From the Daily Mail (hat tip Jesse):
Goldman Sachs is on course to pay its top City bankers multimillion-pound bonuses – despite asking the U.S. government for an emergency bail-out.
The struggling Wall Street bank has set aside £7billion for salaries and 2008 year-end bonuses, it emerged yesterday.
Each of the firm’s 443 partners is on course to pocket an average Christmas bonus of more than £3million.
The size of the pay pool comfortably dwarfs the £6.1billion lifeline which the U.S. government is throwing to Goldman as part of its £430billion bail-out.
As Washington pours money into the bank, the cash will immediately be channelled to Goldman’s already well-heeled employees.
News of the firm’s largesse will revive the anger over the ‘rewards for failure’ culture endemic in the world of high finance.
The same bankers who have brought the global economy to its knees seem to pocketing the same kind of rewards they got during the boom years.
Gordon Brown has vowed to crack down on the culture of greed in the City as part of his £500billion bail-out of the UK banking industry.
But that won’t affect the estimated 100 London partners working at Goldman Sachs’s London headquarters.
The firm – known as Golden Sacks for the bumper bonuses it pay its top bankers – is expected to cut the payouts by a third this year. However, profits are falling much faster. Earnings have plunged 47 per cent so far this year amid the worst financial crisis since the Great Depression.
Readers are welcome to correct me, but M&A professionals (and I mean MDs, partner equivalents) saw their total comp fall to 25%-33% of what it had been in the boom in the dot-bomb bust (as in people who had gotten $1.5-$2 million were getting $400,000). But now that we have bailouts, the reductions are nowhere as deep as in the past, it seems. Of course, Goldman is special…or so we are often told.
And in the old days when the firms were partnerships, in bad times the partners would often take deeper cuts than senior non-partners. Bt the whole point of being a public firm is getting to use, and occasionally abuse, other people’s money.
THIS IS AN OUTRAGE. WHAT CAN BE DONE ABOUT THIS. I WISH I HAD TIME TO PROTEST.
I am stunned, stunned, that gambling is allowed in Rick’s Cafe American!
Pigmen are pigmen…anyone that expects them to change their spots because the light is shinning on them is delusional.
If you want to protest, buy something with dollars that will retain it’s value…er, not an SUV or a McMansion.
“THIS IS AN OUTRAGE. WHAT CAN BE DONE ABOUT THIS. I WISH I HAD TIME TO PROTEST.”
write to Senators Pelosi, Reid, and Waxman. They’ve been complaining about high bonuses at the banks; if they get pressure from voters, they might do more than just complain.
Barney Frank: On November 12th and November 18th the House Financial Services Committee will hold oversight hearings on legislation Congress has passed to cope with the financial crisis. It is very important if Congressional and public support for this program is to continue that we receive assurances at those hearings that the money being advanced will be used only for relending and for no other purpose.
Barney Frank, Reid, Pelosi, Paulson, Bush, whover is in charge of the bailout money, needs to teach these Goldman Sachs bitches a hard lesson: The government needs to take back all the money it has given to Goldman Sachs, and revoke Goldman Sachs charter as a bank or bank holding company. Let this be a lesson to all the banks that have gotten taxpayer bailout: Don’t mess with the taxpayers.
I sent notes to Waxman (my local Congressman) and Pelosi and my Senators — here’s a link to her office:
once you’ve written one you can cut and paste to others at
http://www.house.gov/ for the house (usually reps only respond to locals) and here
for the senate
If you live in Frank’s district e-mail him and tell him you want to see him put those words into action.
Where is Robespierre when you need him? I had read Jesse’s post and laughed as I was reading it. Talk about chutzpah.
“John Liberty said…”
“THIS IS AN OUTRAGE. WHAT CAN BE DONE ABOUT THIS. I WISH I HAD TIME TO PROTEST.”
You wish you had time to protest.
You are outraged and without time.
You define yourself as a slave.
End you slavery and find the time.
Or pick cotton.
I think they realize that the party is already over, and they trying to get last bits of what they can get, before this whole thing goes down.
It isn’t specifically “because we have bailouts” that this occurred.
It’s because that’s how the USA did the bailouts….
In Britain, by contrast, in exchange for the bailout funds, representatives of the Government got actual seats on the boards of directors (and caps on compensation and other givebacks), something that the Americans rejected.
“Goldman’s Rule” -he who has the gold gets to make the rules.
The price of torches and pitchforks will skyrocket when the markets open tomorrow
pitchforks and torches? A few bullets would be a tad more effective. Really wouldn’t surprise me much at all to read about it. This is going to piss off alot of people. ALOT.
I am speachless. This is truly outrageous and hopefully history will record this as a defining moment (in the perjorative!).
That the partners agreed to this outrageous payment shows clearly to the world that they are totally absent of integrity and ethical behaviour (as the “old” goldman guard used to represent).
That there were insufficient dissenting partners really is a blight on Wall Street.
I cannot believe that in a financial crisis such as this, they put themselves first – or maybe I can.
If Goldman had heeded their former Chairman (who is opposed to the largese of Wall Street salaries), they could have SET AN EXAMPLE for other firms to follow. IF one prestigious firm declined to pay bonuses, most would have followed, especially if it was followed by a PR release espousing the virtues of Goldman sacrificing for the good of all etc etc.
Instead, the US Government has just shredded (another) $6bn .
It is called fascism folks. Like it?
Matt Dubuque said…
It isn’t specifically “because we have bailouts” that this occurred.”
I am not sure that “getting seats on the board” etc etc makes any difference.
After all, LAW can restrict compensation and dividends.
In the absence of lawmakers willing to concern themselves with the creation of rules which in the first instance are for the people, the long term worth of a nation (I think in America you call that a Republic) then there is no point in making law.
Then, there is no law.
I have no prescription for the illnesses of America or elsewhere but if lawmakers make laws that allow thievery then I have fear.
There are plenty of Laws Matt. I’ve noticed most of them are never enforced. In fact, once upon a time people attempted ‘do to what’s right’ , whatever that means.
It’s the culture of this country that’s corrupt. There is nothing to aspire to. Our most wealthy and powerful residents are sociopaths.
screw this. i refuse to procreate.
Anonymous said… @ November 2, 2008 10:00 PM
“It's the culture of this country that's corrupt”
If your culture is corrupt the you’re politic & law is corrupt.
You need law whether you like it or not.
Barney Frank, Reid, Pelosi, Paulson, Bush, whover is in charge of the bailout money, needs to teach these Goldman Sachs bitches a hard lesson
The person in charge – with effectively unrestricted authority – is Paulson. Maybe you don’t know what company Paulson was the CEO of a mere 2 years ago. Hint – the initials are GS.
So what’s the back story? These guys are so in debt that without the bonus they will be unable to keep up payments and go bankrupt?
Are we bailing them out directly and personally because they really need it more than others?
And set to music:
I don’t want to get eggs thrown on me for saying this, but the bonus package will be at least 50% lower than last year at Goldman, and the money would have been set aside anyway. It’s not correct to say that the bailout money itself is going to pay bonuses…they are all parts of a whole, and a key to Goldman’s ability to generate earnings growth in the future (and therefore be able to pay back the loan) is to retain their top talent, which is the best in the industry.
Just my 2 pennies…
Heads we win, tails you lose…
Talk about a rigged game. Sheeze…
The revolution will not be televised. In fact it won’t even happen. The average Joe (the plumber was just another fraud) will be tricked into thinking that the government is doing everything it can, with the cooperation of Wall Street no less. But the comment that the execs are hoarding all they can as they know the whole economy is goin’ down, is probably true. If the pitchforks ever do come out, it will give the gov’t and Wall Street the excuse they need to call out the troops to restore order. Wait and see.
RB "Goldman's ability to generate earnings growth in the future (and therefore be able to pay back the loan) is to retain their top talent, which is the best in the industry."
Goldman's "top talent" busted Goldman's investment bank. Goldman's "top talent", including Hank Paulson, were up to their eyeballs in creating the excessive leverage and Frankenstein financial engineering that created this crisis. Goldman's "top talent" would be singing songs in subways, and Goldman's stock price would be $1.00 if it wasn't for Hank Paulson repeatedly bailing their sorry behinds (including their exposure to Fannie, Freddie, & AIG ) and killing their competitors (Bears Stearns, Lehman), and Ben throwing them a bank charter. As federal and state prosecutors dig deeper into the fraud that Wall Street perpetrated, we may see Goldman's "top talent" perp walked from Wall Street to federal and state jails.
Re: Ryan Barnes
If Goldman set a precedent and didnt pay bonuses, then its likely the others would follow and the loss of key staff to competitors would be less likely or unlikely. Now the pressure is on for all others to pay competitive bonuses.
That the bonuses are 50% less means nothing – look at what last years effort provided the firm!
Also, if the money was set aside for bonuses, then clearly a bailout was not required and it was erroneously provided.
Goldman ain’t alone!
It is beyond my understanding how Merrill Lynch, a failed business that was forced to sell itself, will still pay bonuses averaging $110k/employee!
The shareholders of Merrill Lynch who got screwed when the company was sold for pennies should be up in arms.
$20 Billion in Bonuses
It hasn’t exactly been a great year on Wall Street, but pain is always relative. According to calculations by Bloomberg, three big investment banks have set aside a total of $20 billion for bonuses through the third quarter. At Merrill Lynch, which lost so many billions over five quarters that it sold itself to Bank of America, the bonus pool totals $6.7 billion, an average of $110,049 per employee, which is actually up slightly from last year. At Goldman Sachs (GS) and Morgan Stanley, which at least are still profitable, the averages are down, to $210,322 and $138,749 respectively. (Bloomberg)
Uhh, rats always flee a sinking ship first? (or so I’ve been told at least).
The USSA is sinking. The fact Sahra Palin is considered a serious contender for President says it all. A moron Beauty queen?
This is not a country anymore, it is a farce. This is what happens when you let grade inflated morons from 40K private schools run your life.
I say, kill the stock market. No more speculative pieces of fluff run by Ethan from Yale. There is no competition between these people. It is all just one big cocktail party!!
Let’s just remember one point. Last year some banks wanted to be sort of responsible in their payments of bonuses – for instance, UBS paid in stock (and look what happened to their stock this year). Goldman took a sledgehammer to this approach, and announced (and I do think it was announced) that it was still paying large cash bonuses with the *express intent of forcing its competitors to do the same*, in order to weaken them.
GS deserves to die, by any means possible.
Fresno Dan used to write “Did Hank Paulson know how Goldman Sachs made money? ANY answer is disturbing”
Now Fresno Dan asks “Did Hank Paulson know Goldman Sachs would continue with bonuses??? ANY answer is disturbing”
This guy just keeps giving and giving – Like Cool Hand Luke, I just wanna say, “I wish you weren’t so good to me”
When GS has the Fed packed to the rafters with cronies and henchmen, the outcome was obvious – destroy the opposition and support those who enrich us. This is just appalling and why the rest of the world is turning it’s back on a once proud, innovative and prosperous nation. They might have the money but they don’t have the respect. Neither of your presidential candidates will have the moral courage to pursue these criminals.
Wanted to post from a different angle to help readers understand why a bank might accrue a large bonus pool even when having a bad year. I'm in senior management in the back office at one of the top 5 universal banks, so I hope you find this credible / helpful.
Banks have got in the habit of hiring the very best people for all its functions. This is not just about 'bankers' but also support functions. Let's say we have 10 major back office operations or IT&infrastructure functions. Each one of these are HUGE businesses in and of themselves running budgets of potentially $1bn p.a. These all need the best customer relationship managers, the best COO's, the best CFO teams, the best sourcing experts and so forth. As banks have earned so much in past years (see: Cantillon Effects) they have been able to accumulate much of the world's best talent from productive industries such as manufacturing and IT. If you look at it from the perspective of bank management – let's say the bank believes its people are the best money can buy. The fact is that even when times are tough your stars probably have other opportunities. All the more so pertinent as many were poached from 'industry' due to high comp. A bonus is about 50% of comp even in the back office for senior staff. This means if you zero them out, there is a real risk they will go. If this goes away, then these folks will, in some proportion, go away back from whence they came. Most people don't like working for banks. Its really hard work (I'm talking from experience here) and senior people in operations for other industries can also make good money – certainly competitive with base salaries at banks. If banks think that (a) business will return in the relevant future; and/or (b) while they need to adjust comp down they cannot see mass exodus as this creates operational risks that are unacceptable then they will take legitimate decisions to maintain bonus pools at some level. I am not defending multi-million pound bonuses for the CDO sales leads but what I am saying is that there are likely some good people in some good departments that legitimately deserve to earn good money. And yes, there are some doing well, not to mention back office where the volumes are up. Even in bad times. I sincerely hope the thought process is working this way.
For the record I am not a supporter of the bailouts, I do not believe in fractional reserve lending, and I do not believe in fiat currency. It will be a good thing to see this industry shrink in size. That will help the economy grow again.
I must say, “touche.”
The irony of this story brings a smile to my face.
But as a taxpayer, it should bring a tear to my eye. In this regard, I am reminded of the billboards that were plastered on hwys throughout
America of the Indian with a tear running down his cheek. Somehow, this emotion entirely escapes me.
The bottom line is this: our bubble blowing lawmakers can not legislate where the bubbles they blow go toward. It can’t be forced to go towards real investment, and lending to stimulate the economy. As Richard Kline reminds us, “negative rates makes it unprofitable to lend money period! If the world goes ZIRP…a by-product of that is the suffocation of real investment.”
Hey Barney, please get over the loss of $850 billion of taxpayer money asap you just blew and start calculating the size of next installment you will expropriate from taxpayers to subsidize the losses of Wall Street.
We told you this Paulson Plan was a bad idea the way it was structured from the git-go. But did you listen. No, you said, “talk to the hand because the ears don’t want to hear.” Instead of modifying the plan thoughtfully, you went out and bought votes to pass the plan by sweetening the deal for lawmakers with another $150 billion pork paid for by even taxpayer dollars. Just a spoonful of sugar may help the medicine go down for lawmakers, but I promise you this, it became far more offensive and distasteful for the taxpayers you are supposed to represent.
While we all agree something must be done, this latest policy mistake is your fault Barney Frank, you and your fellow lawmakers, not ours. It would behoove you and your cohorts to listen up to the inputs of private market participants who have more than willingly offered their wisdom to establishing appropriate and outcomes that are desirable for everyone, not just cash-strapped banks.
The political regime on Capital Hill’s ability to thoughtfully respond to private market participants inputs will be critical towards minimizing the severity of collateral damage. As it stands now, your latest legislation actually prolongs the mess we are in and begins to create another messy bubble.
We might remind you the Paulson Plan was just three pages long, to which you legislators added 447 more pages of pork and proceeded to called it an emergency economic stabilization bill (EESA in its most polite form, TARP as it is commonly referred to )that will stop the bleeding.
The EESA/TARP bill was no more than a substantial piece of garbage, and costly garbage to taxpayers at that. Garbage in begets garbage out, Mr. Frank. When you go back to the drawing board, please give thoughtful consideration to how you structure the next bit of legislation that your constituents will be paying for, so we don’t end up with more messy garbage. We, your constituents simply cannot tolerate garbage any longer from your ilk.
Even the ABA executive director Ed Yingling is complaining to you that “this is not a program the banking industry sought.” Legislators like yourself Mr. Frank might think of taking a hint from Mr. Yingling, if not from us ~ your constituents, before you decide to go cramming down another $700 billion dollars down the banking industry’s throat.
No surprise really. It’s getting about time to drag these bastards out in the street and give them the beat down.
anon @ 7:35 —
thank you for your informative post. i for one do agree that most of the back office staff DO deserve it.
however, even knowing this fact, many of us here believe that these talented, skillful people would better serve the economy by taking their skills & talents somewhere else more productive than helping to engage in a high-tech fleecing operation.
paying bonuses just continues the incentive to be complicent and delays the needed subterfuge of these operations.
without it, let's hope that folks like yourself will continue to silently spread the word in the back rooms that this whole endeavor is a farce.
good luck and goddess speed.
i keep hoping that enough Bostonites will have waken up by tomorrow morning to show Barney (& Nancy) the door.
i'm not holding my breath however…
anon 8.11 –
Appreciate your kind words. I look forward to a career one day outside of banking, perhaps back in manufacturing or IT. In the meantime I continue at a bank because I do enjoy my job and would stay at least in the short term even without a bonus pool.
As we downsize hopefully I can give honest and fair exits to the staff with adequate warning. You are exactly right that the sooner people are repurposed out of banking and into other business the better. This is actually one of the most unjust aspects of the bailout that has not really been highlighted by many – the fact is we should actually be *facilitating* the exit of bank staff and not trying to continue the charade.
” the best customer relationship managers, the best COO’s, the best CFO teams, the best sourcing experts and so forth.”
Psss.. everyone thinks they’re underpaid. Most people think they’re the best at what they do.
–Most people don’t except any reward for failure. They expect a pink slip and their ass kicked hard as they go out the door.
A friendly reminder from the local proletariat. Too bad all you Goldman H1bs are going to be deported.
I was trying to explain why a bank might think it makes sense to maintain bonus pools ‘at some level.’
Not sure where you got the ‘underpaid’ piece as I strongly implied (see: “Cantillon Effects” and “the industry should shrink” comments) that in fact staff working for banks have been *overpaid* in the past and that this should change.
What worries me in the overall tone of some posters regarding bank staff is that there’s a level of recrimination that is being arbitrarily applied that really does not make sense once one cools down and considers what is being said.
Not trying to be argumentative with you, because I absolutely understand your sentiments (and even share them as I’ve stated), but simply would like you to slow down and understand what I am trying to say, as I am only trying to be informative.
BO Anonymous: I think you are overstating the possibility of walking and finding another job in a recession. I think the best that can be said is that if bonuses really are to be paid, they should be paid in stock vesting after 5 years. Then next year the bonuses can be put to 0.
They Like The Night Life, Baybeh
No bonuses. I don’t care how talented or hardworking they may or may not be. Bonuses under these circumstances are simply not on. I understand that like waittresses, these “tips” constitute the bulk of their compensation …but unlike waittresses, if you take away their bonuses, they will not be making minimum wage. They will still be making an upper middle class wage, and that will have to suffice. And few are going to quit in this economy–an economy some of them helped wreck. No one is advocating tar and feathers–just that their salaries resemble those of a well-off ordinary person.
This was reported 2 weeks ago in the UK Guardian.
MSM failed to pick it up, for some reason.
MSM, as in “Money-Sponsored Media”? Hmm, perhaps not that surprising.
I agree there should be no bonuses, and again, was merely trying to explain the thought process within the banks which will lead them to pay bonuses anyway. I fully expect to receive no cash bonus, but I do think for junior staff there will be some cash pool remaining as those salaries are much lower. Again, I am talking about back office / parts of front office which are profitable. We shall see as the pools are decided in december/jan at most firms.
“Banks have got in the habit of hiring the very best people for all its functions.”
Hahahaha…this cracks me up…
I would say stop patting each other on the back.
Bankers give colossal campaign contributions to politicians, consequently, the entire government and its institutions are shills for Wall Street. The banks continue to pay exorbitant dividends on their stock, compensate their employees with huge bonuses and go on expensive junkets, even after the bailout, i.e., business as usual. The crooked bankers have political tin ears and the cynical politicians won’t do anything to their sugar daddies unless the people hold their feet to the fire. The price of democracy is constant vigilance.
Anybody offer a good link for “Cantillon Effects”? I have Googled but have come up with many links which appear to be long works in which a succinct definition of “Cantillon Effects” within the context of what has been posted on banker’s compensation does not appear to be in the offing.
If the lack of bonuses causes back office staff to leave for “industry”, that is what we want to happen. We do not want them to be able to keep their “best of the best” in this circumstance. Those people should return to productive industry.
The fact that the reprobates don’t see that as justice (the guy who posted earlier) makes it the more important this happen right now this year.
If the banks are “violating the law” in Frank’s words, then by all means, do what you would do to some other poor schmuck who runs afoul of the feds or IRS: freeze their accounts, start confiscating physical assets, and arrest the top tier of execs and board members. And start painful, probing IRS audits for the last 7 years for each of them. Do that and they’ll all be comin’ to Jesus…shit, they’d probably write an even bigger check just to make sure there are no “misunderstandings”.
I am most happy for Mr Buffett. His investment in GS, as well as that of the US taxpayers, have been wisely spent on the retention of productive workers. Well done and long live Wall Street!
Banks don’t hire the “best”, they hire the most impressively credentialed/most employable people, which is a very different concept (appearances/signaling vs. actual performance).
Even for front office positions, the profit centre ones. There are amusing stories about this in Taleb’s book on risk.