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mises
Joined: 05 Nov 2007
Location: retired
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 Posted: Sat Oct 18, 2008 12:12 pm Post subject: the bankers ball |
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Wall Street banks in $70bn staff payout
Pay and bonus deals equivalent to 10% of US government bail-out package
Demonstrators protesting in New York before the $700bn Wall Street bail-out earlier this month.
Financial workers at Wall Street's top banks are to receive pay deals worth more than $70bn (�40bn), a substantial proportion of which is expected to be paid in discretionary bonuses, for their work so far this year - despite plunging the global financial system into its worst crisis since the 1929 stock market crash, the Guardian has learned.
Staff at six banks including Goldman Sachs and Citigroup are in line to pick up the payouts despite being the beneficiaries of a $700bn bail-out from the US government that has already prompted criticism. The government's cash has been poured in on the condition that excessive executive pay would be curbed.
Pay plans for bankers have been disclosed in recent corporate statements. Pressure on the US firms to review preparations for annual bonuses increased yesterday when Germany's Deutsche Bank said many of its leading traders would join Josef Ackermann, its chief executive, in waiving millions of euros in annual payouts.
The sums that continue to be spent by Wall Street firms on payroll, payoffs and, most controversially, bonuses appear to bear no relation to the losses incurred by investors in the banks. Shares in Citigroup and Goldman Sachs have declined by more than 45% since the start of the year. Merrill Lynch and Morgan Stanley have fallen by more than 60%. JP MorganChase fell 6.4% and Lehman Brothers has collapsed.
At one point last week the Morgan Stanley $10.7bn pay pot for the year to date was greater than the entire stock market value of the business. In effect, staff, on receiving their remuneration, could club together and buy the bank.
In the first nine months of the year Citigroup, which employs thousands of staff in the UK, accrued $25.9bn for salaries and bonuses, an increase on the previous year of 4%. Earlier this week the bank accepted a $25bn investment by the US government as part of its bail-out plan.
At Goldman Sachs the figure was $11.4bn, Morgan Stanley $10.73bn, JP Morgan $6.53bn and Merrill Lynch $11.7bn. At Merrill, which was on the point of going bust last month before being taken over by Bank of America, the total accrued in the last quarter grew 76% to $3.49bn. At Morgan Stanley, the amount put aside for staff compensation also grew in the last quarter to the end of August by 3% to $3.7bn.
Days before it collapsed into bankruptcy protection a month ago Lehman Brothers revealed $6.12bn of staff pay plans in its corporate filings. These payouts, the bank insisted, were justified despite net revenue collapsing from $14.9bn to a net outgoing of $64m.
None of the banks the Guardian contacted wished to comment on the record about their pay plans. But behind the scenes, one source said: "For a normal person the salaries are very high and the bonuses seem even higher. But in this world you get a top bonus for top performance, a medium bonus for mediocre performance and a much smaller bonus if you don't do so well."
Many critics of investment banks have questioned why firms continue to siphon off billions of dollars of bank earnings into bonus pools rather than using the funds to shore up the capital position of the crisis-stricken institutions. One source said: "That's a fair question - and it may well be that by the end of the year the banks start review the situation."
Much of the anger about investment banking bonuses has focused on boardroom executives such as former Lehman boss Dick Fuld, who was paid $485m in salary, bonuses and options between 2000 and 2007.
Last year Merrill Lynch's chairman Stan O'Neal retired after announcing losses of $8bn, taking a final pay deal worth $161m. Citigroup boss Chuck Prince left last year with a $38m in bonuses, shares and options after multibillion-dollar write-downs. In Britain, Bob Diamond, Barclays president, is one of the few investment bankers whose pay is public. Last year he received a salary of �250,000, but his total pay, including bonuses, reached �36m. |
http://www.guardian.co.uk/business/2008/oct/17/executivesalaries-banking
Doesn't seem right. |
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Gopher
Joined: 04 Jun 2005
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| Posted: Sat Oct 18, 2008 12:36 pm Post subject: |
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I agree these bonuses and other deals, etc., are out of line and I expect the govt to stop them.
But
| mises wrote: |
| ...despite plunging the global financial system into its worst crisis since the 1929 stock market crash, the Guardian has learned. |
I have grown tired of this hyperbole.
Where are the twenty-something percent unemployment rates, the food rationing, the soup kitchens?
How is it that the United States is on Mars and sending probes to map the solar system's edge? Or in the midst of constructing a new, improved fleet of Gerald R. Ford class supercarriers, projected to serve the American Navy for the next fifty or so years? Why are the European Union's top leaders coming to Washington to talk, rather than the other-way-around? Where can I actually see this dramatic collapse and shift in global power that critics are screaming about in the media and especially on internet fora such as this enlightened one? |
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On the other hand
Joined: 19 Apr 2003
Location: I walk along the avenue
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| Posted: Sat Oct 18, 2008 12:41 pm Post subject: |
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| How is it that the United States is on Mars and sending probes to map the solar system's edge? |
Well, I'd imagine that there were also a lot of great scientific and technological developments taking place in the US around the time of the '29 crash as well. That didn't make the subsequent impact of the crash any less of a reality. |
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Kuros
Joined: 27 Apr 2004
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| Posted: Sat Oct 18, 2008 12:46 pm Post subject: |
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| I feel ill. |
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Gopher
Joined: 04 Jun 2005
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| Posted: Sat Oct 18, 2008 1:10 pm Post subject: |
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On the Other Hand: do you not recognize the economic costs of such space programs? In any case, I note that you seized on and then exploited the opportunities one of my examples presented while ignoring the totality of the pattern I presented.
Western European leaders have asked for and received an audience with W. Bush to present their views and offer suggestions this weekend. If power relations have shifted, should this not be the other-way-around? They once made a war that we disapproved of, On the Other Hand, in North Africa re: the Suez. We told them to stop and they immeidately stopped. We are now making a war that they disapprove of, in Iraq. Why have they not told us to stop it? Also, it is an expensive war. Why, then, are our forces not collapsing or at least falling back for lack of funds, etc., when the American economy has allegedly "tanked" -- as the British did in the Eastern Med when their economy tanked following the Second World War? |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Sat Oct 18, 2008 1:46 pm Post subject: |
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| Gopher wrote: |
I have grown tired of this hyperbole.
Where are the twenty-something percent unemployment rates, the food rationing, the soup kitchens?
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It is a financial crises right now, with an economic crises to follow. We have to hold our breath about unemployment rates until after the Xmas shopping season. |
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sojourner1
Joined: 17 Apr 2007
Location: Where meggi swim and 2 wheeled tractors go sput put chug alugg pug pug
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| Posted: Sat Oct 18, 2008 7:14 pm Post subject: |
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It's obvious that most of the $700b bailout package will funnel through to be executive bonus and temporary capital gains money for investors. When this money has made it's complete circuit through the markets to rich people's coffers, the market is going to be exhausted. It's only running on fumes sent in from Uncle Sam who borrowed it from China and other nations. We can't continue to run up the national debt to finance gross negligence and to pad the rich in lean times due to their boondoggle created from their greedy gross negligence in carrying out their responsbility in high leadership positions.
Why continue to pay people big salaries and bonuses who destroyed value in their companies and our economy? Since when were you rewarded for low performance on a job? Our capitalistic model has fallen into corruption and is failing it's original intended purpose. We have a government to maintain stability in a fair and equitable manner centering around meritocracy where you're rewarded for good performance, but we're only rewarding bad behavior and punishing the innocent victims.
I hope the new administration clamps down and sets things straight. |
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Gopher
Joined: 04 Jun 2005
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| Posted: Sat Oct 18, 2008 7:28 pm Post subject: |
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| sojourner1 wrote: |
| I hope the new administration clamps down and sets things straight. |
Thus the hyperbole. I do not think that people truly believe this nonsense about the end of America and the utter collapse of its economy, etc. Because your and others' hope that "the new administration will set things straight" does not reconcile with that. If the former were true, then the new administration's task would be to pick up the pieces and redefine America's role in world affairs, now as a second- or third-rate nation-state, now under China's thumb, at best. B. Obama could not "clamp down" on this because the patient should already be bled to death and there could be nothing to clamp down on anymore.
This hyperbole nicely supplements the other campaign-year propaganda positions, though: elect B. Obama or else "the rest of the world" will not like us, or else we will prove ourselves a racist country, and now, or else we are all going to die of hunger and cold, etc. |
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Kikomom
Joined: 24 Jun 2008
Location: them thar hills--Penna, USA--Zippy is my kid, the teacher in ROK. You can call me Kiko
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| Posted: Sat Oct 18, 2008 7:38 pm Post subject: |
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I say, what is it with these bald guys?
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Mr. Bailout: The Man Chosen To Oversee $700B
35-year-old Goldman Sachs alum Neel Kashkari has been selected to head the Treasury's new Office of Financial Stability. He is currently the assistant secretary of the Treasury Department.
Day to Day, October 6, 2008 � Treasury Sec. Henry Paulson has announced that 35-year-old Neel Kashkari is interim head of the Treasury's new Office of Financial Stability. Madeleine Brand talks to The Wall Street Journal's Deborah Solomon about the Goldman Sachs Group alum who will be in charge of the $700 billion bailout package.
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Ya-ta Boy
Joined: 16 Jan 2003
Location: Established in 1994
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| Posted: Sat Oct 18, 2008 7:40 pm Post subject: |
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This is from a post on the Job Forum: "My plans have formulated since joining this forum, and I was all on track to take a training course for TEFL certification and joining GEPIK in March.
However, I am now laid off and worried about eating next month. I contacted my trader and she says ALL of my investment money is gone. This was my only cushion and my daily life is always paycheck to paycheck.
So - I am in dire straights and my plans to come to Korea are in jeopardy."
Chances are good this is only the first of many posts we'll be seeing around here. What was that the man shouted as he fell past the 80th floor of the Empire State Building? "So far so good!" |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Sat Oct 18, 2008 7:41 pm Post subject: |
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| Kikomom wrote: |
I say, what is it with these bald guys?
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Mr. Bailout: The Man Chosen To Oversee $700B
35-year-old Goldman Sachs alum Neel Kashkari has been selected to head the Treasury's new Office of Financial Stability. He is currently the assistant secretary of the Treasury Department.
Day to Day, October 6, 2008 � Treasury Sec. Henry Paulson has announced that 35-year-old Neel Kashkari is interim head of the Treasury's new Office of Financial Stability. Madeleine Brand talks to The Wall Street Journal's Deborah Solomon about the Goldman Sachs Group alum who will be in charge of the $700 billion bailout package.
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The dude insisted that his graduation photo from his Wharton MBA was done with his Ferrari in the background. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Sat Oct 18, 2008 7:45 pm Post subject: |
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| Ya-ta Boy wrote: |
However, I am now laid off and worried about eating next month. I contacted my trader and she says ALL of my investment money is gone. This was my only cushion and my daily life is always paycheck to paycheck. |
Paycheck to paycheck and yet he/she has a "trader" (different from a broker)? If you are pay-to-pay you don't invest. You save a 6 month salary buffer and pay down debt to zero. Investing is a luxury for people who can afford it. Not one cent "invested" until you can live without a hit in your standard of living for 6 months on savings alone. That's a solid rule. 12 months is even more preferable.
I'm not without compassion for people like this, but really, are they bloody retarded? |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Sat Oct 18, 2008 7:52 pm Post subject: |
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Related to above:
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Chapter 1 - Choose a Sound Financial Lifestyle
The Bogleheads� Guide to Investing opens with a chapter on a topic that most people tend to ignore: choosing a sound financial lifestyle. I agree with the authors in that in order for a person to be successful with their finances, they must first choose to live a lifestyle that will allow them to accumulate wealth. The authors do a great job profiling the following three financial lifestyles:
The Borrowers - The �live for today� mentality. I know lots of people in this category. My wife and I were in this category during and right after college. It didn�t take us long to figure out that we needed to make a change.
The Consumers - The �can we afford the payments� mentality. This lifestyle is nearly as dangereous as the Borrowers lifestyle because it means that everything that comes in is likely to go right back out again.
The Keepers - The �it�s not how much we earn but how much we keep� mentality. This is the mentality that builds wealth. And, the really cool thing about this lifestyle is that a person doesn�t have to make a lot of money in order to build wealth.
Take a wild guess as to which mentality is going to build wealth?
Finally, Chapter 1 closes by recommending three steps that people should take BEFORE they start investing.
1. Graduate from the paycheck mentality to the net worth mentality.
2. Pay off credit card and high-interest debts.
3. Establish an emergency fund.
I like the way the authors open The Bogleheads� Guide to Investing because it is important to make sure everything is in order before a person starts to build wealth. |
http://allfinancialmatters.com/2006/10/02/bogleheads-october-project-chapter-1/
http://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore/dp/product-description/0470067365
If you do this, you can weather even severe economic storms. |
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Gopher
Joined: 04 Jun 2005
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| Posted: Sat Oct 18, 2008 7:53 pm Post subject: |
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| Ya-ta Boy wrote: |
| This is from a post on the Job Forum... |
So what?
This is your evidence that we are in the Great Depression, that we are hitting unemployment in the twenty-something percentages, that food rationing and soup kitchens are upon us?
I think you are a bit too eager to make the stretch that America is falling from the Empire State Building's eightieth floor, Ya-ta Boy.
________
That is exactly right, Mises. My own broker will not take clients who do not have a $5K or better savings acct because, as he says, he does not ever want to get calls in the middle of the night demanding liquidation. If you invest money, it better not be with funds that you might need before "someday when I retire." And you had better have a stomach for upturns and downturns along the way.
Last edited by Gopher on Sat Oct 18, 2008 7:58 pm; edited 2 times in total |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Sat Oct 18, 2008 7:57 pm Post subject: |
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| It is a good contrast to the bonuses these snake-oil peddlers in the financial services industry have been getting. Millions of real people with real lives (meaning normal) have been sold a financial reality that was false. The bankers/traders continue to earn millions in bonuses and the normal people go tit.s up. |
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