February 4, 2009 / 9:11 PM / 12 years ago

For now, Washington trumps Wall Street excess

WASHINGTON, Feb 4 (Reuters) - Call it the revenge of the bureaucrats.

High-flying Wall Street executives have had their wings clipped by government officials who earn less than many junior bond traders after President Barack Obama on Wednesday capped at $500,000 the salaries of executives whose companies take U.S. bailout money.

Obama and other Washington officials said the move was needed to keep the bailout palatable to ordinary Americans, but it also may have brought into the open long-simmering resentment among bureaucrats who have little sympathy for Wall Street’s culture of lavish spending.

Wall Street workers often view their outsize paychecks as a reflection of their prowess at the trading desk in a business where compensation has been tied to performance for decades.

By contrast, personal austerity is a public virtue in Washington, where skilled employees on the public payroll typically earn less than they could in the private sector.

For many, the chance to influence the direction of the country outweighs the chance to earn additional income — although many eventually leverage their experience into a lucrative lobbying career.

“At work, they are flattered and feared,” New York Times columnist David Brooks wrote. “But they still have to go home and clean out the gutters because they can’t afford full-time household help.”

Bankers, brokers and traders earned an average of $340,312 in 2006, according to the New York state labor department. Only a handful of federal officials earned more than $200,000.

“Everybody who decides to plump for public service rather than a commercial career is well aware of the limitations of pay that they’re going to have to operate under,” said Paul Hodgson of the Corporate Library, which tracks executive pay.


Obama frequently noted during his presidential campaign that he had passed up a lucrative career in corporate law to focus on public service.

He’ll earn $400,000 this year as president — well above the median U.S. income of about $50,000 but perhaps not enough to support a Wall Street tycoon’s lifestyle.

Of course, Obama’s job comes with a few perks — free room and board in the White House, free flights on Air Force One and free use of an armored limousine.

Other government officials earn far less.

Treasury Secretary Timothy Geithner, who is overseeing the Wall Street bailout, will earn $191,300 this year. He earned $411,000 salary as president of the New York Federal Reserve last year.

Congressional lawmakers who oversee trillions in government spending must make ends meet on $174,000.

Lawmakers are often reluctant to grant themselves pay raises for fear of alienating constituents who think they are already overpaid. Some brag of spartan apartments and ramen noodle dinners to show they are careful with taxpayer dollars.

Wall Street titans that take taxpayer dollars to stay afloat must bow to those limitations as well, several lawmakers have said.

This public virtue can haunt lawmakers when they leave office to pursue careers as lobbyists and rainmakers for investment firms.

Just ask Tom Daschle, Obama’s former pick to overhaul U.S. health care, who filmed an ad featuring his old Pontiac when he first ran for Senate in 1986 as a sign of his miserly ways.

The ad surfaced on YouTube shortly before Daschle withdrew his nomination on Tuesday amid revelations that he had not paid $140,000 in taxes incurred by his use of a private car and driver after he went to work for a private-equity firm.

Occasionally, resentment over government pay bubbles up.

Supreme Court Justice Anthony Kennedy warned Congress in 2007 that the federal bench would have trouble attracting qualified legal minds if it did not boost pay. Kennedy noted that Supreme Court clerks entering the private sector often earn more than their former bosses’ $200,000 salaries.

But many on the government payroll know that riches await them any time they want to leave, as lobbying firms, trade groups and other companies will pay them handsomely for their expertise and personal connections.

Former President Bill Clinton, who was essentially broke when he left the White House in 2001, earned $6 million in speaking fees last year. His wife Hillary, now secretary of state, earned at least $8 million from a book deal of her own.

“As the Clintons demonstrated, it’s perfectly possible to make an awful lot more money ... than what the country’s paying you,” Hodgson said.

Editing by Cynthia Osterman

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