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Wall Street Set for Record Payouts a Year After Crash

Despite heightened scrutiny from both the public and regulators in the wake of the AIG bonus scandal, compensation on Wall Street is set for a record year in 2009. Jeffrey Brown reports.

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  • JIM LEHRER:

    Now our story on a return to record compensation in the financial industry.

    Jeffrey Brown has our report.

  • JEFFREY BROWN:

    Profits are rolling in again on Wall Street, just a year after it led a crash that nearly brought down the global financial system.

  • MAN:

    The New York Stock Exchange has just passed down Dow 10000 2.0 hats.

  • JEFFREY BROWN:

    And now, after trillions of dollars in taxpayer-funded rescues, it was reported today that the financial sector is also on pace to set a new record for executive compensation.

    A Wall Street Journal analysis says 23 top firms will pay out $140 billion this year. That's 20 percent more than in 2008. And it's up by $10 billion from 2007, when executive pay peaked. Average pay at those companies will be just over $143,000 when all workers are taken into account.

    In Washington today, White House spokesman Robert Gibbs had this to say.

    ROBERT GIBBS, White House press secretary: We can't go back to the type of pay structure that incentivized wild speculation, like we had before this economic collapse.

  • JEFFREY BROWN:

    The renewed debate over executive pay came as Kenneth Feinberg, the administration's executive compensation overseer, pressed to scale back bonuses at AIG. The financial services and insurance firm received $180 billion in rescue funds last year.

    AIG is now scheduled to pay nearly $200 million in bonuses next March. That's on top of $168 million last March, a payout that drew fire from the president on down.

  • U.S. PRESIDENT BARACK OBAMA:

    I mean, how do they justify this outrage to the taxpayers, who are keeping the company afloat?

  • JEFFREY BROWN:

    A report today on the AIG furor said that, in the midst of the bailout, the Federal Reserve and the Treasury Department did not communicate with each other on the company's compensation structure.

    Neil Barofsky is the special inspector general on the federal rescue program, the TARP. He presented his report at a House hearing.

    NEIL BAROFSKY, special inspector general, Troubled Asset Relief Program: The Federal Reserve did not view until very recently — I mean, until recently, before the payments were made — didn't really view these as much of being a — of a big deal.

    And that's the problem about Treasury outsourcing this, because while Treasury may have been and would be required to have been more sensitive to these issues, the Federal Reserve was looking at this from a creditor. And $168 million, from a creditor's perspective, just wasn't that much of a concern.

  • JEFFREY BROWN:

    Treasury Secretary Tim Geithner came in for particular criticism. He was head of the New York Fed last year when it helped bail out AIG, and he had assumed his present post when the bonus issue blew up.

  • NEIL BAROFSKY:

    Much like if anything goes wrong in my organization, I'm responsible, and it's my failure, since we are criticizing both the Federal Reserve and the Treasury for failures of communication, management and oversight, of course, he's ultimately responsible.

  • JEFFREY BROWN:

    The Treasury Department would only say it continues to work on compensation packages for firms that participated in the federal bailout.

    And we have our own debate on the pay issue now with Sarah Anderson, director of the Global Economy Project at the Institute for Policy Studies, a research center in Washington, D.C. She co-authors the group's annual report on executive compensation. And Steve Bartlett, president and CEO of the Financial Services Roundtable, a trade association representing 100 of the country's largest banking, insurance and securities companies.

    And welcome to both of you.

    Sarah Anderson, start with this report from the Wall Street Journal that large institutions are on course for record bonuses. What's your response?