A modest proposal to help the financial industry’s tattered brand

Sally Saville Hodge

Think about it. You and I and every other U.S. taxpayer have recently taken on the additional financial burden of $5,073 each to help keep Wall Street afloat. That’s how the $700 billion Troubled Asset Relief Program translates in an up close and personal way.

Am I willing to help out to this extent? Well, sure. I guess. Though I don’t recall anyone asking me and, even if they had, I would have said I had certain expectations tied to my generosity.

See, it’s actually a sacrifice for me to be doing this. I have plenty of other debt, personally and for my business, and really don’t need to be shouldering anybody else’s. Plus, mine is a small business and, yup, we’ve been feeling the pinch of the spiraling economy for awhile now. I’m already sacrificing, and so, for that matter, are my employees. Nobody’s gotten any raises in a long time. Bonuses? What a concept.

So I am more than mildly irked that the hotshots who played a major role in getting us into this mess a) haven’t turned the lending spigot back on; b) have not accounted for the uses to which they’ve put our money (because they weren’t required to); and c) have had the absolute and utter gall to keep bonuses and exorbitant salary structures in place for many, many executives – not to mention others further down on the business’ totem poles.

It’s all been delved into this week in Congressional testimony that has had a decidedly defensive tone. As Wells Fargo’s John Stumpf told lawmakers: “We are frugal. We’re Americans first. We’re bankers second.”

Really? The latest issue of Vanity Fair outlines in fascinating, if painful, detail how the sector has continued to line its own pockets even in the face of cascading red ink and the government rescue.

Consider Morgan Stanley. Its CEO, John Mack, and his top two lieutenants didn’t take bonuses for 2008. It was the second bonus-less year for Mack. Other senior managers in the firm saw their compensation cut by 60 to 75 percent. That didn’t mean bonuses were eliminated, though. The pool was just cut – all the way down to $5 billion.

How much did Morgan get in TARP money? Ten billion dollars. What makes it okay to put half the bailout total into bonuses? Well, the bonus and TARP monies were not the same money! Never mind, as one noted gadfly said, that “if the government hadn’t bailed these people out they would have gone bankrupt and … no one [would have gotten a bonus]!”

It’s not just Morgan Stanley. AIG had its secret “retention” awards of between $92,500 and $4 million to as many as 7,000 employees, bestowed to keep them from jumping ship during the sale of assets. One Citigroup trader took home a bonus of $125 million. Two lieutenants of Merrill Lynch’s John Thain, who departed with him last month after the firm’s acquisition by Bank of America, were lucky enough to carry home with them about $100 million in contractually agreed-upon pay and bonuses.

What’s clear through all of this is that the idea – much less the practice – of reputation management seems to have gone down the drain in this sector at a time when proactive measures have never been more needed. The financial industry is getting thoroughly tarred, and ironically enough, the hand that’s holding the brush is its own.

Here’s a modest proposal that might help restore badly needed trust and confidence. The leaders of these businesses – actually, any business that’s being forced to lay off thousands in the wake of a down economy – should consider foregoing not just bonuses, but their salaries until sales and profits begin to come back.

Unlike many who have been hardest hit by the recession, it’s not like they don’t have other assets to fall back on in the interim. And I think at this stage, the public wants more than lip service that the beneficiaries of our largesse actually do feel our pain.