The SEIU's Dishonest Attack on Wall Street Banks

There are plenty of reasons to dislike Wall Street. A common complaint is that banker pay is simply outrageous. There are very legitimate ways to formulate arguments about why this could be a problem for an economy. But instead of adopting a sensible approach to complaining about Wall Street pay, a new piece of propaganda called "Big Banks Bonus Bonanza," (.pdf) written by a coalition of progressive groups, including the Service Employees International Union (SEIU) relies on half-truths to sensationalize Wall Street compensation.

The apparent thesis from this pamphlet (it's too much of a stretch to call it a "report," so I'm not sure what else to call it) is that Wall Street bankers make way too much money, and that money could be spent in other ways to better benefit the economy. In its first section called "Bonus Bonanza on Wall Street", it provides the following chart:

seiu bank comp 2010-12.png

This data is technically correct, but doesn't represent what the creators of the pamphlet would like you to believe. In fact, the staggering $142.7 billion sum doesn't consist of Wall Street bonuses. That will probably be well below 10% of this sum for these six banks. This big number represents total compensation paid by these banks. That means it includes salaries, benefits, and all other compensation paid, along with bonuses.

The pool of employees that this figure includes also extends far beyond the bankers and traders on Wall Street. It includes the salaries of the tellers at their thousands of branches across the U.S. It includes their mortgage underwriters and credit card customer service representatives. It even includes their IT staff and administrative assistants. Everyone who works for these firms is a part of this total, even if they live thousands of miles from Wall Street.

In short, this gigantic $142.7 billion is meaningless as a measure of Wall Street pay, because it doesn't represent it. But that doesn't stop the pamphlet from drawing all kinds of wild conclusions. It imagines all the great things that could be done with that money, like paying down state deficits and creating jobs.

Let's focus on that second for a moment. It says:

If Wall Street pumped this money directly into the economy instead of paying it to its bankers, it could create 3.6 million new jobs, and lower the unemployment rate by 2.3 percent.

First of all, hundreds of thousands of jobs would be eliminated if you took this money away, because it makes up the compensation for every employee of these six huge firms. And I'd also like to see what magic plan the creators of this pamphlet have for using $142.7 billion to create 3.6 million jobs. They should certainly send that plan directly to Congress, because through the second quarter, even the White House's most optimistic estimate is that 2009's $787 billion stimulus package only created that many jobs. And of course, its cost was 5.5x as great, which means that spending alone could have lowered the unemployment rate to zero if the pamphlet is to be believed.

In fact, "pumping this money directly into the economy instead of paying it to" these bank employees would not create many more jobs than would be destroyed by eliminating these six giant banks.

The report also makes seemingly benign statistics sound terrible. In one bullet point, it laments:

37 percent of every dollar the top six banks take in gets set aside for bonuses and compensation.

What, exactly, is wrong with that? Isn't it great when workers get a large share of a firm's revenue? Indeed, wouldn't the SEIU love it if its union members were paid a larger portion of revenue? Banks are, after all, a service industry. That revenue should be going back in large part to employees, since their work directly results in their firms' success or failure.

This is just a snapshot of some of the ridiculous things written in this pamphlet. The SEIU should be ashamed to affix its name to this sort of pathetic propaganda. There are plenty of legitimate ways to argue that Wall Street pay is excessive, but twisting facts isn't one of them. These six banks perform many important functions in our economy, and it is nonsense to simply imagine a world where they don't pay their employees at all.