Bonuses and Investment Bankers

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Should bonuses be paid to employees of companies which almost went bankrupt but didn’t because the company took bailout money from the government? Most bankers say yes, yet to the general public, this seems to be absolutely inexcusable. I decided to look into this topic further to satisfy my curiosity.

The large banking businesses are in many ways at blame for the current recession. They lobbied for, and got, the relaxation of rules limiting how much debt they could have. By going into greater debt, they could increase their profits. However, this also greatly increases their risks. When the economy began to decline, these companies suddenly were not able to pay back their debts, which made a huge impact upon the economy. This trickled down throughout the entire economy, which relies upon loans and investments to keep working. The government had to step in and passed a “bailout” for these large companies in order to keep the economy from getting worse, but the damage was already done (Labaton).

The general public is angry at the banking industry because of the damage they did to the economy, which affected the entire country. The public also feels that these companies are in a debt to the public because the government had to bail them out with taxpayer money. Therefore, the public expects the banking industry to be humbled, and being extremely frugal right now. Yet, these companies are gearing up to pay out large bonuses to their employees. The companies seem to be returning to the very same ways which brought about this recession (Kaiser). As Cornelius Hurley, director of the Morin Center for Banking and Financial Law at Boston University says, “It is setting us up for another fall,” (Eder). In this situation, it is not hard to...

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Gomstyn, Alice, and Lauren Pearle. "Could Be Worse: AIG Double Bonus Jeopardy." ABC News/Money. 17 Mar. 2009. ABC News. 25 Jan. 2010. .

Holson, Laura M. “Ready to Spend, but Not to Boast.” The New York Times. 24 Jan. 2010: ST1.

Kaiser, Emily. “Americans want limits on bailed-out banks’ pay.” Reuters. 21 Jan. 2010. Reuters. 25 Jan. 2010. .

Labaton, Stephen. “Agency’s ’04 Rule Let Banks Pile Up New Debt.” The New York Times. 2 Oct. 2008. The New York Times. 25 Jan. 2010. .

Leonidis, Alexis, and Collins, Margaret. “Executive Bonuses: Empty Clawbacks?” BusinessWeek. 14 Jan. 2010. Bloomberg. 25 Jan. 2010. .
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