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Americans want limits on bailed-out banks’ pay

WASHINGTON - The overwhelming majority of Americans think executive compensation is too high and most want the government to set pay and bonuses for banks that took bailout money, an opinion poll released on Thursday suggests.

The Thomson Reuters/Ipsos poll of 1,006 adults also found that nearly 60 percent ranked executive pay and bonuses among their top five concerns about the U.S. economy.

The results underscore the growing resentment and outrage over multimillion-dollar Wall Street bonuses — particularly at firms that received taxpayer money — when the nation’s jobless rate sits at a painfully high 10 percent.

Those job losses were the consequence of the deepest recession since the Great Depression, and risky bank loans were among the biggest causes of the meltdown.

Many economists think the practice of giving out lavish annual bonuses that reward short-term gains encourages risky behavior because there are no consequences if those bets later turn bad.

For President Barack Obama, the risk is this resentment turns into voter anger in an important congressional election year. His Democratic party suffered an embarrassing defeat in a special U.S. Senate election in Massachusetts this week.

Obama has been taking a more populist stance, and on Thursday proposed stricter limits on financial risk-taking. The Ipsos online poll was conducted Jan. 15-19, before Obama’s announcement.

Some critics think the Obama administration may have previously underestimated the public outrage and focused too much attention on healthcare reform at the expense of a regulatory crackdown that might have curbed executive pay.

The polling sample was taken from Ipsos’ U.S. online panel. The firm said statistical margins of error do not apply to online polls because they are based on samples drawn from opt-in online panels, not on random population samples.

Half of those polled were asked about whether government should have any say on pay at bailed-out firms, while the other half were asked the same question about banks that had repaid those taxpayer funds.

Some 62 percent thought banks that took government money ought to have their executive pay determined by the government, but only 43 percent thought Washington should dictate pay at firms that had given the money back.

Overall, 87 percent thought executive pay and bonuses were somewhat or much too high.

Goldman Sachs Group Inc, which has repaid its bailout money, has been at the center of the bonus controversy and announced on Thursday that it had cut its bonus pool and given $500 million to charity.

Some European officials have pushed hard for hard caps on executive pay as a way of discouraging excessive risk-taking, but the United States has rejected that as unworkable.

Instead, the United States has proposed various schemes such as giving shareholders more say in setting pay, linking bonuses to risk levels, or establishing “claw-back” provisions that would force bankers to give back big checks if their bets later prove to be costly.

Joseph Stiglitz, a Columbia University professor and Nobel laureate economist, said it was essential that regulation address the issue of perverse incentives that drive banks to make risky bets under the assumption that the U.S. government will step in if things go horribly wrong.

He said what was particularly galling for many Americans was that the bailout money was pitched as a way to get banks to lend more money. However, lending actually contracted, while banks have made huge profits by trading and investing in emerging markets such as Brazil.

“What we should have done is take that money and allocate it disproportionately to the lending institutions and not to the gambling institutions,” he said.