Inside the D.C. bubble, Wall Street’s titans continue to have their way.
Their Republican allies in the Senate helped the titans kill the Buffet Rule, which would have required those who made more than $1 million a year to pay at least 30 percent in taxes, double what investors pay on capital gains income.
Wall Street has continued to stifle efforts to regulate risky derivatives like the ones that led to the financial collapse, while most of the Dodd-Frank financial reform enacted in the wake of the financial crisis has yet to be implemented.
In the Wall Street Journal (no link), columnist David Weidner asserted Wednesday that Wall Street has gotten some of its swagger back. “Big financial interests,” Weidner wrote, “are beating back every broadside with a vigor not seen since the financial-bubble days.”
But outside Washington it is a different story.
Voting for the first time on the CEO compensation of a too-big –to-fail bank, Citibank shareholders rejected a $14.9 million annual compensation for its top executive. The “say on pay” vote, mandated as part of Dodd-Frank, is strictly advisory. Citibank officials can ignore it if they want.
For years, the company’s executives had promised that their pay would be strictly tied to performance. The CEO, Vikram Pandit, had been making $1 a year since the bailout during which time the bank performed miserably. But this year, the bank’s directors decided that Pandit deserved to get back on the gravy train with the rest of the industry’s CEOs.
The following day, shareholders at another smaller regional bank, FirstMeritCorp of Akron, Ohio, rejected the compensation package for their CEO in another “say on pay” vote. Directors of that bank wanted to raise the CEO’s pay $1 million to $6.4 million a year, after the bank’s stock had fallen 20 percent during the past year.
They’re just a couple of non-binding votes. But I found it striking that when Main Street voters had the opportunity to express their opinion directly on one aspect of Wall Street’s practices, the voters voiced disapproval.
Wall Street can’t dismiss their shareholders as a bunch of Occupy Wall Street types out to destroy the system, or marginalize their rejection as mere envy. These are hardnosed investors who would like nothing better than for Wall Street banks to get on solid footing and make money. But these voters realize that despite all the administration’s happy talk about how well the bailouts have worked, the banks still aren’t sound, and that the outrageous pay for top executives who haven’t delivered is a big part of the problem because it encourages focus on short-term profit, loading up on risk and relying on continuing government help to prop up their businesses.
According to Weidner, polls show that most voters have moved on from anger at Wall Street. That may be so. But if ordinary citizens, rather than Washington insiders beholden to Wall Street, were making decisions, I think they would coolly, calmly and rationally favor the wealthy paying their fair share of taxes, and sensible regulation that would keep the titans from getting too carried away with themselves and their schemes.