Speaking to businesses leaders yesterday at the Museum of American Finance in Manhattan, Paterson refused to join the chorus of lawmakers who have vilified Wall Street for hefty bonuses, exorbitant pay, or the risky lending behaviors that helped contribute to the subprime mortgage crisis.
Instead, he praised bonuses as incentives, saying while many Americans blame Wall Street for the nation's economic problems, they should remember the financial sector is New York's economic engine. He said when Wall Street does well, the state does too.
"If you say anything about corn in Iowa, they'll run you out of town. If you say anything about oil in Texas, they'll string you up in the nearest tree. We need to stand behind the engine of our economy in New York, and that engine of the economy is Wall Street," Paterson said.
Salaries on Wall Street, Paterson said, are “really rather low,” and he dismissed the widespread criticism of huge annual bonuses, saying that New York would be worse off if they were not given out. Bank of America seems to agree, announcing this week it was paying back its Troubled Asset Relief Program, or TARP funds, to the federal government -- just in time for bonus season.
He did not directly mention the meltdown of the mortgage market that set off the financial crisis or Bernard Madoff, nor any of the other recent scandals involving financiers that have contributed to the widespread antipathy toward Wall Street, the New York Timesnotes.
Paterson told financiers, bankers and other players of the financial industry that the state was now broke and he was withholding payments to schools, local governments and non-profit services until thing improve.
"New York has run out of cash," he said. Without irony, he told the Wall Street Group "You can't spend money you don't have."
The governor spent eight minutes of a 25-minute speech singing the praises of Wall Street, saying it creates "careers, profits, and resources," that generates about one fifth of the state's tax revenues.
"It hasn't just been acquisitions and land transfers or initial public offerings. It's been schools for our children, health care for our families, homes for our neighbors, and jobs for our state workforce," he said.
According to New York Magazine, Richard Parsons, the chairman of CitiGroup, called the speech "terrific." A year after accepting two taxpayer bailouts, Citigroup, too, is racing to raise billions of dollars to repay its TARP funds, a crucial step in freeing itself from Washington’s grip and getting those big bonuses back.
Paterson came to Wall Street's defense as he faces a possible primary challenge from Attorney General Andrew Cuomo, who has led high profile investigations on Wall Street pay and Bank of America's purchase of Merrill Lynch.