Posts Tagged ‘TARP’

Brokerage Firms Pay Billions in Bonuses in 2008 While Taking Taxpayer Money

Written on July 31st, 2009 by Jason M. Kueserno shouts

On July 30, 2009, New York Attorney General Andrew Cuomo issued a report entitled “No Rhyme or Reason: The ‘Heads I Win, Tails You Lose’ Bank Bonus Culture.”

In the report, Mr. Cuomo discusses the compensation programs instituted by banks and brokerage firms while the economy was heading for, and in the midst of, crisis. The findings are truly astonishing are summed up well as “When the banks did well, their employees were paid well. When the banks did poorly, their employees were paid well. And when the banks did very poorly, they were bailed out by taxpayers and their employees were still paid well. Bonuses and overall compensation did not vary significantly as profits diminished.”

The report illustrates that while Citigroup and Merrill Lynch suffered losses of $54 billion in 2008, they “paid out nearly $9 billion in bonuses and then received TARP bailouts totaling $55 billion.” Furthermore, the bonuses paid in 2008 by Goldman Sachs, Morgan Stanley, and J.P. Morgan Chase exceeded their net income. Specifically, the report notes that “these three firms earned $9.6 billion, paid bonuses of nearly $18 billion, and received TARP taxpayer funds worth $45 billion.” The report also noted that State Street paid approximately $470 million in bonuses while receiving $2 billion in TARP funding.

Appendix A to the Report is a must read for anyone concerned about the problems in the financial system. A table contained in the Appendix shows that J.P. Morgan Chase & Co. paid each of more than 1,600 employees bonuses that were equal to or greater than $1 million (while the firm accepted $25 billion in TARP). Goldman Sachs and Citigroup paid similar bonuses to more than 950 and 730 employees, respectively (while accepting $10 billion and $45 billion, respectively from TARP). In 2008, Merrill Lynch suffered losses of more than $465,000 per employee. Nevertheless, the firm paid total bonuses that averaged more than $61,000 per employee.

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Wall Street Compensation Returns, Investors Portfolios Have Not

Written on April 27th, 2009 by Jason M. Kueserno shouts

On April 26, The New York Times reported that in 2009, “workers at the largest financial institutions are on track to earn as much money this year as they did before the financial crisis began.”  (See article here).  In fact, the article reports that six of the largest banks have “set aside over $36 billion in the first quarter to pay their employees.”   At Goldman Sachs, the average compensation per employee could equal as much as $569,220.  At J.P. Morgan Chase, the average employee in the company’s trading and investment banking unit is on pace to earn $509,524.  Yes, the average compensation would exceed one-half of a million dollars.

In 2008, the stock market experienced losses of $30.1 trillion in market value.  So far this year, the S&P 500 has declined by approximately 8% more.  Meanwhile, the federal government has committed $12.1 trillion to financial bailout programs, and specifically, $10 billion and $25 billion, respectively, to Goldman Sachs and J.P. Morgan.  

This begs the question, why are taxpayers footing the bill for the failure of the financial markets and continuing to lose money in the process while the compensation of the very people who contributed to the need for a bailout is returning to record high levels?

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