Saturday, August 1, 2009

What Gives?

Greetings good citizen,

Sometimes you just have to scratch your head and wonder to yourself just WTF is going on when this is today’s headline news story and the markets still go up!

The question on most rational people’s lips is how the fuck do you pay more in bonuses than you earned? How the fuck does that work? Did Mr. Paulson hand out the TARP funds knowing this is how they would be put to use? Until Hank handed over those big checks these banksters didn't have the money to pay these lavish, er, ‘incentives’.

But that’s okay, right? Isn’t the ‘important thing’ here that the banking system didn’t implode?

Um, now that this is out in the open, when do you suppose Congress is going to start issuing subpoenas?

Bankers Reaped Lavish Bonuses During Bailouts

Nine of the financial firms that were among the largest recipients of federal bailout money paid about 5,000 of their traders and bankers bonuses of more than $1 million apiece for 2008, according to a report released Thursday by Andrew M. Cuomo, the New York attorney general.

At Goldman Sachs, for example, bonuses of more than $1 million went to 953 traders and bankers, and Morgan Stanley awarded seven-figure bonuses to 428 employees. Even at weaker banks like Citigroup and Bank of America, million-dollar awards were distributed to hundreds of workers.

The report is certain to intensify the growing debate over how, and how much, Wall Street bankers should be paid. [When the real issue is how long a sentence should Wall Street Executives be handed for massive malfeasance! They gave Bernie Madoff 150 years, that should serve as a good ‘benchmark’.]

In January, President Obama called financial institutions “shameful” for giving themselves nearly $20 billion in bonuses as the economy was faltering and the government was spending billions to bail out financial institutions. [The President is correct to point the finger of shame at these criminals when it only now has become apparent that the banks weren’t ‘good for’ the sums they paid out. Until now the public has been led to believe the banks had this money ‘set aside’ to pay these bonuses. Now it is apparent the bonuses were paid with TARP and/or ‘other’ government ‘rescue’ funds!]

On Friday, the House of Representatives may vote on a bill that would order bank regulators to restrict “inappropriate or imprudently risky” pay packages at larger banks. [So far, the banks have successfully ‘deflected’ EVERY attempt to rein in their scandalous/criminal behavior.]

Mr. Cuomo, who for months has criticized the companies over pay, said the bonuses were particularly galling because the banks survived the crisis with the government’s support.

“If the bank lost money, where do you get the money to pay the bonus?” he said.

All the banks named in the report declined to comment.

Mr. Cuomo’s stance — that compensation for every employee in a financial firm should rise and fall in line with the company’s overall results — is not shared on Wall Street, which tends to reward employees based more on their individual performance. Otherwise, the thinking goes, top workers could easily leave for another firm that would reward them more directly for their personal contribution.

Many banks partly base their bonuses on overall results, but Mr. Cuomo has said they should do so to a greater degree.

At Morgan Stanley, for example, compensation last year was more than seven times as large as the bank’s profit. In 2004 and 2005, when the stock markets were doing well, Morgan Stanley spent only two times its profits on compensation. [And once again you have to ask yourself how the hell that works? How the hell do you spend twice what you make and remain in business?]

Robert A. Profusek, a lawyer with the law firm Jones Day, which works with many of the large banks, said bank executives and boards spent considerable time deciding bonuses based on the value of workers to their companies.

“There’s this assumption that everyone was like drunken sailors passing out money without regard to the consequences or without giving it any thought,” Mr. Profusek said. “That wasn’t the case.” [Um, as you may have guessed, Mr. Profusek is not inclined to share with us what, precisely, IS the case…]

Mr. Cuomo’s office did not study the correlation between all of the individual bonuses and the performance of the people who received them.

Congressional leaders have introduced several other bills aimed at reining in the bank bonus culture. Federal regulators and a new government pay czar, Kenneth Feinberg, are also scrutinizing bank bonuses, which have fueled populist outrage. Incentives that led to large bonuses on Wall Street are often cited as a cause of the financial crisis.

Though it has been known for months that billions of dollars were spent on bonuses last year, it was unclear whether that money was spread widely or concentrated among a few workers. [Wrong! What was unclear until now was whether or not the banks had this money as reserves. The public was outraged over the bonuses but until now, most of us ‘assumed’ the banks had the money ‘set aside’ to pay the bonuses. It is absolutely criminal that these enterprises engaged in nothing less than fraudulent accounting in order to pay employees more than twice what the enterprise earned over the entire year!]

The report suggests that those roughly 5,000 people — a small subset of the industry — accounted for more than $5 billion in bonuses. At Goldman, just 200 people collectively were paid nearly $1 billion in total, and at Morgan Stanley, $577 million was shared by 101 people.

All told, the bonus pools at the nine banks that received bailout money was $32.6 billion, while those banks lost $81 billion.

Some compensation experts questioned whether the bonuses should have been paid at all while the banks were receiving government aid. [Is it beginning to look like the term ‘expert’ is being rather loosely defined here?]

“There are some real ethical questions given the bailouts and the precariousness of so many of these financial institutions,” said Jesse M. Brill, an outspoken pay critic who is the chairman of, a research firm in California. “It’s troublesome that the old ways are so ingrained that it is very hard for them to shed them.” [More perplexingly, where are the accountants that approved this rip-off and why isn’t anyone calling for their heads on pikes?]

The report does not include certain other highly paid employees, like brokers who are paid on commission. The report also does not include some bank subsidiaries, like the Phibro commodities trading unit at Citigroup, where one trader stands to collect $100 million for his work last year. [Okay, more succinct question, where were the regulators while these shenanigans were going on? You simply can’t pay out twice what you make and remain solvent!]

Now that most banks are making money again, hefty bonuses will probably be even more common this year. And many banks have increased salaries among highly paid workers so that they will not depend as heavily on bonuses. [This is perhaps one of the most disturbing statements in the whole article; how, pray tell, are banks ‘making money’ again when pretty much everyone in the damn nation is on the brink of insolvency? Is there more ‘creative accounting’ in play?]

Banks typically do not disclose compensation figures beyond their total compensation expenses and the amounts paid to top five highly paid executives, but they turned over information on their bonus pools to a House committee and to Mr. Cuomo after the bailout last year.

The last few years provide a “virtual laboratory” to test whether bankers’ pay moved in line with bank performance, Mr. Cuomo said. If it did, he said, the pay levels would have dropped off in 2007 and 2008 as bank profits fell.

So far this year, Morgan Stanley has set aside about $7 billion for compensation — which includes salaries, bonuses and expenses like health care — even though it has reported quarterly losses.

At some banks last year, revenue fell to levels not seen in more than five years, but pay did not. At Citigroup, revenue was the lowest since 2002. But the amount the bank spent on compensation was higher than in any other year between 2003 and 2006.

At Bank of America, revenue last year was at the same level as in 2006, and the bank kept the amount it paid to employees in line with 2006. Profit at the bank last year, however, was one-fifth of the level in 2006.

Still, regulators may have limited resources for keeping pay in check. Only banks that still have bailout money are subject to oversight by Mr. Feinberg, the pay czar. He will approve pay for the top 100 compensated employees at banks like Citigroup and Bank of America as well as automakers like General Motors.

It is obvious that the reporters of this story are suffering from ‘cognitive dissonance’. I’m sure you are just like me when it comes to figuring out how ANY company can spend more than twice what it earns and remain in business.

There is only one ‘entity’ that can do that without performing ‘magic’ and that is the guys that own the printing press, the US government.

Yet we see here testimony that large investment banks are acting like the US government, compensating their ‘select’ employees without regard to income from earnings…

Which naturally begs another question…where is our Justice Department while this shit is going on?

If you have been skeptical that our government has been ‘hijacked’, this should be all the proof you need.

If you tried this same stunt, you’d be shoved in a hole so dark and deep that you’d never be heard from again.

So what gives?

Thanks for letting me inside your head,


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