Americans Oppose Bonuses for Wall Street Bailout Beneficiaries

By Matthew Benjamin

Dec. 11 (Bloomberg) -- Three-quarters of Americans say Goldman Sachs Group Inc., Citigroup Inc. and other banks that accepted taxpayer funds should cancel all bonuses this year.

A majority of respondents in a Bloomberg/Los Angeles Times poll conducted Dec. 6-8 also say the U.S. government should have a voice in how those companies run their businesses and almost two-thirds favor tighter regulation of the financial industry.

“I don’t understand how people who drive their companies into the ground should earn massive stock options and bonuses,” says poll respondent David Lovett, 68, a retired soldier from St. Marys, Georgia. “The government now has a stake in those institutions and, like any owner, it should expect representation on its board.”

Most investment banks this year plan to give employee bonuses, although at a drastically reduced rate. The top executives at Goldman Sachs, Morgan Stanley and Merrill Lynch & Co., whose firms all took taxpayer funds, have agreed to give up their bonuses.

Americans also favor massive government spending to boost the economy, regardless of the consequences for the budget and the national debt, the poll shows.

A majority in the survey views the $700 billion Treasury bailout for the financial industry and a proposal before Congress to help automakers as steps toward socialism. At the same time, by a margin of 50 percent to 33 percent, they say government ownership is necessary to rescue the economy.

‘Starting to Worry’

“I’m starting to worry that the government has its foot in just about everything,” says poll respondent Linda Earl, 47, a house cleaner in Redmon, Illinois. “Yet if they don’t do these bailouts, a lot of people will lose their jobs.”

While half of poll respondents deem federal intervention in the economy essential, there is less support for helping financial institutions. By a margin of 48 percent to 34 percent, Americans say the government should allow banks to fail if they can’t sustain themselves.

Treasury has taken equity stakes in 88 banks -- a list that includes almost every major U.S. financial institution -- in exchange for cash injections designed to stabilize a system decimated by home foreclosures and a credit crunch.

In the poll, 76 percent say banks that have received government cash should cancel year-end bonuses to employees this year. About half of those say all Wall Street firms, regardless of whether they participated in the Treasury’s Troubled Asset Relief Program, should cancel bonuses.

Executive Pay

Still, a majority in the survey opposes a proposal by some lawmakers to cap at $400,000 the annual executive pay at companies that took taxpayer money.

Wall Street’s five biggest firms paid a record $39 billion in bonuses for 2007, a year when three of the companies suffered the worst quarterly losses in their history and shareholders lost more than $80 billion. The average bonus was $211,849.

Goldman Sachs, Morgan Stanley, Merrill Lynch, Lehman Brothers Holdings Inc. and Bear Stearns Cos. together awarded $65.6 billion in compensation and benefits last year to their 186,000 employees.

Though most Wall Street firms plan to pay employees’ bonuses this year, the most senior executives at the companies will see their bonuses slashed by as much as 70 percent, according to a report by Johnson Associates, a compensation- consulting firm. Bonuses for other workers will drop by 10 percent to 45 percent.

Gloom on Economy

Bonuses may sound like a luxury to most Americans, 90 percent of whom say the economy is doing badly. Six in 10 say it’s doing very badly. At the same time, twice as many people - - 35 percent -- say they expect the situation to improve six months from now as those who say it will be worse; 45 percent predict little change. In an August poll, 28 percent said the economy would improve in six months, while 21 percent expected it to get worse.

In this month’s poll, almost 9 in 10 respondents say deregulation of the financial industry is at least partly to blame for the financial crisis. About half say deregulation is entirely or mostly to blame. The survey of 1,000 adults nationwide has a margin of sampling error of plus or minus 3 percentage points.

Government Spending Favored

A strong majority -- 56 percent -- favor significant government spending to fix the economy even at the risk of far wider budget deficits. By a margin of 58 percent to 21 percent, respondents say they’re more worried about the possibility of a deep recession than they are about the consequences of an additional trillion dollars of debt. That’s the size of the stimulus package many economists are urging President-elect Barack Obama to consider.

Six of 10 poll participants favor government assistance to homeowners facing foreclosure, about the same level of support as in an October poll. By a margin of 54 percent to 33 percent, respondents say government spending on infrastructure improvements would be more effective in jump-starting the economy and creating jobs than tax cuts.

“I don’t mind paying for things I want, and that includes decent schools and roads,” says poll respondent Rose Rasmussen, 53, a retired electrical engineer and now a self- employed florist in Oshkosh, Wisconsin. “The return on that money will help us much more than any other investment the government can make.”

To contact the reporter on this story: Matthew Benjamin in Washington at mbenjamin2@bloomberg.net .

Last Updated: December 10, 2008 17:00 EST

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