Bankers Bonuses at $145 billion - A record

Get your Outrage on....according to the Wall Street Journal, pay at U.S. banks and securities companies increased 18% to a record $145 billion.

executive bonuses
Src: Mother Jones

 

At JP Morgan Chase, we have $9.3 billion for just their investment branch alone.

JPMorgan Chase & Co., the second- largest U.S. bank, set aside $9.3 billion for compensation and benefits for investment-bank employees in 2009, enough to pay each worker in that unit $378,600.

Recall the U.K. just put a 50% tax on executive compensation greater than $40,000. If the United States had such balls to do the right thing and enact a similar tax!

Bloomberg is reporting other bonus plans:

Goldman Sachs Group Inc., which announces results on Jan. 21, set aside $16.7 billion, or enough to pay each employee at the entire firm $527,192, for the first nine months of 2009.

According to Mother Jones:

  • 4,793 bonuses were $1 million or more in 2008
  • 7.7% overall compensation increase from 2007 to 2009 on Wall Street
  • 30% increase at JP Morgan Chase, a TARP recipient

Are you asking yourself how such outrageous riches can be had by a group of financial institutions that just caused the great recession, put the entire globe at the brink of Economic Armageddon, and demanded the U.S. taxpayers fork over trillions to save them?

Barry Ritholtz calls it as it is, Record bonuses based on record fraud. Ritholtz points out (and this hasn't gotten much press) but in March 2009 mark-to-market accounting rules were changed, so we have no idea what kind of real losses are on those financial institutions books.

See this link of the pressure from lobbyists against the FASB, who sets the accounting standards, and this one on what mark-to-market is.

Hence in terms of real profits, we know banks are not lending, we have story after story of derivative games, mortgage modification horror stories and fictional books. We also know they have free money from the Fed (0% effective federal funds rate), and can turn around and lend that free money at a profit, guaranteed. Ritholtz gives this possible conclusion for the bonuses:

Perhaps they realize the true state of their balance sheets, and are making hay while the sun is shining.

Joseph Stiglitz says the financial institutions are morally bankrupt:

How the market has altered the way we think is best illustrated by attitudes toward pay. There used to be a social contract about the reasonable division of the gains that arise from acting together within the economy. Within corporations, the pay of the leader might be 10 or 20 times that of the average worker. But something happened 30 years ago, as the era of Thatcher/Reagan was ushered in. There ceased to be any sense of fairness; it was simply how much the executive could appropriate for himself. It became perfectly respectable to call it incentive pay, even when there was little relationship between pay and performance. In the finance sector, when performance is high, pay is high; but when performance is low, pay is still high. The bankers knew—or should have known—that while high leverage might generate high returns in good years, it also exposed the banks to large downside risks. But they also knew that under their contracts, this would not affect their bonuses.

Paul Krugman outright calls bankers clueless.

the important thing looking forward is to stop listening to financiers about financial reform.

But what do they know? The answer, as far as I can tell, is: not much.

I disagree with Krugman on financial executives being clueless. Financial institutions know exactly what they are doing. They simply are very good at feigning stupidity to the public.

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Comments

Things have changed

I would disagree. Things have changed in the sense that these people are even more brazen and greedy.

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Farsighted more likely

I disagree with Krugman on financial executives being clueless. Financial institutions know exactly what they are doing.

I completely agree. Krugman is so often all over the landscape and mystifies me with his opinions.

When the banksters walk away with billions and trillions, they most certainly are on top of things, and most likely want to squeeze as much blood out of the turnip as they can probably foresee what is coming.

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Citigroup to cap cash @ $100k

Financial Times.

That said, there are many more ways to skin a cat, namely in options, you can award millions in stock options, then there are all sorts of other perks.

So, it would be nice to know their total bonus/compensation plans.

Still, someone has just a tad bit more common sense than the rest of these.

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Why is anyone at Citigroup getting a bonus?

Bonuses would be warranted if the company is profitable and specifically in the case of Citi no longer dependent on taxpayer money.

There was a time when companies would not give any bonuses if the company was in the red or didn't hit targets and many non-Wall Street companies still practice this. But I guess Wall Street doesn't practice this.

RebelCapitalist.com - Financial Information for the Rest of Us.

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executive compensation in the United States is out of control

and has been for years. Seriously, no rhyme or reason to it.

That's why the dot.com crash is called dot.con. During that time you saw a ricked game of IPOs where Citigroup and others rigged up stocks issued before the IPO, guaranteed to make them serious money and then the IPO...

then, when it was realized the company was vaporware, or had a business model that never was going to make any money or whatever it was and went bankrupt, a host of "executives" (i.e. deemed pals of VCs and/or "chosen ones") had golden parachutes that even in bankruptcy, they somehow managed to get things like cash outs of a few million to literally guaranteed yearly payouts in the millions.

Unreal, the company is bogus, on top of it, no longer exists, yet this guaranteed money, in the millions, was set up, usually by contract when the company was "started".

Same thing with meritocracy, a complete joke. You see the same idiots, who run companies into the ground over and over, somehow manage to land yet another executive position at yet another company. Then, there are huge incentives with mergers, acquisitions at some, so because these same cats are going to make out like bandits, you see a host of mergers/acquisitions that hurt the bottom line, make zero sense and of course guarantee at least 10k workers lose their jobs.

I mean it's seriously criminal and not a damn thing happens.

I also cannot name, the list would go off of the page, by companies hiring these idiots who then are so power hungry screw ups they miss major innovations and market trends, to literally "dethrowning" that same company from their original market leadership.

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Let Them Eat Cake

Citi was bailed out in the early ninties on the QT at the time and they have never been the picture of health.

I have a picture of them partying in their corporate tower while a lowly gas company employee is turning the gas off in the basement because Citi can't pay the bill as the mailman passes him carrying notices to several million citi card holders that their rates are being increased to 60% because, well no reason given.

They should have been seized by the FDIC last fall. We have protected the wealthy shareholders at the expense of taxpayers and the overall health of our economy now dependent on zombie banks.

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