Bailout Outcry: Stop Big Pay Packages for Bank Execs

Sept. 24, 2008 — -- Whether or not they support the government's proposed $700 billion bailout for ailing financial firms, many Americans seem to agree on at least one thing: Executives at firms that participate in the plan shouldn't continue receiving outsized compensation packages.

"CEOs who have failed should not get these huge golden parachutes," said Dave Fett, 47, a computer system administrator from Cedar Rapids, Iowa, who said he was against the bailout.

Fett was one of more than 300 people who responded when ABCNews.com asked readers to share their opinions on the bailout plan. He said that the losses suffered by the financial firms and their executives shouldn't be shouldered by taxpayers.

"They were making plenty on Wall Street and they weren't going to share it with you or me or anybody else," Fett said.

Karen Gipson, 56, a metal saleswoman from Olive Branch, Miss., said she supports the bailout.

But, she said, "I don't think we should have to bail out people who are supposed to know what they're doing in the first place, especially when you've got the CEOs of those companies walking out with millions of dollars. It's mind-boggling."

Between 2004 and 2007, the chiefs of the Wall Street brokerage firms and other companies that today are at the center of the storm -- including the heads of the now-defunct brokerage firm Bear Stearns, the now-bankrupt brokerage firm Lehman Brothers, ailing mortgage lender Washington Mutual and insurance giant AIG, which recently received an $85 billion loan from the federal government -- received a total of nearly $1 billion in cash, stock and stock options.

Congress is considering a measure that would force firms that participate in the bailout to limit executive compensation.

But for some, curbing executive pay isn't enough. Jeanne Donaldson, 67, a retired real estate agent in Athens, Ga., said those executives who helped package and sell troubled mortgage-backed securities should be subject to a criminal investigation.

"They packaged these up in investments and sold them -- essentially they were selling air," Donaldson said. "The ones who dreamed up this scheme should be prosecuted for fraud."

Disagreement About the Bailout

Outrage about the actions and salaries of Wall Street's top dogs hasn't seemed to translate into wider agreement about the government's bailout plan.

Fett, for instance, said his main opposition to the government's bailout plan lay in his distrust of the government.

"I don't have a lot of confidence in the government in pulling it off," he said.

Proponents of the plan argue that it would allow struggling banks to clear their balance sheets and start lending money again, thereby easing the credit crunch.

He also said he blamed much mortgage turmoil on the government -- specifically, he cited older federal policies encouraging mortgage lending as well as the lack of earlier regulation for mortgage giants Fannie Mae and Freddie Mac.

Government officials helped created the problem, he said, and "now these same people want more money to fix it. … We're just throwing worse money after bad."

Karen Lockwood of Fresno, Calif., has a very different opinion. Lockwood, 54, a former medical office staffer who is now studying to become a medical transcriptionist, said she believes that the bailout is the country's "best chance" for an economic recovery. She said that Congress should quickly pass the bailout plan proposed by Treasury Secretary Hank Paulson and backed by Federal Reserve chairman Ben Bernanke.

"Paulson and Bernanke are highly respected economic financial specialists and we are fortunate to have them in place in times such as these," Lockwood wrote in a message to ABCNews.com

Members of Congress this week advocated for major amendments to the plan, including executive compensation limits and more oversight for how the $700 billion is spent.

But Lockwood said in an interview Tuesday afternoon that Congress should wait to make additions to the plan after it's already been passed.

"If we try to set them now, it's a decision by committee -- it's going to take time and I think conditions are going to worsen," she said. "If we leave it up to [Congress] now, the captain on the ship doesn't make the decisions and the boat sinks in the process."

When it comes to steps taken by the Treasury Department and the Federal Reserve to resolve the financial crisis, Americans are split, according to a new ABC News/Washington Post poll. The poll shows that 44 percent approve of the efforts by Treasury and Federal Reserve while 42 percent disapprove.

Mixed Feelings on the Bailout

For many Americans, opinions on the bailout don't boil down to a simple "I'm for it" or "I'm against it."

Robert Ballard, 72, a teacher's assistant in Canton, Ga., said he supports the bailout because he wants to see the health of the country's banks improve.

"That's the underlying strength of the economy," he said. "The banks have to be stable."

But Ballard said he also worried that the bailout wouldn't stop foreclosed homes from continuing to flood the housing market and that, he said, would force his own property values to lower. Even if the government works with homeowners to create better mortgage payment plans, Ballard said he worried those with unsteady incomes would still default.

"The bailout will give some people relief for [a] temporary period of time but they haven't solved the basic problem," he said.

Gipson, of Mississippi, was optimistic that the bailout would help calm the stock market -- to the benefit of small investors like herself -- and save jobs in the financial sector. But she was worried about news that the government would seek to buy not just mortgage investments but other troubled assets such as banks' investments in automobile loans.

"That is just blatantly wrong," she said.

Eric Mathews, 40, a software developer in Zeeland, Mich., said the $700 billion should be spent on a different kind of bailout. The money should be invested, he said, in new roads and bridges, renewable energy, education and health care.

"Let's give the golden parachute to the American people for a change," he said.

Some experts said that any bailout that focuses only on helping financial institutions without directly addressing the needs of struggling homeowners could add to the growing resentment of the nation's corporate hotshots and wealthiest residents.

"We're living through an interesting transformation. The public, since Ronald Reagan was president, has been taught to be very cynical about government," said Robert Reich, the former U.S. labor secretary under President Clinton and a professor of public policy at the University of California at Berkeley. "After this latest round of excesses from the private sector, coming on top of years of corporate scandals including Enron, the public is now beginning to think that it needs protection from the tycoons."

Ed Paisley of the progressive think tank the Center for American Progress Action Fund said that in the last few years, flat wages and rising costs for everything from health care to education have meant that all but the nation's top 1 percent of income earners have either struggled or treaded water.

"The housing bubble was a bubble, there's no doubt about it, but while that bubble was going on there was a feeling that Americans in general were prospering together," Paisley said.

"If we can recraft the mortgage industry so it delivers on that promise again," he said, "that's good for America."

With reports from ABC News' Zunaira Zaki and Gary Langer.