Already one third of the first $125billion of bailout funds went straight into the pockets of Wall St Parasites. Way to go USA
Bonuses for Wall Street Should Go to Zero, U.S. Taxpayers Say By Christine Harper Nov. 11 (Bloomberg) -- U.S. taxpayers, who feel they own a stake in Wall Street after funding a $700 billion bailout for the industry, don't want executives' bonuses reduced. They want them eliminated. ``I may not understand everything, but I do understand common sense, and when you lend money to someone, you don't want to see them at a new-car dealer the next day,'' said Ken Karlson, a 61-year-old Vietnam veteran and freelance marketer in Wheaton, Illinois. ``The bailout money shouldn't have been given to them in the first place.'' Compensation at Goldman Sachs Group Inc., Morgan Stanley, Citigroup Inc. and the six other banks that received the first $125 billion of the federal funds is under scrutiny by lawmakers, including Rep. Henry Waxman, a California Democrat, and New York Attorney General Andrew Cuomo, also a Democrat. President-elect Barack Obama cited the program at his first news conference on Nov. 7, saying it will be reviewed to make sure it's ``not unduly rewarding the management of financial firms receiving government assistance.'' While year-end rewards are likely to decline with a drop in revenue this year, industry veterans say that eliminating them risks driving away the firms' most productive workers. ``There are instances where bonuses are justified, deserved, and in the best interests of the investment bank involved,'' said Dan Lufkin, a co-founder of Donaldson Lufkin & Jenrette Inc., the investment bank acquired by Credit Suisse Group AG in 2000. ``Your very best people are people you want to hold, and your very best people will have opportunities even in this environment to transfer allegiance.'' `Your Jaw Drops' The companies, which set aside revenue throughout the year to pay bonuses, haven't commented on plans for year-end awards, typically decided this month or next. A study released last week said the firms are likely to cut bonuses for top executives by as much as 70 percent. ``Even really sober people are saying this is the worst financial crisis since the Depression, and they're saying bonuses are just going to be reduced?'' said Patrick Amo, a 53-year-old retired merchant marine in Seattle. ``Oh my God, you read that and your jaw drops.'' Wall Street firms' pay has traditionally been tied closely to performance of the companies, which is why employees receive most of their compensation at the end of the year after final results are known. Depending on seniority and performance, bonuses for traders, bankers and executives can be a multiple of their salaries, which range from about $80,000 to $600,000. Blankfein's $67.9 Million The nine banks that Waxman pressed to detail their bonus plans asked for more time to respond, according to his spokeswoman, Karen Lightfoot. She said they've been granted an additional two weeks. The original deadline was yesterday. Goldman, the largest and most profitable U.S. securities firm in the world last year, paid Chief Executive Officer Lloyd Blankfein a record $67.9 million bonus for 2007 on top of his $600,000 salary. That was justified, he told shareholders at the company's annual meeting in April, because of Goldman's superior financial results. ``We're very much a performance-related firm,'' he said. ``If those results don't come in, I assure you at Goldman Sachs you won't see that compensation.'' Goldman's profit is down 47 percent so far this year and five analysts expect the company to report its first loss as a public company in the fourth quarter that ends this month. The stock price has dropped 67 percent this year and Goldman received $10 billion from the U.S. government in the bailout last month. Michael DuVally, a spokesman for Goldman Sachs in New York, declined to comment on the company's plans for bonuses this year. `Appalling' ``The executives in companies that get bailout money should have their base salaries reduced by 10 percent for 2009 and they should pay back a substantial portion of their 2007 bonuses to the government for the financial devastation they oversaw, fostered and, in some cases, directly caused,'' said S. Woods Bennett, a 57-year-old lawyer in Baltimore. ``Their sense of entitlement is appalling.'' In addition to Goldman, Morgan Stanley and Citigroup, the companies that received the first round of money from the U.S. government's Troubled Asset Relief Program were Merrill Lynch & Co., JPMorgan Chase & Co., Bank of America Corp., Wells Fargo & Co., State Street Corp. and Bank of New York Mellon Corp. Some needed the money more than others. Citigroup and Merrill haven't been profitable since early last year. Earnings at each of the other firms, except Boston-based State Street, have been dropping. `Money's Money' ``Bonuses and severance packages will obsess the American public'' and become ``a humiliation and embarrassment,'' said Arthur Levitt, a senior adviser to the Carlyle Group, former chairman of the Securities and Exchange Commission, and a board member of Bloomberg LP, the parent company of Bloomberg News. ``Compensation committees, believe me, are paying close attention to this.'' Several of the companies -- including Citigroup and Wells Fargo -- have said they won't use federal funds to pay bonuses. That's disputed by some, including former compensation consultant Graef Crystal. ``The argument of saying we're not using the bailout money is just crap because money's fungible, money's money,'' said Crystal, who writes the newsletter graefcrystal.com. ``It exposes them to ridicule.'' A renegotiated government rescue for American International Group Inc., which was once the world's largest insurance company, includes a freeze on the bonus pool for 70 top executives and imposes limits on severance benefits, the Treasury said in a statement yesterday. AIG's bailout is separate from the $125 billion being invested in nine banks. Economy Contracts The bailout is only part of the reason that people object to Wall Street bonuses this year. The financial industry worldwide has taken more than $690 billion in writedowns and credit losses this year and cut more than 150,000 jobs, according to data compiled by Bloomberg. A decline in lending has caused the wider economy to contract: the U.S. gross domestic product shrank at a 0.3 percent annual pace in the third quarter, consumer spending fell at its fastest pace since 1980 and unemployment jumped to 6.5 percent, the highest since 1994. ``This is the real economy these vultures have wrecked once again,'' said Leo Gerard, president of the Pittsburgh-based United Steelworkers, which represents 1.2 million active and retired members. ``Workers are taking it on the chin through no fault of their own.'' Top Executives ``Please explain how miserable performance of biblical proportions warrants any bonuses, particularly using money from me the customer and taxpayer,'' said Glenn Brown, 67, who recently retired after 21 years as a researcher in the department of surgery at Beth Israel Deaconess in Boston and as an adjunct assistant professor at Harvard Medical School. ``I don't understand how they can even conceive of doing that.'' ``If these guys were so talented how did this problem happen anyway?'' said Mark Whitling, 63, who works as the chief financial officer of a steel service company that employs 125 people in Eastern Ohio. ``We don't feel sorry for them.'' Attention is most focused on the top executives at the banks that are receiving federal money. They'll have to take the steepest pay cuts because their pay is disclosed in proxy filings, according to Alan Johnson, managing director of Johnson Associates, the compensation consulting firm that estimates bonuses will decline between 10 percent and 70 percent. ``I'd advise the CEO to say he can't take anything if it's one of these firms getting bailed out by the government,'' said Crystal. ``I think he's just going to have to go down to just his salary.'' Pay or Lose That's probably not the case for employees whose pay isn't disclosed, even those who get bonuses that exceed $1 million. Both Johnson and Crystal say that top performers should receive bonuses this year or companies risk losing their best workers. Of about 600 people who responded to an online survey on the eFinancialCareers.com Web site, 46 percent said they would be unwilling to take any pay cut this year. ``You could build up, I would think, a lot of resentment on the part of people who say, `Look I did give my all this last year, and I know it's been a bad year, but everything that was asked of me I accomplished and then some,''' said Crystal. Eliminating bonuses across the board ``could be very demoralizing in the long run and it could lose you some people.'' Larry Frank, a 60-year-old retired software company owner who lives in Ormond Beach, Florida, said he told his broker at Merrill Lynch that he would pull his money from the company if it paid the $6.7 billion it has set aside this year to pay bonuses. While he thinks top managers should suffer, he doesn't think everybody should lose out on getting a bonus. `Bunch of BS' ``Individual brokers, if they're performing and their areas are profitable and they're doing their job, I can't see punishing them,'' he said. ``The CEO shouldn't get anything.'' Still, other people say that all employees working at companies receiving bailout funds should pay the price. ``It's crazy, it's all one company, it's the same thing,'' said Scott Floyd, a 37-year-old marketing executive in Manhattan Beach, California. ``For people to say the guys in the brokerage should get bonuses because they did well, but it was just the mortgage lending division that did terribly, that's a bunch of BS.'' Amo, the retired ship captain in Seattle, said that since most financial companies are cutting jobs, they shouldn't worry about paying bonuses to keep people from leaving. ``Where are they going to go? Don't let the door hit you on your way out,'' he said. ``It's not like it's just one company -- the entire Street is frozen.'' `Thumbing Their Noses' Karlson, the Vietnam vet, said he thinks Wall Street executives are ``thumbing their noses at the common people'' if they pay themselves bonuses while people in the country are losing their homes. ``The rationale that they depend on their bonuses, come on, how are we supposed to relate to that?'' he said. ``You don't get a bonus from your company if it doesn't do a good job.'' Jim Beachboard, a 57-year-old lawyer in Little Rock, Arkansas, compared taking a bonus to ``kind of like being on the Titanic.'' ``It was supposed to be women and children first, so the guys that tried to jump in the lifeboats weren't really looked upon with much kindness,'' he said. ``When you start thinking of this many tax dollars being injected into the system, I know there are all sorts of rationalizations and justifications that you can use to try to justify almost anything, but it's just really in very poor taste.'' Taking a bonus isn't something executives should be proud of, Beachboard added. ``My mother always told me, don't ever do anything that you would be too ashamed to tell me about, and I thought, would they really want to tell their mother that?'' To contact the reporter on this story: Christine Harper in New York at [EMAIL PROTECTED] --~--~---------~--~----~------------~-------~--~----~ Thanks for being part of "PoliticalForum" at Google Groups. For options & help see http://groups.google.com/group/PoliticalForum * Visit our other community at http://www.PoliticalForum.com/ * It's active and moderated. Register and vote in our polls. * Read the latest breaking news, and more. -~----------~----~----~----~------~----~------~--~---
