By Mark Huffman
ConsumerAffairs.com
October 19, 2009
A lot can change in 12 months. On the other hand, it seems a lot can stay the same.
What's changed is the financial condition of the U.S. financial services industry. Last October, amid the credit freeze, it seemed that the entire U.S. banking system could collapse. After all, the biggest investment bank of them all, Lehman Brothers, went under in September 2008.
As Congress proposed massive "bailouts" of the banking industry, citizens were outranged that the banks planned to continue handing out million dollar bonuses to top executives. Under government pressure, most of the bonuses were squashed.
Now, 12 months later, while small community banks continue to go under every week, the major banks are back to reporting profits and many have paid back the "bailout" money to the government. And with the end of the year fast approaching, many plan to hand out million dollar bonuses to top executives. Goldman Sachs, alone, plans to pay out a record $20 billion in bonus payments this year.
The outrage is returning and a lot of it is coming from the White House. Sunday, top Obama Administration officials hit the talk show circuit, urging banks to reconsider.
White House Chief of Staff Rahm Emanuel said it was frustrating that the big banks were returning to their old ways. White House political advisor David Axelrod called the bonuses "offensive," coming at a time when many Americans are still struggling.
Consumers don't much like the bonuses either. Dave, of New York City, said he was stunned when he read his "notice of account change" from Citibank and saw that his credit card interest rate was rising to 29.99 percent.
"I called them and they said it has nothing to do with my account as I am always paying in full," Dave told ConsumerAffairs.com. " The reason, they say, is their access to capital costs is raising and they must increase. This is at a time where the American public funded their survival for billions. To make matters worse, they are back-dooring a deal to pay their executives hundreds of million in bonuses which, in my humble opinion, is a breach of contract -- if not legally, certainly morally."
White House officials are particularly incensed that the banks, restored to financial health by the U.S. government, has not resumed lending.
"There are a lot of small businesses, credit-worthy businesses around this country who still can't get the capital they need to grow, which is important for our economy," Axelrod said on the ABC News program "This Week."
The White House has seized on the bonus issue to prod Congress to pass a package for legislation, designed to provide a new layer of regulation - and strong consumer protections - for the financial services industry.
