Obama lets rip at banks over executive pay

Guardian story here.

President Barack Obama let rip at troubled Wall Street banks yesterday for paying out billions of dollars in bonuses to staff, accusing them of displaying "the height of irresponsibility" and of letting down the American people.

In a sign that the new administration intends to take a far tougher line on financial excess than the Bush regime, Obama expressed outrage that banks spent $18.4bn (£12.8bn) on bonuses last year despite receiving emergency bail-out funds from taxpayers to avert bankruptcy.

"That is the height of irresponsibility. It is shameful" said Obama after a meeting his new treasury secretary, Timothy Geithner. "Part of what we're going to need is for the folks on Wall Street who are asking for help to show some restraint and show some discipline, show some sense of responsibility."

Figures published by New York state's comptroller general on Wednesday showed that although bonuses fell by 44% the total payout on Wall Street was still the sixth largest ever, with bankers typically receiving $112,000 each.

"They have to start acting in a more responsible fashion if we are going to get this economy moving again," Obama said. "There will be a time for them to make profits and there will be a time for them to get bonuses. Now is not that time."

He singled out Citigroup for criticism, attacking the bank for trying to buy a $50m executive jet after receiving $45bn in rescue money from the Treasury's troubled asset relief program (Tarp).

"Secretary Geithner has already had to pull back one institution that was going ahead with a multimillion-dollar jet purchase at a time when it was receiving Tarp money. We should not have to do that."

He added: "The American people understand that we've got a big hole we've got to dig our way out of. But they don't like the idea that people are digging a bigger hole even as they're being asked to fill it up."

Banks argue that their staff get relatively small basic salaries and bonuses are essential in retaining key talent. But critics say this explanation is hard to swallow after a year of large-scale layoffs in the financial industry, leaving precious few opportunities for bankers to seek better compensation at rival firms.

Goldman Sachs yesterday estimated that it could cost as much as $4tn to restore the financial industry to health. The sum would be needed to buy up bad assets if the US treasury presses ahead with plans to create a "bad bank" to cleanse balance sheets by swallowing up toxic financial instruments.