.

Banking executives have long argued that they need to pay bonuses to retain quality executives.

This week, ABC News asked all 26 banks that have received $1 billion or more in bailout funds if they gave executive bonuses for 2008. Of the 21 that responded, 19 indicated they've either paid bonuses, or might still.

Yet government strings come at a cost. Several healthy banks have recently declined money from the bailout fund aimed at persuading them to loosen credit and foster lending to boost the economy.

Rick Adams, executive vice president of United Bankshares Inc. of Charleston, W.Va., told ABC News the bank has declined $197 million in government funds in order to keep the government out of the boardroom, citing the government's ability to change the rules unilaterally and limit dividends, which have increased at the bank for 35 consecutive years.

"That was one of the factors," Adams said. "We're in a position to weather the tough times ... but the terms of the conditions was also a factor."

Nevertheless, the laments of bankers have been pilloried on Capitol Hill.

"We have a bunch of idiots on Wall Street that are kicking sand in the face of the American taxpayer," Sen. Claire McCaskill, D-Mo., said Friday on the Senate floor.

Wall Street greed has been panned on late night television, as when Jay Leno recently lampooned former Merrill Lynch and Bank of America executive John Thain, who spent $1.2 million redecorating his office.

"Then he gave billions of dollars to former Merrill Lynch employees," Leno said, deadpan. "They're calling this the biggest Wall Street scandal since Friday."

Banking excess has been lamented in the labor movement.

"Giving themselves $20 billion for the worst year we've had sine 1929 flies in the face of anything that make sense," Richard Trumka, secretary-treasurer of the AFL-CIO labor union, told ABC News.

Trumka says excessive executive compensation contributed to the risk-taking that caused the collapse of the financial industry. With executive bonuses tied to revenue, he said, executives were encouraged to take bigger risks – in particular on housing loans for risky borrowers who later defaulted.

"All of that contributed to the collapse," Trumka said. "We need to rein that in. We need to reregulate them and we need to arm investors with the tools to be able to control companies and manage this risk so investors don't get hurt in the long term."

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