News that Wall Street firms recently paid $18 billion in bonuses inspired an e-mail argument among Slate editors. Usually we try to wait until our ideas are fully developed before we publish them, but in this case, we thought the half-baked arguments might interest readers.
David Plotz: I wonder, almost as an intellectual experiment, whether we could even find someone who would go on the record saying that the 2008 Wall Street bonuses are justified. I would love to read such a piece, just to see the gumption of the author, and to hear the argument. I am sure there is some case to be made that would be interesting to hear.
James Ledbetter: I suspect you can find it. The question will be whether you can find a qualified person who wants to make the argument who can also write. Happy to help with the search, but ... you really want to do this?
Rachael Larimore: If a bunch of guys who are already worth $200 million or $300 million kept their $30 million bonuses, no, I wouldn't say it's justified. But if the companies limited bonuses to the lower-level employees, I could see a case being made for it. Also, there was a wire story a while back about how much the lack of bonuses was going to cost New York state in tax revenues.
Julia Turner: A banker friend was just making the case to me. The argument is about retaining talent and thus having a shot at actually fixing the mess they're in and paying back the government. But it overlooks the fact that other banks aren't in a poaching frame of mind.
James Ledbetter: And that will always be the argument that Wall Street makes. The obvious rejoinder to which is: If you paid your "talent" half as much, is there a possibility they would have fucked this up half as much? I suspect that a company like, for example, AIG—now a wholly-owned subsidiary of taxpayers' money—is still paying massive salaries to people who not only brought the company into ruin, but are now recipients of Wall Street welfare.
I come back to my question: You can find someone to make the argument, but who among us really respects the argument enough to publish it?
James Ledbetter: Correction: When I said that AIG is a "wholly-owned subsidiary" of the U.S. government, I should have said "79.9 percent-owned subsidiary." Crossing the 80 percent line would make the government liable for debts and taxes, which it smartly avoided.
Dan Gross: Last night I was at a dinner with the co-chair of an investment bank, who took pains to say his firm wasn't in the financial capital business but was rather in the intellectual capital business. And that's the only possible line of defense. Sure, all the big investment banks had jillions in assets, buildings, all sorts of physical stuff. But it's an old and somewhat true cliché that a Wall Street firm's assets all go home every night. And you never know which ones will return—or which will decide to jump, or start a hedge fund, or go sailing. And since they only respond to money, the only way to keep them coming back is the prospect of a bonus. Of course this is an argument for paying bonuses in January 2008 on 2007 results. By January 2009 there was nowhere else for most people to go.
James Ledbetter: But again, it's like the Bush administration: If everyone left the investment banks, would they really have done a worse job? Those "assets" were the problem. Bring in interns, cap salaries at $50,000, and they'd lose less! The idea of rewarding people for massive failure is not only morally offensive, it's also bad business (or this year, welfare). The bonuses are a function of greed, pure and simple, the rest is just rationalization.
John Dickerson: Has anyone ever returned a bonus? And at a personal level, how does a banker accept the bonus? What's the rationalization at the personal level? Presumably, "I worked hard and all this bad market stuff had nothing to do with me?"