Banks, Bailouts, Bonuses and Blow Ups

It is now being called “The Great Recession”. The severe economic downturn and global financial crisis accompanying it, has left lasting changes on the United States, from consumers’ spending habits to the expected rate of unemployment. The bankruptcy of a large bank, Lehman Brothers, is generally considered the beginning of the collapse. As explanations for why this was all happening were researched, it became clear that the main responsibility lay on banks (Lucchetti, Enrich, & Lublin, 2009).

Yet, as most Americans were learning to do with less, and the government stepped in to keep other banks from failing, some Wall Street employees were going home with larger paychecks than ever. In 2008, for example, Citigroup had an overall loss of $27.7 billion, received $45 billion in government funding, and then proceeded to pay its top four executives $43.66 million in addition to salaries (Cuomo, 2009, p. 7-8). The view that it is unethical for top executives of the major banks that received bail-out money to be allowed to receive large bonuses, is defended from both utilitarian and deontological perspectives.

By deciding to continue paying themselves such amounts, bank executives brought about several negative outcomes on themselves and their firms. Most significantly, a great deal of ill will was generated. Shareholders of Merrill Lynch might be among the first to express such an opinion. In his report for the state of New York, Attorney General Andrew Cuomo (2009) reported that though Merrill Lynch had net losses of nearly $25 per share, its top executives received $121 million (p. 10). The outcry of the shareholders of Merrill Lynch and other banks not only produced sell-offs of the stock, but also caught the attention of legislators, such as Congressman Barney Frank. Frank introduced a bill that would allow shareholders to vote to approve executive pay (Freifeld, 2009). Though the vote would not be binding on the executives, the idea sets precedent...