Wall Street Bonuses in 2008 – Disappointing or Shameful?

When I first heard that bonuses paid to Wall Street types dropped from around $33 billion in 2007 to only $18.4 billion, the Manhattan resident in me thought – “ouch, that’s going to hurt the already sagging aggregate demand around here”. Call me a Keynesian. The President had a different thought:

President Obama branded Wall Street bankers “shameful” on Thursday for giving themselves nearly $20 billion in bonuses as the economy was deteriorating and the government was spending billions to bail out some of the nation’s most prominent financial institutions. “There will be time for them to make profits, and there will be time for them to get bonuses”

OK – we don’t reward incompetence and we don’t give income assistance during hard times to the very wealthy. I’m with you Mr. President!

Update: Rudy Guiliani goes Keynesian on this story too:

Bonuses for Wall Street fat cats are easy political fodder in uncertain economic times, but former New York Mayor Rudy Giuliani said Friday cutting corporate bonuses means slashing jobs in the Big Apple. "If you somehow take that bonus out of the economy, it really will create unemployment," he said on CNN's "American Morning." "It means less spending in restaurants, less spending in department stores, so everything has an impact."

Memo to self – in the future, check out what Josh Marshall has to say before blogging on these types of issues:

As a resident of New York City, I think it's probably true that those dollars do do a decent amount for New York City economy, in the form of tax dollars and supporting local businesses -- though I would question its relative efficiency in stimulus terms. (And that's in large part because it's a lot of money in a fairly restricted geographic area.) But the government support that keeps these firms afloat doesn't just come from New York City, does it? This is the definition of trickle down -- give huge amounts of money to a small number of individuals, most of which will be socked away but a relatively small percentage of which will be spent on luxury goods. Amazing that this goof was once the GOP frontrunner for president.