Well What Did You Expect?

Honestly, this seems like the silliest complaint I've seen from lawmakers in some time.

But Wall Street, helped by improving profits, is on track to pay employees as much as, or even more than, it did in the pre-crisis days. So far this year, the top six U.S. banks have set aside $74 billion to pay their employees, up from $60 billion in the corresponding period last year.

The increase in set-asides for employee pay has raised the ire of Washington, where lawmakers denounced financial leaders for returning to old habits and vowed to enact measures governing executive compensation.

"It strengthens our commitment to getting legislation passed," Rep. Barney Frank (D-Mass.), the chairman of the House Financial Services Committee, said in an interview Wednesday, adding that a committee vote on a bill to increase oversight of Wall Street pay has been scheduled for Tuesday. "The amounts are troubling."

Goldman Sachs caused a stir last week when it disclosed it had set aside a record $6.6 billion for compensation expenses in the most recent quarter, bringing the total for the first six months of the year to $11.4 billion. If that pace continues for the rest of the year, Goldman's employees will earn an average of about $773,000, more than double the figure last year and even exceeding the $700,000 paid in 2007.

The recent set-asides came as Goldman announced it earned a record $3.4 billion for the second quarter, positioning itself, along with J.P. Morgan Chase, as one of the strongest banks to emerge from the crisis.

But some analysts and investors had especially sharp words for Wall Street rival Morgan Stanley, which reported Wednesday that it had set aside $6 billion so far this year for compensation expenses even as it recorded its third straight quarterly loss. In reporting its second-quarter results, Morgan Stanley said it lost $1.26 billion, after accounting for one-time charges including an $850 million expense related to paying the government back after its bailout. Still, the company set aside $3.9 billion in compensation expenses, representing 72 percent of its revenue for the quarter.

I see a number of major problems here.

One, we're still waiting on Congress to actually get legislation to the President to sign. Both the Dems and the GOP are foot-dragging on this. As Dick Durbin famously said this April, Wall Street "owns the place".

Two, if you want to know where all this money that banks are getting is coming from, remember the AIG counterparty bailouts earlier this year. The $100 billion that went to AIG to satisfy its creditors was a back door bailout to the banks that they never have to pay back. No wonder they are right back where they were, and paying out even larger bonuses.

Three, why shouldn't the banks go right back to doing what they were doing before? They know that if things really go wrong again, they'll get bailed out. The big banks live, the small banks die.

It's business as usual, and the guys feigning outrage at it are the ones who should have passed regulation months ago as part of the bailout. Instead, nothing was done...and the banks will continue to gorge themselves on big profits and huge bonuses courtesy of you and me...while peons like us continue to lose half a million jobs a month.

And we'll be right back in the same crisis situation down the road. Perhaps Congress will complain then, too.