President Barack Obama lashed out on Thursday at “shameful” Wall Street executives for claiming billions of dollars in bonuses while their stricken institutions asked taxpayers for support.
Mr Obama was responding to a report showing that financial sector employees received $18.4bn (£12.9bn) in bonuses last year, amid dire financial crisis. The figure was down 44 per cent from 2007 but was still the sixth largest payout in history.
Mr Obama described the bonuses as the “height of irresponsibility”, and made clear that additional government support for the industry would be subject to tough conditions on pay and other perks.
“Part of what we’re going to need is for the folks on Wall Street who are asking for help to show some restraint,” he said. “There will be time for them to make profits, and there will be time for them to get bonuses. Now is not that time.”
The White House is working on plans for the second $350bn tranche of funds available through the troubled asset relief programme as well as additional measures to clean up “toxic assets”.
Mr Obama is under pressure to adopt a tough line against Wall Street amid mounting public anger over how the first $350bn of bail-out funds was used.
The president recently chided Merrill Lynch, which has received taxpayer support, for spending more than $1m renovating the office of John Thain, its former chief executive, and his administration pressured Citigroup to cancel its order for a $50bn corporate jet.
“We shouldn’t have to do that, because they should know better,” he said yesterday, referring to Citigroup.
“The American people understand that we’ve got a big hole that we’ve got to dig ourselves out of, but they don’t like the idea that people are digging a bigger hole even as they’re being asked to fill it up.”
Bankers reacted to the president’s remarks with a mixture of anger and resignation.
“Attacking Wall Street is like fishing out of a barrel at the moment,” said one financial executive. “Obama is in the middle of a tough political battle to get the stimulus plan approved. He has to say these things.”
Mr Obama’s proposals for tougher oversight of Wall Street received backing on Thursday from a congressional panel charged with overseeing the government response to the crisis.
The Congressional Oversight Panel said policymakers and the financial industry ignored multiple warning signs that a crisis was brewing and called for tighter regulations to prevent it happening again.
In a draft report released on Thursday, the panel recommended greater supervision of financial institutions deemed “too big to fail” and limits on leverage throughout the sector.