The well-justified furor over executive bonuses at banks that receive taxpayer money, which has been reignited over the weekend by the reports of AIG bonuses, is rooted in two entirely valid issues. One is the very appropriate concern over the wisdom of these payouts from a business perspective -- Americans have major ownership stakes in these banks and want a return on their investment.
The other is something that is even more visceral: It's about a sense of fairness. Families who have had to trim their budgets, tighten their belts and change the way they live just to get by are understandably furious when they see these banks carrying on with business as usual.
Because of that, positive balance sheets aren't the only things that would be good to see coming out of Wall Street. There would be enormous substantive and psychological value in seeing bank executives proactively demonstrate that they know we're all in this together, that they too have changed their way of life and that they too can sacrifice in times of crisis.
This is why I'm unsettled by the recent reports of banks giving out deferred or creatively-titled bonuses, even as Congress was passing legislation to ban bonuses in banks that receive federal assistance under TARP.
A big part of the concern is about whether these payouts constitute misuse of taxpayer money. Banks have argued that deferred bonuses can be kept completely separate from taxpayer money, though it's been said that money moves around like water at these firms. And banks have also argued that "retention awards" will help keep skilled brokers from jumping to a rival firm, though I doubt there are many jobs on Wall Street to jump to these days.
But beyond whether or not these payouts make for smart business, I am concerned that these actions merely reinforce the perception that Wall Street will go to great lengths to preserve an out-of-touch way of life, even as it stays afloat on taxpayer money.
From a personal perspective, financial institutions have laid off thousands of workers in my home state of New Jersey. It would be comforting to know that their former employers are doing everything they can to get credit flowing, become viable again and start re-hiring -- and it would be comforting to know that that my constituents' jobs weren't lost to save a CEO bonus.
I have asked the Treasury Department to examine whether these alternative bonuses violate the letter or spirit of the law. I would think that if the banks believe these payouts to be necessary and productive, they would welcome this examination wholeheartedly.
But it's really about more than the legality of these bonuses. It's also about whether banks "get it," even after all the controversy.
Do they understand that it seems like they're pulling out all the stops to hang on to the status quo? Do they understand how this looks to families who are feeling a financial squeeze? Do they understand that they are held to a new standard of responsibility that comes with taxpayer money?
The answers to these questions would help us understand if the banks are doing what they're supposed to be doing with taxpayer dollars: jump-starting the lending that allows homebuyers to get responsible mortgages, families to get auto loans, students to pay for their education and small business to create jobs and grow the economy.
Banks need to show they understand what's going on in this economy -- that if your business is in trouble you can't just go about business as usual, that as families tighten their belts, banks have to tighten the reins on their internal expenses. All across America, this is a time for shared sacrifice. Whether they're using taxpayer dollars or not, banks need to focus their resources on lending -- for the sake of their future and for ours.