What's Happening With Shareholder Vs Bank Executive Pay?

The following post is from Yves. I feel the message is so important...

White House Opposing Key Measure in Shareholder v. Bank Executive Pay Reform Fight

Well, the BP disaster, in particular the intense press coverage of this week, appears to have provided the Administration with some very useful air cover, by diverting public attention from the final rounds in the battle to reform Wall Street.

One of the common arguments against the need to create mechanisms to moderate corporate and in particular financial services compensation levels is that that burden falls on shareholders, and they don’t seem to be doing much about it. That’s a major misconstruction.

Public companies represent a major agency problem. How, exactly, are fragmented investors supposed to discipline managements that overpay themselves? It isn’t as if this is a new problem; then star Wall Street analyst, Sallie Krawchek, remarked in the early 1990s, when bonus levels were much tamer than now, that it was better to be an employee than a shareholder of an investment bank. Pay for performance is also a myth. Numerous studies have found that correlation is negative, and particularly highly paid executives are typically at companies that underperform.

Why does this situation persist? Investors have the deck stacked against them. Merely making noise has no impact; for instance, unhappy institutional investors met with Goldman last year to protest its expected record 2009 bonuses, to no avail. Mounting a battle to install new directors is costly and almost always fails (virtually all companies have staggered director elections, so even a successful campaign one year, a rare event, is not sufficient to change how the board votes. It’s cheaper to sell shares than fight, and with most equity investors having to be diversified by sector (and often having specific sector weights), institutional investors can’t escape practices they deplore once they become well entrenched.

( Moolah: Sadly I always belive in either AVOID LIKE PLAGUE or VOTE WITH OUR FEET! )

And don’t fool yourself: management has stacked the deck in its favor. Board rely on compensation consultants, which are recommended by the human resources department, which reports to the CEO. For reasons I cannot fathom, most boards have been persuaded to set the target pay for their CEO in the top half, sometimes the top third or quarter, of their peer group. This assures constantly escalating pay. When companies drops into the bottom half, they must raise pay levels, which moves the average for that group up, which will put some other firm(s) in the bottom half, who must raise pay, again raising the averages…..

Huffington Post today describes how Team Obama threw its weight behind the financial oligarchs:

• The White House is intervening at the last minute to come to the defense of multinational corporations in the unfolding conference committee negotiations over Wall Street reform.
  
  A measure that had been generally agreed to by both the House and Senate, which would have affirmed the SEC’s authority to allow investors to have proxy access to the corporate decision-making process, was stripped by the Senate in conference committee votes on Wednesday and Thursday. Five sources with knowledge of the situation said the White House pushed for the measure to be stripped at the behest of the Business Roundtable. The sources — congressional aides as well as outside advocates — requested anonymity for fear of White House reprisal…..
  
  The White House move pits the administration against House Speaker Nancy Pelosi (D-Calif.), who told Barney Frank (D-Mass.) to stand strong against the effort.
  
  “I met with the Speaker today and she said, ‘Don’t back down. I’ll back you up,’” Frank, the lead House conferee, told HuffPost. “Maxine Waters is very upset, as are CalPERS and others.”
  
  Advocates said that the corporations fought the issue primarily over executive compensation concerns. Given proxy access, investors could rein in executive salaries. The Business Roundtable is a lobby of corporate CEOs…..The investor-protection language was stripped and replaced by an amendment from Sen. Chris Dodd (D-Conn.), who leads the upper chamber’s negotiations in the conference committee…
  
  The SEC is planning to issue rules related to proxy access. Those rules would be made meaningless by the language currently being pushed.
  
  We're just horrified that the Senate would try to weaken language that was similar in both bills. To set such a high threshold makes the reform totally unworkable," said Ann Yerger of the Council of Institutional Investors

Yves here. I suggest you read the entire piece. This conduct is a disgrace, and should settle any doubts as to whose interests Obama really serves. Hint: it isn’t yours and mine.

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If this executive pay does not stop consider the following..

CEOs Booted With Insane Bonus And Severance Packages!

1. Lloyd Blankfein: Goldman Sachs Group Inc. – $67.9 million bonus received in 2007.
2. Charles Prince: Citigroup Inc. – Retires with a $42 million package in 2007
3. Stanley O’Neal: Merrill Lynch & Co. Inc. – Retires with $161.5 million in 2007
4. Angelo Mozilo: Countrywide Financial Corp – Retirement package of $23.8 million, while refusing to accept $37.5 million severance package in 2007
5. Martin J. Sullivan: AIG - $47 million severance package received in 2008

Consider the insane destruction of the value of money: Nice Work John Thain!

Them Insane And Mad CEO Bonuses Just Has To End!

• By almost any measure, 2008 was a complete disaster for Wall Street — except, that is, when the bonuses arrived. Despite crippling losses, multibillion-dollar bailouts and the passing of some of the most prominent names in the business, employees at financial companies in New York, the now-diminished world capital of capital, collected an estimated $18.4 billion in bonuses for the year. That was the sixth-largest haul on record, according to a report released Wednesday by the New York State comptroller.

Yes..

• Some bankers took home millions last year even as their employers lost billions.

Yeah back then ... on cnbc: Obama: Wall Street Bonuses 'Outrageous'

• Obama said, "That is the height of irresponsibility. It is shameful. It's outrageous."

Sir... what exactly have you done? You talk about reform but what exactly is being reformed?

See blog posting: Citi Broke But Still Insist On A $50 Million Jet

See also Goldman Sachs $20 Billion Bonuses?!!! and What's Wrong With Our Financial Worlds?

See also Bankers To Be Paid Much, Much More In Bonuses!

See also Are You Pissed With The Bankers' Pay???

More Shareholders Against Bankers Bonus!

Great!!

On UK Telegraph: Shareholders attack banks in bonus row

• Institutions want regulators to calculate the value of the state aid provided to Britain's lenders to ensure bonuses are only paid out of profits the bank has generated independently. Their demands echo angry comments made over the weekend by George Soros, the hedge fund manager, who described the industry's recent success as a "hidden gift" from the taxpayer that should not be used in payouts.
  
  Colin Melvin, chief executive of Hermes Equity Ownership Services, which represents about £50bn of assets, said: "From an incentivisation point of view, you want to establish the principle that bank performance based on guarantees or government support would not be part of a bonus calculation...

Now on CNBC website: Banks Taking Same Risks That Led to Crisis: ECB's Noyer

• European Central Bank Governing Council member Christian Noyer warned that banks are taking the same risks that led to the financial crisis and said they should preserve capital rather than pay it out to bankers and investors.
  
  His comments came as regulators around the world mull reforms to lower the risks that large banks can pose to the financial system and rein in the type of recklessness that fueled the credit crisis.
  
  Noyer said impressive bank profits in recent weeks were a result of public policies to combat the crisis, and did not mean the industry had recovered its balance or that further reforms were not necessary.
  
  "Nothing could be further from the truth. Indeed, one major risk in the period to come is the emergence of a business as usual mentality," Noyer said in a speech at a financial conference in Singapore on Monday.
  
  "There are signs that parts of the financial industry have resumed risk taking practices reminiscent of those which led to the crisis," he said, pointing to bankers' pay packages that appeared out of line with performance.
  

Are You Pissed With The Bankers' Pay???

So they (JP Morgan) made $3.59 billion.

But get this.. they are setting aside $7.3 billion to pay their staff!

Which means the bank is on track to payout $29 billion in pay and bonus!!!!

Does this make sense?

WTF is wrong with our world today?

Where and what are they lawmakers doing?

Is the world really ruled by the bankers now???

Is any sane person out there who is NOT ANGRY WITH WHAT THESE BANKERS are doing?

Hell yes! I am utterly pissed!

Sigh.

JPMorgan heralds return to bumper bonuses

• JPMorgan Chase heralded a return to the golden days of Wall Street bonuses after delivering $3.59bn (£2.25bn) in profits and setting aside $7.3bn to pay staff.
  
  By James Quinn, US Business Editor
  Published: 4:01PM BST 14 Oct 2009
  
  The global banking conglomerate – best known in Britain as the parent company of investment bank JP Morgan – has now set aside $21.8bn in compensation for employees for the first nine months of the year. Should it keep it up, the bank will be on track to hand out as much as $29bn in pay and bonuses this year
  
  The news – combined with expected confirmation on Thursday that Goldman Sachs is on track to pay out as much as $22-23bn in its bonus pot this year – is likely to reignite the row over bankers' pay.
  
  Across the board, Wall Street banks are expected to collectively dole out more than $140bn by the end of the year, a record figure for the US banking sector, beating the previous high of 2007.
  
  JP Morgan Chase appears set to dole out as much as $29bn in compensation at the year-end, a 27pc rise on the last two years, when its total pay pool has amounted to approximately $22.7bn each year.
  
  This year’s bumper pay-out, which will be paid in mid to late December, is therefore likely to equate to $131,304 for each of the bank’s 220,861 employees, compared to a $100,906 pay-out for the 224,961staff the bank at the end of the last year.
  
  JP Morgan received $25bn in financial support from the US government, money it repaid in June, and has handed over a package of linked warrants to the Treasury, which will auction them off to the highest bidder by the end of the year.......

Posted this morning: Bankers To Be Paid Much, Much More In Bonuses!

Bankers To Be Paid Much, Much More In Bonuses!

Highlighted by Jesse: Wall Street Set to Pay a Record $140 Billion In Bonuses Topping 2007

While the world suffers, Wall Street pays itself record bonuses, larger even than the peak year of 2007, by taxing the productive economy to maintain an extravagant lifestyle. These bonuses are being paid with your money, and your children's money, if you hold US dollars.

And while this happens, the US credit card banks are raising interest rates to 20+% even on customers with excellent payment records and jobs which is certainly usury, and with an arrogant impunity. The insider trading scandals and tales of government graft yet to be told are so blatant and shocking that only a captive mainstream press keeps them from being investigated.

The rest of the world looks on in shock and amazement. What has gone wrong with America? What are they thinking? America has not only lost the high ground, it is sliding into a ditch.

While Americans are pacified by bread and circuses, the rest of the world looks at a painful reality show in the States, a country in a death spiral of corrupt leadership and public apathy. If it was Zimbabwe or Iceland there would still be sympathy for the people, but far less concern.

A deflationist friend was railing about the US slide into bankruptcy, and I could not help but ask, "What happens to the paper of a bankrupt company, or country?"

Where indeed will the dollar gain its long anticipated strength, its renaissance of value?

Or yes, from "less dollars" through debt destruction. Mutant monetarism gone mad, an argument worthy of Herr Goebbels. The dollar will rise in value by immersing itself in a pool of corruption, and by destroying its shareholders, those who hold their savings in it, while oligarchs loot the financial system. Unless the US can turn its trade balance positive overnight, while raising interest rates, and maintaining a growing domestic economy based on consumption, it is not going to happen. The US is running out of degrees of freedom.

Wall Street holds the US public and government hostage by threatening financial armageddon if they do not get what they wish. We would anticipate a similar threat to the global economy based on dollar debt at some point, asking for a global monetary regime controlled out of New York and London, with perhaps a few associates.

Nothing goes straight up or down. There will be more sucker rallies and bubbles, but the train is starting to come off the rails a little more with each wrenching turn of this cycle.

The banks must be restrained, and the financial system reformed, and balance restored to the economy before there can be any sustained recovery.

Finfacts Eire

• Wall Street firms set to break new records in 2009 with pay rising to $140bn; Bailed-out insurance giant AIG paid “retention bonuses” to kitchen staff
  By Finfacts Reporting Team
  Oct 14, 2009 - 6:10:22 AM
  
  Wall Street firms are set to break new records with employee pay set to rise to $140bn this year. Meanwhile, it has been reported that the bailed-out insurance giant AIG paid “retention bonuses” to kitchen staff earlier this year from a $168m pot, that was ostensibly designed to keep staff from leaving the government controlled firm.
  
  Workers at 23 top investment banks, hedge funds, asset managers and stock and commodities exchanges can expect to earn even more than they did in the peak year of 2007, according to an analysis of securities filings for the first half of 2009 and revenue estimates through year-end by The Wall Street Journal.
  
  The Journal reports that total compensation and benefits at the publicly traded firms it analyzed, are on track to increase 20% from last year's $117bn -- and to top 2007's $130bn payout. This year, employees at the companies will earn an estimated $143,400 on average, up almost $2,000 from 2007 levels.
  
  Average compensation per employee at investment bank Goldman Sachs, is set to reach about $743,000 this year, double last year's $364,000 and up 12% from about $622,000 in 2007, according to the Journal analysis...

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See also Goldman Sachs $20 Billion Bonuses?!!! and What's Wrong With Our Financial Worlds?

Folks keep asking me, is the worst over?

Oh can it ever be over when the very same financial institutions are still running the rule? Yeah, is our world now truly run by the financial markets?

How can things get better when NO reform is made on the very same financial system that had brought the world to its knees recently?

And these very same people are to be rewarded more?

What for?

These bankers take on insane risks and when they fail, they get bailout. And now they are being rewarded with more money?

Are they serious? Or are they out of their minds?

Capitalism rules?

The rich elite gets richer and needless to say, screw the poor!

Is the worst over when there is a foreclosure filing every 13 Seconds?!

Oops... who cares! The worst is because the financial markets says so! Loooook at the stock markets! Can't you see what it has been telling you for so many months already?

Damn!

Life is certainly good as long as you are in the financial markets! Heck the kitchen staff is even getting retention bonus!

What a wonderful world!

ps: please don't forward this to ALL THE ANGRY AMERICANS!

Do see this video on MSNBC.

Visit msnbc.com for Breaking News, World News, and News about the Economy

Thirst Of CEO Bonus Is In Their DNA?!!

Posted the other day: Them Insane And Mad CEO Bonuses Just Has To End

Yesterday, the EconomistTimes has the following article: For CEOs, thirst for bonuses may be in their DNA

• NEW YORK: Why do CEOs need extravagant perks even when they are firing staff and pleading for taxpayer bailouts? It may just be in their makeup, experts say.
  
  It takes arrogance and narcissism to become leader of a Fortune 500 company. Those same traits, however, have become their undoing during the deepest recession in decades.
  
  U.S. President Barack Obama has noticed, telling reporters on Thursday he was outraged by a New York State report that $18.4 billion in Wall Street bonuses were paid in 2008 as taxpayers rescued the crumbling financial system.
  
  "That is the height of irresponsibility. It is shameful," Obama said.
  
  New York State Attorney General Andrew Cuomo, who is investigating Wall Street bonuses, welcomed Obama's comments.
  
  "While Wall Street melted down, top executives believed that, unlike the rest of the country, they still deserved huge bonuses," Cuomo said.
  
  For Bob Monks, a former executive who has written nine books on corporate governance, the reason is that the rich and powerful simply love their toys.
  
  "It's a boy thing. Sort of, 'Mine's bigger than yours.' It's really childish," said Monks, a shareholder rights activist and the subject of a book called "A Traitor to His Class."
  
  Monks related a story about flying on someone's corporate jet. The host was devastated when, upon landing, he saw that while he planned for a limo to be waiting at the airport another captain of industry had a helicopter take him to town.
  
  "I thought my guy was going to die. ... It's entirely about people's self-image."
  
  THE JETS OF WRATH
  
  Longtime advocates of shareholder rights were handed a gift in November when Detroit auto executives flew to Washington on corporate jets to ask for billions of dollars in taxpayer money, sparking a public outrage.
  
  More recently, it became known that former Merrill Lynch CEO John Thain spent $1.2 million remodeling his office last year, including $1,405 for a trash can. Merrill Lynch is owned by Bank of America, which consumed $45 billion of taxpayer money through bailouts. (see blog posting: Nice Work John Thain! )
  
  Then on Tuesday, Citigroup canceled plans to buy a $50 million executive jet after a White House rebuke. ( see blog posting: Citi Broke But Still Insist On A $50 Million Jet )
  
  "People don't become head of Merrill Lynch without having a certain sense of self-importance. Once they arrive at that position, they have all kinds of toadies tell them what geniuses they are, then of course they begin to feel their lifelong feelings of self-importance have been confirmed," said Charles Goodstein, a psychoanalyst and professor at New York University School of Medicine.
  
  Defenders of executive perks say generous compensation is needed to retain talent.
  
  Sometimes it's jets but can also include home security systems, country club memberships, sports tickets and financial advice. The value of these benefits is considered income, so CEOs also sometimes get another perk: company help in paying their taxes.
  
  "I was CEO of a bank once and it's not rocket science. You need the same skill set as somebody running a hardware store in a medium-sized town," Monks said.
  
  Steve Thel, a former lawyer with the Securities and Exchange Commission and now a professor at Fordham Law School, blames compliant board members who often come from the same privileged world and can get paid hundreds of thousands of dollars for attending a few meetings each year.
  
  "It's endemic to the system. The last administration didn't think there was any structural flaw. Now across the political spectrum people feel that Wall Street executive compensation is out of control," Thel said.
  
  He predicted Congress would pass legislation granting minority shareholders more say on pay and possibly introduce higher taxes on some parts of executive compensation.
  
  "A year ago it was absolutely unthinkable that this would be heard in Congress," Thel said.

Them Insane And Mad CEO Bonuses Just Has To End!

Posted on NewYorkTimes: What Red Ink? Wall Street Paid Hefty Bonuses

• By BEN WHITE
  Published: January 28, 2009
  By almost any measure, 2008 was a complete disaster for Wall Street — except, that is, when the bonuses arrived
  
  Despite crippling losses, multibillion-dollar bailouts and the passing of some of the most prominent names in the business, employees at financial companies in New York, the now-diminished world capital of capital, collected an estimated $18.4 billion in bonuses for the year.
  
  That was the sixth-largest haul on record, according to a report released Wednesday by the New York State comptroller.
  
  While the payouts paled next to the riches of recent years, Wall Street workers still took home about as much as they did in 2004, when the Dow Jones industrial average was flying above 10,000, on its way to a record high.
  
  Some bankers took home millions last year even as their employers lost billions.
  
  The comptroller’s estimate, a closely watched guidepost of the annual December-January bonus season, is based largely on personal income tax collections. It excludes stock option awards that could push the figures even higher.
  
  The state comptroller, Thomas P. DiNapoli, said it was unclear if banks had used taxpayer money for the bonuses, a possibility that strikes corporate governance experts, and indeed many ordinary Americans, as outrageous. He urged the Obama administration to examine the issue closely.
  
  “The issue of transparency is a significant one, and there needs to be an accounting about whether there was any taxpayer money used to pay bonuses or to pay for corporate jets or dividends or anything else,” Mr. DiNapoli said in an interview.
  
  Granted, New York’s bankers and brokers are far poorer than they were in 2006, when record deals, and the record profits they generated, ushered in an era of Wall Street hyperwealth. All told, bonuses fell 44 percent last year, from $32.9 billion in 2007, the largest decline in dollar terms on record.
  
  But the size of that downturn partly reflected the lofty heights to which bonuses had soared during the bull market. At many banks, those payouts were based on profits that turned out to be ephemeral. Throughout the financial industry, years of earnings have vanished in the flames of the credit crisis.
  
  According to Mr. DiNapoli, the brokerage units of New York financial companies lost more than $35 billion in 2008, triple their losses in 2007. The pain is unlikely to end there, and Wall Street is betting that the Obama administration will move swiftly to buy some of banks’ troubled assets to encourage reluctant banks to make loans.
  
  Many corporate governance experts, investors and lawmakers question why financial companies that have accepted taxpayer money paid any bonuses at all. Financial industry executives argue that they need to pay their best workers well in order to keep them, but with many banks cutting jobs, job options are dwindling, even for stars.
  
  Lucian A. Bebchuk, a professor at Harvard Law School and expert on executive compensation, called the 2008 bonus figure “disconcerting.” Bonuses, he said, are meant to reward good performance and retain employees. But Wall Street disbursed billions despite staggering losses and a shrinking job market.
  
  “This was neither the sixth-best year in terms of aggregate profits, nor was it the sixth-most-difficult year in terms of retaining employees,” Professor Bebchuk said.
  
  Echoing Mr. DiNapoli, Professor Bebchuk said he was concerned that banks might be using taxpayer money to subsidize bonuses or dividends to stockholders. “What the government has been trying to do is shore up capital, and any diversion of capital out of banks, whether in the form of dividends or large payments to employees, really undermines what we are trying to do,” he said.
  
  Jesse M. Brill, a lawyer and expert on executive compensation, said government bailout programs like the Troubled Asset Relief Program, or TARP, should be made more transparent.
  
  “We are all flying in the dark,” Mr. Brill said. “Companies can simply say they are trying to do their best to comply with compensation limits without providing any of the details that the public is entitled to.”
  
  Bonuses paid by one troubled Wall Street firm, Merrill Lynch, have come under particular scrutiny during the last week.
  
  Andrew M. Cuomo, the New York attorney general, has issued subpoenas to John A. Thain, Merrill’s former chief executive, and to an executive at Bank of America, which recently acquired Merrill, asking for information about Merrill’s decision to pay $4 billion to $5 billion in bonuses despite new, gaping losses that forced Bank of America to seek a second financial lifeline from Washington.
  
  A Treasury department official said that in the coming weeks, the department would take action to further ensure taxpayer money is not used to pay bonuses.
  
  Even though Wall Street spent billions on bonuses, New York firms squeezed rank-and-file executives harder than many companies in other fields. Outside the financial industry, many corporate executives received fatter bonuses in 2008, even as the economy lost 2.6 million jobs. According to data from Equilar, a compensation research firm, the average performance-based bonuses for top executives, other than the chief executive, at 132 companies with revenues of more than $1 billion increased by 14 percent, to $265,594, in the 2008 fiscal year.
  
  For New York State and New York City, however, the leaner times on Wall Street will hurt, Mr. DiNapoli said.
  
  Mr. DiNapoli said the average Wall Street bonus declined 36.7 percent, to $112,000. That is smaller than the overall 44 percent decline because the money was spread among a smaller pool following thousands of job losses.
  
  The comptroller said the reduction in bonuses would cost New York State nearly $1 billion in income tax revenue and cost New York City $275 million.
  

And on cnbc: Obama: Wall Street Bonuses 'Outrageous'

• Obama said, "That is the height of irresponsibility. It is shameful. It's outrageous."
  
  The president said he and new Treasury Secretary Timothy Geithner will have direct conversations with corporate leaders to make the point.
  
  Obama said there is a time for corporate leaders to make profits and get paid bonuses but now is "not that time." "You're never going to get any support for the continued tough decisions we have to make if this kind of behavior continues.
  

I am simply over the moon that the insane CEO bonus is now an issue.

It was total madness that CEOs are paid such amount!

The CEO bonus bubble must be pop and it has to end NOW!!!

Blogged last year: CEOs Booted With Insane Bonus And Severance Packages!

Nice Work John Thain!

It was just on January 15th 2009 that John Thain made the following remark on a New York Times article.

• "We have been consistently cleaning up the balance sheet, repairing the damage that was done over the last few years" ( source: Bank of America to Receive Additional $20 Billion )

Cleaning up the balance sheet?

Repairing the damage that was done over the last few years?

Guess what good old Charlie has literrally found under John Thain's rug! (yeah, pun intended. What do you expect when you read his $87,000 rug!!! )

In a Daily Beast/CNBC exclusive, Charlie Gasparino reveals how Merrill Lynch’s CEO spent over $1 million and hired the Obamas' decorator to redecorate his office last year—even as the firm faced a financial crisis.

John Thain’s $87,000 Rug by Charlie Gasparino

Below, The Daily Beast presents Thain’s top 16 outrages.

1) $2,700 for six wall sconces.
2) $5,000 for a mirror in his private dining room.
3) $11,000 for fabric for a "Roman Shade.”
4) $13,000 for a chandelier in the private dining room.
5) $15,000 for a sofa.
6) $16,000 for a "custom coffee table.”
7) $18,000 for a “George IV Desk.”
8) $25,000 for a "mahogany pedestal table.”
9) $28,000 for four pairs of curtains.
10) $35,000 for something called a "commode on legs.”
11) $37,000 for six chairs in his private dining room.
12) $68,000 for a "19th Century Credenza" in his office.
13) $87,000 for a pair of guest chairs.
14) $87,000 for an area rug in Thain's conference room and another area rug for $44,000.
15) $230,000 to his driver for one year’s work.
16) $800,000 to hire celebrity designer Michael Smith, who is currently redesigning the White House for the Obama family for just $100,000.

And that's not all!!

On the Naked Capitalism, Yvess Smith wrote the following: Merrill Execs Pay Selves Bonuses Ahead of Schedule (and Before BofA Closing)

• Playing fast and loose seems to be the theme of the evening. First we have the credulity-stretching China fourth quarter GDP release, and now we have the eleventh hour stealing of the silver by Merrill's top executives as one of the firm's final acts.
  
  Let us remember the fact set: Merrill managed to get Bank of America to agree to buy it in September, elbowing aside Lehman. The deal is subject to shareholder approval, however. BofA, realizing it has acquired a garbage barge, threatens to scuttle the deal unless Uncle Sam lends a helping hand. Negotiations proceed behind closed doors (and neither Merrill nor BofA shareholders are told prior to the shareholder vote that BofA has agreed to do the deal subject to some form of government support).
  
  Now we learn that after it was evident that the US taxpayer was going to subsidize the Merrill acquisition, the Merrill compensation committee accelerated bonus payments by a month to make sure they were paid out before the BofA deal closed.
  
  Efforts are being made to minimize the amount involved (it is claimed to be only $3-$4 billion, but the fact is amounts were reserved in prior quarters that are excessive in light of full year performance. So the fact that some of the amounts were allowed for in previous quarters is misleading).
  
  Were Merrill bankrupt, the bonus payments could be deemed fraudulent conveyance and clawed back. But we don't do either financial firm bankruptcies or clawbacks in this country.
  
  From the Financial Times:
  
  Merrill Lynch took the unusual step of accelerating bonus payments by a month last year, doling out billions of dollars to employees just three days before the closing of its sale to Bank of America.
  
  The timing is notable because the money was paid as Merrill’s losses were mounting and Ken Lewis, BofA’s chief executive, was seeking additional funds from the government’s troubled asset recovery programme to help close the deal.
  
  Merrill and BofA shareholders voted to approve the takeover on December 5. Three days later, Merrill’s compensation committee approved the bonuses, which were paid on December 29. In past years, Merrill had paid bonuses later – usually late January or early February, according to company officials.
  
  Within days of the compensation committee meeting, BofA officials said they became aware that Merrill’s fourth-quarter losses would be greater than expected and began talks with the US Treasury on securing additional Tarp money...
  
  Despite the magnitude of the losses, Merrill had set aside $15bn for 2008 compensation, a sum that was only 6 per cent lower than the total in 2007, when the investment bank’s losses were smaller.
  
  The bulk of $15bn in compensation was paid out as salary and benefits throughout the course of the year. A person familiar with the matter estimated that about $3bn to $4bn was paid out in bonuses in December.
  
  Nancy Bush, an analyst with NAB Research, described the size of the 2008 Merrill bonus payments as “ridiculous”
  

And yes, John Thain has been sacked!

Nice work John Thain!

CEOs Booted With Insane Bonus And Severance Packages!

I was reading Chris Puplava's market wrap, Why So Depressed?, when I came upon the following passage.

• In case you hadn’t heard, real wages for the average consumer have DECLINED this decade unlike Wall Street heads who have been showered with multi million dollar bonuses. They have received these bonuses as a reward for helping expand the financial economy’s largess to produce a generational credit bubble and for selling our asset-backed slime all over the world, damaging our financial institution’s credibility in foreigners’ eyes. Those same Wall Street CEOs have been punished for their crimes by getting the boot with outlandish bonuses and severance packages as the small list below highlights.



• 1. Lloyd Blankfein: Goldman Sachs Group Inc. – $67.9 million bonus received in 2007.
• 2. Charles Prince: Citigroup Inc. – Retires with a $42 million package in 2007
• 3. Stanley O’Neal: Merrill Lynch & Co. Inc. – Retires with $161.5 million in 2007
• 4. Angelo Mozilo: Countrywide Financial Corp – Retirement package of $23.8 million, while refusing to accept $37.5 million severance package in 2007
• 5. Martin J. Sullivan: AIG - $47 million severance package received in 2008

Holy Cow!

This is ABSOLUTELY MADNESS!!!!!!!!!!!!!!! TOTALLY INSANE!!!!!!!!!!!!!!!!

And if there was something that needs to be fixed is these disgustibating, grotesque and outlandish CEO pay packages!!

Wall Street Bonus

Published on Bloomber news:

• Wall Street Plans $38 Billion of Bonuses as Shareholders Lose
  
  By Christine Harper
  
  Nov. 19 (Bloomberg) -- Shareholders in the securities industry are having their worst year since 2002, losing $74 billion of their equity. That won't prevent Wall Street from paying record bonuses, totaling almost $38 billion.
  
  That money, split among about 186,000 workers at Goldman Sachs Group Inc., Morgan Stanley, Merrill Lynch & Co., Lehman Brothers Holdings Inc. and Bear Stearns Cos., equates to an average of $201,500 per person, according to data compiled by Bloomberg. The five biggest U.S. securities firms paid $36 billion to employees last year.
  
  The bigger bonus pool derives from a record $9 billion of fees for arranging acquisitions and $5 billion for underwriting initial public offerings and sales of junk bonds, the most lucrative securities, Bloomberg data show. Bankers' record fees help explain why 2007 will prove to be the industry's second- most profitable after the subprime mortgage market collapse led to losses at Merrill and Bear Stearns. The last time bonuses declined was 2002 when the Standard & Poor's 500 Index fell 23 percent, and Enron Corp. and WorldCom Inc. went bankrupt.
  
  Goldman's record earnings and gains at Morgan Stanley and Lehman mean all the New York-based firms will be forced to pay more in a year when all but Goldman lost more than 20 percent of their market value, said Charles Geisst, finance professor at Manhattan College in Riverdale, New York.
  
  ``They're all going to have to fall into line,'' said Geisst, author of ``100 Years of Wall Street.'' ``If Bear and Merrill plead poverty, they're going to lose all of their good people.''
  
  Pay for Performance
  
  John Thain, Merrill's newly appointed chairman and chief executive officer, is already grappling with the bonus issue and he doesn't start at the world's biggest brokerage until next month. Thain, whose contract calls for him getting at least $44 million in cash and stock payable over five years, said top performers will receive bonuses while those involved in the subprime market collapse that led to the firm's $8.4 billion third-quarter writedown will be penalized.
  
  ``Most of Merrill Lynch's businesses are actually doing well, and so what you have to do in that circumstance is to pay the people who are performing,'' Thain, 52, said in a Nov. 15 interview. ``Getting that balance right, paying the people who perform well and taking enough money from the people who caused some of the problems, that is going to be one of the first topics I address.''
  
  Bonus Pool
  
  Securities firms typically use slightly less than 50 percent of their revenue to pay salaries, benefits and bonuses, a percentage that firms adjust throughout the year. This year's bonus estimate was based on the five-year average ratio at each of the five firms. Year-end bonuses usually account for about 60 percent of compensation.
  
  In the first nine months of 2007, Goldman, Morgan Stanley, Merrill, Lehman and Bear Stearns told their shareholders that they set aside $52.4 billion for compensation, up 9 percent from a year earlier. For the whole year, the figure rises to $62.5 billion, according to analysts' estimates that combined revenue at the five largest securities firms will climb 1.7 percent to $135 billion.
  
  That brings bonuses to almost $38 billion. The total increases when bonuses for employees at hedge funds, leveraged buyout firms and banks such as New York-based JPMorgan Chase & Co. and Frankfurt-based Deutsche Bank AG are included.
  
  The industry's bonuses are larger than the gross domestic products of Sri Lanka, Lebanon or Bulgaria. The average $201,500 bonus is more than four times the $48,201 median household income in the U.S. last year, according to U.S. Census Bureau statistics.
  
  `A Good Hand'
  
  It's also enough to buy a Porsche 911 Turbo Cabriolet, a day for two at a VIP spa suite at New York's Mandarin Oriental hotel, and a year's tuition and fees for a high-school student at Trinity School on the Upper West Side of Manhattan.
  
  Goldman is the world's biggest securities firm and also the most profitable. Analysts estimate the company, led by CEO Lloyd Blankfein, will earn an all-time high of $11 billion this year. Goldman reported a 79 percent increase in third-quarter net income, while profits slid at Morgan Stanley, Lehman and Bear Stearns, and Merrill reported a $2.24 billion loss. Goldman set aside $16.9 billion to pay salaries, benefits and bonuses in the first nine months of the year, exceeding the full-year record in 2006.
  
  ``They're playing a good hand as aggressively as you can play it,'' said John Gutfreund, 78, president of Gutfreund & Co. and former chief executive officer of Salomon Brothers, now part of New York-based Citigroup Inc. That has put Goldman's competitors in ``an awkward position,'' he said.
  
  Natural History Museum
  
  Merrill's revenue probably will decline 13 percent this year after losses from mortgage-related bets in the third quarter, analysts estimate. Merrill said last month that it set aside 58 percent of revenue in the first nine months of 2007 for compensation, up from 49 percent a year earlier, to ``appropriately reward employees.'' The firm said the ratio may rise further in the fourth quarter.
  
  ``I can understand what they're doing at Merrill,'' said William Fitzpatrick, an analyst at Racine, Wisconsin-based Johnson Asset Management, which oversees $1.7 billion and holds Morgan Stanley shares. ``If they don't pay up now, they could lose a lot of their top performers.''
  
  Bankers are showing their confidence about the size of payouts they expect to receive by donating record amounts to organizations including the American Museum of Natural History in New York and the UJA-Federation of New York.
  
  The American Museum of Natural History raised $3.2 million last week at its annual Museum Gala dinner, said communications director Steve Reichl. About 650 people attended, the most ever, he said.
  
  Park Avenue
  
  UJA-Federation, a Jewish philanthropy, raised $41 million, up from $38 million last year, at an annual campaign event hosted last month at the home of Alan Greenberg, the 80-year-old chairman of Bear Stearns's executive committee. The organization hopes to raise at least $21.5 million at its annual Wall Street dinner on Dec. 5, topping last year's $21 million, said Stuart Tauber, UJA's senior vice president.
  
  Demand for ``super-luxury'' apartments in Manhattan, those priced at or above $10 million, also was at an all-time high in 2007, said Pamela Liebman, chief executive officer of the Corcoran Group real estate brokers. A 12-room Park Avenue apartment placed on the market this month sold in less than a week for more than the $12 million asking price, she said.
  
  ``Some people were a little surprised because there's been so much negative talk in the press about the market,'' Liebman said. ``When there's all this talk about the credit crunch and potential job loss and not everybody sharing in the same pie, the ones who are the most fortunate don't want to rub it in anyone's face so they're quiet about their purchases.''
  
  Stock Options
  
  Investment banks will distribute the money less evenly than in 2005 and 2006, according to the Options Group, the New York- based firm that has tracked pay and hiring trends for more than a decade. Employees involved in packaging and trading mortgage- backed securities will see bonuses drop 30 percent to 35 percent, while commodities traders may see gains of as much as 20 percent, the company estimates.
  
  Another change this year: 70 percent or more of bonuses will be stock grants instead of cash, up from 50 percent in a typical year, said Michael Karp, Options Group's CEO.
  
  UBS AG, Europe's biggest bank by assets, is capping the cash portion of investment bank bonuses this year at $750,000 and paying anything above that in stock, said a person familiar with the company's plans. The Zurich-based bank, which reported its first quarterly loss in almost five years, is adding a new type of restricted stock award that employees can sell after one year instead of waiting for three years, the person said.
  
  Slumping Stocks
  
  ``What they do is they issue the majority of the compensation in shares,'' said Roy Smith, a finance professor at New York University's Stern School of Business and a former partner at Goldman Sachs. ``You want these people to be thinking of themselves as working for the same company, and that means they will suffer and improve with the company.''
  
  The size of the payouts is a concern given how badly the shares of most securities firms have performed this year, said Fitzpatrick of Johnson Asset Management.
  
  ``They're paid very handsomely in good times because they're supposed to take a hit in bad times,'' Fitzpatrick said. ``Performance has dwindled this year, and I think they should feel that.''

Well, just how about that?

Such bonus is simply insane!

Insane Money

Saw this article posted on CNN.

• Is John Mack worth $40 million?
  When a CEO takes home tens of millions, even after a great year, some critics wonder if it's worth it.
  By Rob Kelley, CNNMoney.com staff writer
  December 15 2006: 5:20 PM EST
  
  NEW YORK (CNNMoney.com) -- Morgan Stanley's John Mack has just taken home $40 million in stock and options - the largest bonus ever given to a Wall Street CEO - and it's expected that the record will be broken in coming days.
  
  And you can't say that Morgan Stanley, one of the nation's biggest brokerage houses, hasn't had an exceptional year - its stock has risen 40 percent so far and analysts surveyed by Thomson expect the firm to report annual earnings of $7.1 billion, up 45 percent from last year's $4.9 billion. (Full story)

$40 Million bonus?

Comeon. This is getting really absurb, don't you think?

A $40 Million bonus equates to a bonus of $109,589.04 per day.

Totally insane!

Huge Wall Street Bonuses. Do they deserve it?

CNN carried an article from Reuters on Wall Street bonuses set to soar

Here is the bottom-line mentioned by the article:

• Bonuses for bankers will probably jump 25 percent, and equities traders may take home 20 percent to 25 percent more, according to the study by Johnson Associates Inc., a New York compensation consultant.
• Investment banking bonuses often comprise the bulk of overall pay. A top banker or trader can receive seven- or even eight-figure bonuses after a stellar year.
• "A lot of people are already making an enormous amount of money" before bonuses, Johnson said. "Now they can make twice as much of an enormous amount of money."

Do you ever wonder if these are really INSANE money being paid?

Do you reckon if these bankers really deserve so much money?

And oh, where and how do you reckon these investment bankers make their money from?

Care to share your views and opinions?