The “Wall Street Party” For This Week

August 2, 2009  

Over the past several days there’s been a lot of information come out about the ‘enemy at the gate’ — Wall Street. (Actually, it’s more like ‘they’ve entered the gate, emptied the castle treasury, and left’.) So I decided I would just run this report of “shorts” on what we’ve learned this week. It’s gruesome, but mostly it’s sickening and insulting — except, of course, to the ‘enemy’.

‘Outrageous Pay’ vs. the Sanctity of the Contract – the author, Stephen Grocer, talks about white-collar contracts with employers. He also quotes some pros and cons on the contracts by others in the media. Interesting to me was the one by Yves Smith, who said the same thing I’ve said several times before — “I don’t seem to recall many, or frankly any Wall Street types going on about sanctity of contracts when agreements with the UAW were reworked to save GM … employment contracts can and do get voided and renegotiated ALL THE TIME”.

Banker’s Bonuses Beat Earnings as Industry Imploded – “The nation’s nine largest banks handed out $32.6 billion in bonuses last year even as they ran up more than $81 billion in losses and accepted billions of dollars in emergency federal aid”. What the author is telling us with his article title is that banker’s bonuses are more than the total profits of the companies. “Government” Sachs made $2.3 billion and paid out $4.8 billion in bonuses. Morgan Stanley earned $1.7 billion and paid $4.5 billion in bonuses. J.P. Morgan Chase made $5.6 billion and paid $8.7 billion in bonuses. (How the hell does a company stay in business when they pay out more in bonuses than they earn? Oh, that’s right — they didn’t! But the taxpayer Calvary came riding in and saved their asses.) This should make the stock holders and investors real happy. I know as a taxpayer whose money was used to keep them alive, I’m ecstatic about it. I’m no Barney Frank fan, but he was right on the money (no pun intended) when he said “[he] doubted firms would be restructuring pay practices if Congress wasn’t moving ahead with legislation”.

And Government Sachs isn’t finished. According to Jonathan Weil of Bloomberg’s, they have set aside 49 percent of their 2009 revenues for bonuses. Not profits, but revenues! And that’s just for the first half of this year. Any time a company can pay out half of their revenues in bonuses, they are charging waaaaaaay too much for what ever they do. Steve Pearlstein of The Washington Post gives us his take on this raping of America and the taxpayers in The Dust Hasn’t Settled on Wall Street, but History’s Already Repeating Itself. He says “the Wall Street herd is at it again. Even as the cleanup crew is carting away the debris left by the last financial crisis, the investment banks, hedge funds and exchanges are busy working on the next one”.

Wall Street Compensation — ‘No Clear Rhyme or Reason’ – an article on New York Attorney General Andrew Cuomo’s investigation into bonuses paid out in the financial industry. “There is no clear rhyme or reason to the way banks compensate and reward their employees. In many ways, the past three years have provided a virtual laboratory in which to test the hypothesis that compensation in the financial industry was performance-based”. This one gives a good breakdown of the amounts of bonuses paid out by each institution.