Slate's editors squabble about whether Wall Street deserved its bonuses.

Conversations in real time.
Jan. 30 2009 5:45 PM

Bonus Babies

Slate's editors squabble about whether Wall Street deserved its bonuses.

(Continued from Page 1)

Dan Gross: The rationalization is that the bonus is the salary. The paycheck they get every week, which might add up to $150,000, is nothing. Without the bonus, [they get] no private school tuition, no mortgage, no nothing. Not getting a bonus is like getting fired. It's as if you've worked all year for nothing.

James Ledbetter: Right, and if they fired a bunch of those folks, they would have lost less money, and there would be fewer people on the government dole. The bonus system is rational that way. Paying it when companies have created hundreds of billions of dollars in losses is irrational, even if it might have ancillary economic benefits. Paying pedophiles billions of dollars in bonuses would also have ancillary economic benefits—that doesn't make it a good idea.

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Dan Gross: Right. I'm not saying it's right, just providing a window into the mind-set of the typical managing director.

Chadwick Matlin: Instead of coming down on one side or another on the current bonus question, isn't it more useful to re-imagine it and provide a viable solution going forward? Via this conversation, it appears that one could make the case for rewarding some employees with a bonus to help with brand capital, corporate culture, and talent retention. But the issue here is what kind of bonus structure does make sense, given the new financial landscape.

For example, if the government owns any slice of a company, should that company be allowed to give bonuses? Should it have to give an equal dollar amount back to the U.S. government, a la matching 401(k)? If a company loses money, should it still reward departments/desks that did well? Or does the whole company suffer? Etc., etc. It's a normative set of questions, but it has potential to find a nuanced middle ground, rather than the yes/no poles.

James Ledbetter: I'm going to write a piece today: Give Back the Bonuses.

Michael Newman: Late to this, but can't a case be made that the bonuses are a form of stimulus? Leaving aside the question of whether they're deserved, they're a quick injection of money likely to be spent on things this year—dinners, cars, houses, nannies, etc. Isn't the whole point of the stimulus to encourage this kind of spending?

Rachael Larimore: I can 100 percent assure you that the absence of bonus money indeed reduces spending.

James Ledbetter: Sure. Nearly any form of economic activity can be described as stimulating some sector of the economy. Bombing Cleveland right now would create the need for more bombs, bombers, and Halliburtons to rebuild Cleveland. That doesn't make it a good policy.

John Dickerson: Isn't the economic case that the bonus boys would save lots of it (having, like many members of Congress, just been reminded of the necessity of prudential behavior by their own imprudent acts)? And the larger point is that it distracts from the goal, which is less about stimulus than using every dollar to get the credit markets moving again, a system upon which the entire economy relies. Plus, there's the psychology of the thing. If regular people think that the fat cats are getting taken care of with no moral penalty, then their view of what government can and can't do for them gets distorted. This puts noise in the legislative system and it distracts people from the one true goal of government right now which should be the making of and implementing plans to bomb Cleveland.