Wall Street's $18.4B Bonus: 'Sense of Entitlement Has Not Been Beaten Out'

The cataclysm on Wall Street did not stop New York City-based employees from collecting $18.4 billion in bonuses for 2008. Sure, that pool is down 44% from the prior year but still represents the sixth-largest bonus haul on record, according to the NY State comptroller's office.

So after the worst year ever, Wall Street collected its sixth-biggest bonus pool. Makes perfect sense.

But whether its John Thain's rationale for paying Merrill employees accelerated bonuses (or any bonus for that matter), Citigroup's purchase of a $50 million corporate jet (before reneging), or the sickening vapidity of the DABA blog, it's clear many people on Wall Street remain completely out of touch with reality.

"The sense of entitlement that's been engendered in this group of people has clearly not been beaten out of them by the brutal performance of the financial sector over the course of the last year," says Bob O'Brien, stocks editor at Barrons.com.

Of course, what's most sickening to the vast majority of Americans is these bonuses were paid (mostly) by the same firms who've received TARP funds. The rationale that "bonuses must be paid or we'll lose our best people" doesn't hold water when everybody on Wall Street is suffering and cutting back. Similarly, the idea "there are separate pools of capital for bonuses vs. lending" doesn't hold water when Wall Street CEOs say "money is fungible" as a way of explaining why they can't track TARP funds.

Since Wall Street is clearly incapable of policing itself, the biggest question now is whether the Obama administration, Congress and Treasury Secretary Geithner will summon the political will and do the right thing -- attach major strings on future bailouts, including:

• Severe limitations on bonuses and executive pay at TARP recipients. (I know many people want 'clawbacks' but let's start with the future first, which is simpler.)
• Elimination of dividends paid by TARP recipients. (Even after "slashing" their dividends to a penny per share each, Citigroup and Bank of America are set to collectively pay approximately $425 million in dividends this year.)
• Force banks to write-down bad debts before injecting capital, a.k.a. The Swedish Solution.
• Elimination of lobbying by TARP recipients. (Sorry Tim Geithner, "imposing restrictions" isn't enough.)