Monday, October 12, 2009

Goldman Sachs $20 Billion Bonuses?!!!

On CNBC, Charlie Gasparion: Goldman Faces PR Dilemma Over Huge Bonuses

  • Rival banks are eagerly awaiting this week's earnings announcement from Goldman Sachs not only for the third-quarter results but for how the firm deals with up to $20 billion in bonuses just a year after it received federal bailout money during the height of the financial crisis....Goldman received $10 billion of federal bailout money last year. But more significantly, Goldman benefited from the government's bailout of troubled insurer AIG because it held insurance contracts on debt that were made good once AIG was saved.

    On top of that, Goldman was able to be classified as a commercial bank, even though it doesn't hold substantial amounts of deposits from consumers.

    Because of that status, Goldman can borrow from the Federal Reserve's discount window, and more cheaply in the private markets to finance its trades, particularly in the fixed income market, one of the major drivers of its earnings.

Stinks like hell, yes?!

In an older posting: What's Wrong With Our Financial Worlds?

Written by Paul Krugman in his NY Times editorial: Reform or Bust

  • ............
    What’s wrong with financial-industry compensation? In a nutshell, bank executives are lavishly rewarded if they deliver big short-term profits — but aren’t correspondingly punished if they later suffer even bigger losses.
    This encourages excessive risk-taking: some of the men most responsible for the current crisis walked away immensely rich from the bonuses they earned in the good years, even though the high-risk strategies that led to those bonuses eventually decimated their companies, taking down a large part of the financial system in the process.

That's exactly the problem isn't it?

Isn't it so clear?

Why are the executives still being paid with totally obscene money??

Why should they be insanely rewarded when they aren't "correspondingly punished if they later suffer even bigger losses"????


4 comments:

solomon said...

Why one can run away without punishment? I could only say good politicking at office and govt.

We could afford to hammer GS for a good few days, then we will forgot abt it the next week....that is the reality of world. HAHAHA....

Kris said...

I am in the wrong field..should have went to finance..lol...Huge bonuses even though the company is screwed left and right..

Moolah said...

Sorry but issues like this makes me so sick of the current financial world.

At the rate things are going, things will certainly get much worse!

So we recently had burst bubble.

Where is the reform?

Without reform, history is doomed to repeat itself!

Kris said...

History has tendency to repeat itself.People have a very short term memory.

For one thing, i am not sure why the heck their bonuses are so high. Should at least give the money back as dividend to the stockholders. :P