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Wall Street banks in $70bn staff payout

 
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Maggie AAR
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PostPosted: Tue Oct 21, 2008 7:56 pm    Post subject: Wall Street banks in $70bn staff payout Reply with quote

Thoughts?

maggie b.

Wall Street banks in $70bn staff payout
Pay and bonus deals equivalent to 10% of US government bail-out package


* Simon Bowers
* The Guardian,
* Saturday October 18 2008
* Article history



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.
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LizE



Joined: 22 Mar 2007
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PostPosted: Wed Oct 22, 2008 8:17 pm    Post subject: Re: Wall Street banks in $70bn staff payout Reply with quote

maggie b. wrote:
Thoughts?


At least it's out in the open now.

But what will we--what can we do about it?

Eat cake?
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Maggie AAR
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PostPosted: Thu Oct 23, 2008 4:20 pm    Post subject: Re: Wall Street banks in $70bn staff payout Reply with quote

LizE wrote:


But what will we--what can we do about it?

Eat cake?


I plan to eat cake anyway. Wink It's the best solution to tough times I can think of. But I went ahead and emailed my congressmen and representatives and pasted the article into my email. The point of this bail out was supposed to be helping the economy, not keeping wall street broker's inflated bonus plans going. I don't know what all can be done about it but I think if they hear from enough us they will manage to do *something*.

maggie b.
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LisaW



Joined: 05 Apr 2007
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PostPosted: Thu Oct 23, 2008 11:52 pm    Post subject: Re: Wall Street banks in $70bn staff payout Reply with quote

maggie b. wrote:
I don't know what all can be done about it but I think if they hear from enough us they will manage to do *something*.

maggie b.



I heard a very good suggestion this evening --- advocate with your Congressmen and Senators that these organizations taking the money must make the money they've received available to the public in the form of loans (well, not subprime loans!) by a set (in the near future) date --- or have to immediately pay back the funds and if the organization fails, it fails. This would include meaning personnel given money fromt the organization would have to pay back that money.
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Kerstin



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PostPosted: Fri Oct 24, 2008 1:20 am    Post subject: Reply with quote

I feel the absolute politically incorrect urge to capture these greedy people and tar and feather them and shoo them through the streets. I now feel considerable sympathy for the Parisian mob back then in the 1780's. I can't understand why vice directors and presidents have so little accountability, that they obviously don't shoulder any risk. Such perversely high salaries can only be justified if a huge financial risk (for them!!!) is involved even if the job is done well generally. And they did such a lousy job to boot. And thanks to globalization we all sit in one and the same boat now (well, except for all those vice presidents who go hunting and fishing and save themselves with their golden parachutes to quote Gordon Gecko)

Here's a nice Youtube clip which sums it up all (warning, veeeery dry, black British humor at work) :


http://www.youtube.com/watch?v=mzJmTCYmo9g

Kerstin
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Maggie AAR
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PostPosted: Fri Oct 24, 2008 7:02 am    Post subject: Reply with quote

Kerstin,

That was utterly brilliant! (and I like your tar and feathering idea Wink )

maggie b.
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dick



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PostPosted: Sat Oct 25, 2008 1:35 pm    Post subject: Reply with quote

About those payouts: Don't you think it's probable that those people had contracts stipulating how their "payoffs" would be figured? If any of us were to have a job which required two weeks notice before being let go and two weeks of pay when severed, would we want the government to decide that two weeks notice and two weeks pay was unnecessary? Would we really want to live in an economy where contracts, regardless how greedy they make the recipients appear, could be abrogated by government?
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Kerstin



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PostPosted: Sun Oct 26, 2008 9:44 am    Post subject: Reply with quote

dick wrote:
About those payouts: Don't you think it's probable that those people had contracts stipulating how their "payoffs" would be figured? If any of us were to have a job which required two weeks notice before being let go and two weeks of pay when severed, would we want the government to decide that two weeks notice and two weeks pay was unnecessary? Would we really want to live in an economy where contracts, regardless how greedy they make the recipients appear, could be abrogated by government?


If I as a tax payer pay these perversely high bonuses in the end which I am doing right now-yes, then the state should regulate the whole thing. If these people would now at least have to pay for the damage they have caused with their accumulated wealth that would be a different thing altogether. But they all walk off scot-free and are not held accountable for their actions. Where is the financial risk for them that is usually part of a real free market ? It is not them but us from the middle class that pay the bill in the end and that's why I'm all for state regulations.




Kerstin
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Maggie AAR
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PostPosted: Sun Oct 26, 2008 9:57 am    Post subject: Reply with quote

dick wrote:
About those payouts: Don't you think it's probable that those people had contracts stipulating how their "payoffs" would be figured? If any of us were to have a job which required two weeks notice before being let go and two weeks of pay when severed, would we want the government to decide that two weeks notice and two weeks pay was unnecessary? Would we really want to live in an economy where contracts, regardless how greedy they make the recipients appear, could be abrogated by government?


Dick,

those contracts should stipulate what the company would pay them. The company is no longer paying them, the government is, which to me means new stipulations. If, on the other hand, the company can afford those payoffs, there is no need to give them bail out funds. I feel these folks have figured out how to have their cake and eat it too -- and make someone else foot the bill to boot! Evil or Very Mad

maggie b.
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Charlotte McClain



Joined: 04 Oct 2008
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PostPosted: Sun Oct 26, 2008 10:13 am    Post subject: Reply with quote

dick wrote:
About those payouts: Don't you think it's probable that those people had contracts stipulating how their "payoffs" would be figured? If any of us were to have a job which required two weeks notice before being let go and two weeks of pay when severed, would we want the government to decide that two weeks notice and two weeks pay was unnecessary? Would we really want to live in an economy where contracts, regardless how greedy they make the recipients appear, could be abrogated by government?


The way I see it: My house, my rules. When you folks were earning enough to stay out of my pocket, then you were welcome to reward yourselves for screwing up. When you screw up so bad that I'm going to lose my house, I don't think you should be rewarded for that.

My house, my rules.
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dick



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PostPosted: Mon Oct 27, 2008 10:38 am    Post subject: Reply with quote

to kerstin, maggieb, and charlotte: But none of those are the issue. The issue is whether contracts should be honored.
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Maggie AAR
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PostPosted: Mon Oct 27, 2008 10:41 am    Post subject: Reply with quote

Dick,

my point was the contract was nullified by the bail out, ergo it should not be honored.

maggie b.
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LisaW



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PostPosted: Mon Oct 27, 2008 3:11 pm    Post subject: Reply with quote

dick wrote:
to kerstin, maggieb, and charlotte: But none of those are the issue. The issue is whether contracts should be honored.



If the organization had gone bankrupt, those contracts might have become just one of all the other creditors ... and paid out pennies on the dollar. In any bankruptcy, there's a whole bunch of people who get preferential treatment -- and officers "bonuses for work well done" isn't one of them (or, at least, shouldn't be!!).
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dick



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PostPosted: Wed Oct 29, 2008 10:04 am    Post subject: Reply with quote

to lisaw: A judge, of course, would decide whether a contract in bankruptcy should be honored and to what degree. The issue remains, despite that, whether contracts should be honored.
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