Obama Doesn't "Begrudge" Bankers' Wealth

Less than a month after calling bank executives' pay "obscene," President Barack Obama is declining to criticize bonuses received by two top Wall Street chief executives, saying he doesn't "begrudge people success or wealth."

In an interview with Bloomberg Business Week, the president compared Jamie Dimon, CEO of JPMorgan Chase & Co., and Lloyd Blankfein, CEO of Goldman Sachs Group Inc., with athletes who are paid even more.

"First of all, I know both those guys," Obama said. "They're very savvy businessmen. And I, like most of the American people, don't begrudge people success or wealth. That's part of the free market system."

The full interview will not appear until Friday. But the White House, eager to defend the president's remarks, issued a transcript Wednesday of the exchange over bank compensation.

Dimon received a $17 million bonus and Blankfein received $9 million. The compensation was in the form of stock that can't be redeemed immediately.

"Listen, $17 million is an extraordinary amount of money," Obama said in the interview. "Of course, there are some baseball players who are making more than that who don't get to the World Series either. So I'm shocked by that as well."

Obama's remarks display a much more temperate approach to bankers whom not long ago he derided as "fat cats" and whose bonuses he decried as "obscene." They also illustrate the complicated relationship Obama has with Wall Street, a convenient populist target for the president but also an essential component of an economic recovery.

Dimon in particular has been courted by the president. A top Democratic donor, Dimon recently joined other executives for a private lunch with Obama and met privately with Treasury Secretary Timothy Geithner. But Dimon hasn't ignored Republicans, meeting with House Republican Leader John Boehner at the Capitol Hill Club recently, just steps from House office buildings.

After giving equally to national Democratic and Republican party organizations going back at least to 2002, JPMorgan's political action committee last year contributed only to GOP national organizations. It has divided its money among specific members of Congress more equally, however.

Dimon has privately voiced frustration with the past tone of Obama's comments about bankers. Last month, he criticized a fee on large banks that Obama proposed to cover shortfalls in the government $700 billion bank rescue fund. "Using tax policy to punish people is a bad idea," Dimon said at the time.

Obama has been especially critical of Wall Street banks and their lobbyists for their opposition to certain aspects of his proposed financial regulations, especially a new independent consumer financial protection agency.

Rep. Dennis Kucinich of Ohio, a liberal Democrat who has proposed a 75 percent tax on bank bonuses, said Obama was now trying to be conciliatory with an industry that should be reined in.

"It's like we're afraid of upsetting these people," he said. "This condition where there is such a profound separation between the financial economy on Wall Street and the real economy on Main Street needs to be addressed."

Obama's reaction to Blankfein's and Dimon's bonuses also flies in the face of his administration's stated desire to shrink banks that are considered too big to fail, said Simon Johnson, former chief economist with the International Monetary Fund and professor at the Massachusetts Institute of Technology's Sloan School of Management.

Both Goldman Sachs and JPMorgan Chase received billions of dollars from the government's unpopular Troubled Asset Relief Program. Both institutions have since repaid the money, but Johnson argued that they are still large and that the bonuses encourage risky behavior.

"I don't begrudge success and wealth, but I would like for it to be socially productive and socially constructive, not massively damaging," he said.

The White House moved swiftly Wednesday to dampen any suggestion that Obama was taking a different tone with bankers. It provided reporters with copies of past remarks, dating back to the presidential campaign, where Obama has asserted that he did not "disparage" or "begrudge" wealth and success.

In the interview with Bloomberg, Obama stressed that shareholders should be given a say, even if not binding, on the pay packages of executives. He also said bonuses received as stock that is held over time - such as those for Blankfein and Dimon - are preferable because they tie the compensation to long-term performance.

"I guess the main principle we want to promote is a simple principle of 'say on pay,' that shareholders have a chance to actually scrutinize what CEOs are getting paid," Obama said. "And I think that serves as a restraint and helps align performance with pay."