Bloomberg: "Wall Street Bonuses May Go the Way of the Dodo Amid Bailouts"
Started by Topper
about 17 years ago
Posts: 1335
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From what I've read on past Streeteasy postings I expect this will break a lot of hearts... http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a7qaT8UPOUI0 Wall Street Bonuses May Go Way of Dodo Amid Bailouts (Update1) By Dawn Kopecki and Christine Harper Jan. 30 (Bloomberg) -- The Wall Street bonus, considered a sacred ritual, may become the industry’s biggest casualty as governments... [more]
From what I've read on past Streeteasy postings I expect this will break a lot of hearts...
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a7qaT8UPOUI0
Wall Street Bonuses May Go Way of Dodo Amid Bailouts (Update1)
By Dawn Kopecki and Christine Harper
Jan. 30 (Bloomberg) -- The Wall Street bonus, considered a sacred ritual, may become the industry’s biggest casualty as governments worldwide bail out financial institutions.
UBS AG was told to reduce bonuses after the Swiss government gave the country’s biggest bank a $59.2 billion lifeline. Bank of America Corp. is under pressure to scale back payouts after New York Attorney General Andrew Cuomo subpoenaed executives earlier this week for information on compensation and President Barack Obama said just yesterday that bonuses handed out by banks represent “the height of irresponsibility.”
The current system of “asymmetric compensation,” in which people are rewarded when they do well and aren’t required to return the rewards when they lose money, is detrimental to society and needs to change, said Nassim Taleb, a professor at New York University and author of “The Black Swan: The Impact of the Highly Improbable,” in an interview.
The worst economic crisis since the Great Depression, a $700 billion taxpayer bailout in the U.S. and the demise of three of the biggest securities firms -- Bear Stearns Cos., Lehman Brothers Holdings Inc. and Merrill Lynch & Co. -- didn’t deter investment banks from offering year-end rewards to employees on top of their salaries.
Financial companies in New York City paid cash bonuses of $18.4 billion last year, the sixth-most in history, even as they posted record losses, according to data compiled by the office of state Comptroller Thomas DiNapoli.
Drain the Pool
“We won’t arrive at a situation where there are no bonuses,” Stephen Green, chairman of HSBC Holdings Plc, said at a press conference in Davos today. “There are always parts of companies that are profitable, and if somebody’s been working in a profitable business in a market where bonuses are a normal part of compensation, it’s difficult sometimes to say you won’t have any bonuses in that business.”
NYSE Euronext Chief Executive Officer Duncan Niederauer said today in Davos that “some compensation models need to be completely overhauled.” He added that this would be difficult to legislate and companies will have to take the lead.
“While a number of people clearly do create wealth by brain power, by use of the company’s balance sheet and by other resources, other people have been receiving incentives for basically turning up,” Barclays Plc Chairman Marcus Agius said at the World Economic Forum. “That I don’t think is very smart. An incentive system properly designed and fairly calibrates is absolutely fundamental.”
Subpoena for Thain
Zurich-based UBS cut its 2008 bonus pool by more than 80 percent to less than 2 billion Swiss francs ($1.75 billion) after the company was forced to accept government funds in October. Chief Executive Officer Marcel Rohner, his 11 colleagues on the executive board and Chairman Peter Kurer won’t get any variable pay for last year.
Former Merrill Lynch CEO John Thain was asked this week by the New York attorney general’s office for information about payouts made before the largest brokerage firm was acquired by Charlotte, North Carolina-based Bank of America. The U.S. Treasury agreed earlier this month to provide $20 billion of capital and $118 billion in asset guarantees to Bank of America, the country’s biggest mortgage lender, to help absorb losses at New York-based Merrill.
Treasury Funds
Wall Street firms need to “show some restraint and show some discipline,” Obama said yesterday, with Treasury Secretary Timothy Geithner and Vice President Joe Biden at his side.
Obama’s attack on “shameful” bonuses may lead to new pay limits and management restrictions as the price for companies that seek out government aid. Senator Banking Committee Chairman Christopher Dodd went further, vowing to use “every possible legal means to get the money back.”
Dodd, a Connecticut Democrat, plans to summon executives whose companies received taxpayer aid to testify before his committee and explain their bonuses.
“You’re never going to get any support for the continued tough decisions we have to make if this kind of behavior continues,” Dodd said. “We can’t be underwriting to the tune of billions of dollars, whether it was used directly or indirectly. This infuriates the American people.”
The Treasury Department has injected about $200 billion into banks across the country through its Troubled Asset Relief Program. Banks and financial companies have fired 265,000 people since the collapse of the subprime mortgage market triggered the financial crisis.
‘Don’t Fly’
Charles Elson, director of the University of Delaware’s John Weinberg Center for Corporate Governance, said it would be “very difficult” for the Treasury to recoup bonuses.
“Usually these bonuses were contractually made and paid out based on a formula unless you can show bad faith, some intentional misconduct,” Elson said. “These are situations where monies were paid under a contract, and the worst you can accuse these people of is of making very bad decisions.”
People such as Robert Rubin, who received more than $100 million while serving as chairman of New York-based Citigroup Inc.’s executive committee, should be punished for their failure to understand the risks their institutions were taking, said Taleb, author of “The Black Swan.” A spokesman for Rubin declined to comment.
“These people make excuses, after the fact, saying that nobody saw it coming and that you couldn’t predict it,” Taleb said in an interview. “That’s no excuse. If you know there are storms, don’t fly. And if you fly, fly with someone who knows about storms.”
Unless Rubin and others are required to return their bonuses or are punished in some other way, Taleb said a regrettable system emerges “where profits are privatized and losses are nationalized.”
TARP Authority
Treasury has the authority under legislation that created the Troubled Asset Relief Program to issue regulations that “claw back” excessive executive compensation, and that may give the administration some authority to go after excessive pay, said Larry Hamermesh, a corporate law professor at Widener University in Wilmington, Delaware.
“It was pretty clear from TARP I that the secretary of the Treasury was supposed to establish a provision for executive claw-back,” Hamermesh said in a phone interview. “How the secretary has implemented that isn’t clear.”
The Treasury could require companies that request additional funds to repay excessive bonuses as a condition of the further financing, Hamermesh said.
“If they come around to ask again, they could say, ‘We’re going to deny it unless they cough up the bonuses,’” he said.
To contact the reporters on this story: Dawn Kopecki in Washington at dkopecki@bloomberg.net; Christine Harper in Davos at charper@bloomberg.net.
Last Updated: January 30, 2009 05:43 EST
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Response by julia
about 17 years ago
Posts: 2841
Member since: Feb 2007
the democrats have too many friends and contributors, Robert Rubin, etc. on wall street to do anything serious about bonus money. They'll make a lot of noise but then a year or two it will be the same old way.
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Response by FlatBank1
about 17 years ago
Posts: 2
Member since: Jan 2009
I work for a small company on Wall Street. We do the things that were a bit too small for the big firms. But we make real fees. We had nothing to do with the financial crises or the overleverage of the market. We still make fees, and we still pay bonuses.
Not paying bonuses at BofA, etc. will just drive more people to doing what I'm doing at similar type places. Of course I had wanted a bit to get away from the people at the big firms for numerous reasons. But you take those people away from BofA, Morgan, Goldman, etc. because you won't pay them a bonus, well, then you take away valuable revenue from those companies. So you end up with a BofA, Morgan, Goldman that are just cesspools of liability covered over by federal money and no prospects. Go outrage away, but think two steps ahead about what you are truly asking.
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Response by Topper
about 17 years ago
Posts: 1335
Member since: May 2008
Where do you suppose all those BofA, Morgan, and Goldman folk would go, Flatbank1?
I don't think anyone would argue against rewarding good performance - with bonuses. But this has gotten crazy. I work for a tech company and I can tell you that regardless of my personal performance, if the company has a bad year my bonus will be small.
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Response by patient09
about 17 years ago
Posts: 1571
Member since: Nov 2008
"The problem with socialism is that you eventually run out of other people's money."
Margaret Thatcher
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Response by FlatBank1
about 17 years ago
Posts: 2
Member since: Jan 2009
Patient - you are entirely correct. And if you think of a valuable employee who generates revenue, he goes to work for a firm to share the revenue, so some of the money is the firm's, some is the employees (the bonus). If the valuable, revenue generating employee is put in the position where his money is always held back because the firm has done poorly and wants to stake a claim to all of this employee's revenue, well, out the door he'll go. Who ends up the loser?
Topper - These folks will start small firms, whether they be for advisory or brokerage or trading activities. Eventually you'll have crippled legacy firms on Wall Street with no good employees and no way to generate revenue. They'll end up selling their platforms and systems to the newer firms full of smart, revenue generation capable employees who will go and raise funds of their own to buy assets at a steep discount.
As for tech companies, when it gets old working at Yahoo and the promises of riches aren't there anymore, people go off to Google and when it gets old working at Google and the promises of riches aren't there anymore, people go off to Facebook, etc.
People will rail on about the executives making money at the firms in trouble. Well, the legacy guys responsible should be tarred and feathered so to speak. But, if you are a troubled airline (or automaker, or steelmaker, etc.) and you need someone to manage what is essentially an essential company but that is effectively a nightmare (labor costs, legacy issues, etc.) and you don't want to pay, well then you get what you pay for. And then we get government bureaucracy.
Think a couple steps ahead.
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Response by type3secretion
about 17 years ago
Posts: 281
Member since: Jun 2008
"The problem with socialism is that you eventually run out of other people's money."
Margaret Thatcher
Funny, seems like the same problem with capitalism recently.
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Response by JKB
about 17 years ago
Posts: 162
Member since: Nov 2007
FlatBank, these banks have already been effectively socialized. We already have 'government bureacracy' running the show. The only question is whether the government will be a good steward of taxpayer money.
To say that NOTHING should be done about compensation structure because the best and the brightest will jump ship is a little too black and white. I don't think Treasury should gut all these executives completely, but should they trim the fat? Absolutely -- none of these guys is worth the money they've been paid for the last seven years. None of them are that smart or hard-working. None. And compensation structure going forward should reflect that.
I bet you can get very, very good talent for $2 million a year. Could you get better at $20 million/year? Maybe. I don't think you can know. You can effectively guess. If all these 'geniuses' start boutique firms, my guess is that that will just open the door to new, fresh talent that's willing to work hard for the measly sum of a few million a year. You can actually tie compensation to performance on a more or less individual basis. You don't have to say - as you seem to suggest - "We think you're so great that we'll guarantee you $20 million/year (or more) and we don't care how you perform."
It's the difference between the Detroit Tigers and the New York Yankees. Detroit's better right now with a much smaller payroll. How's that possible when all the 'best' talent plays for the Yankees? In your world, it's not possible because you set up an equation that compensation somehow determines performance.
If Rubin, et al. want to go boutique, I say let them. They'll just need to leave my money in the desk when they go.
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Response by bs10065
about 17 years ago
Posts: 21
Member since: Jan 2009
What is interesting about the investment banking model is that many people who earn millions per year only do so because they work AT an investment bank and can leverage the bank's balance sheet without taking any personal risk. If everyone lowered comp scales, where would those people go?
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Response by notadmin
about 17 years ago
Posts: 3835
Member since: Jul 2008
exactly. when their unit screws up big time they should be liable. right now, they not only demand a bonus but they can re-start their careers as if nothing had happened. my take: make them pay, and if they cannot, bring back the debtors jail. that will surely purge the profession and fix long term incentives.
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Response by notadmin
about 17 years ago
Posts: 3835
Member since: Jul 2008
what i don't get at all is how after the damage they had created they believe they are entitled to a bonus. shouldn't they be entitled to the food pantry and unemployment insurance? that's the way it works on other industries. ok, society needs banks, i get that. but should the taxpayer reward them with a bonus given the incompetence of the industry had showed?
it would be far better from now on not allow for asymmetric compensation. that will help to lower their egos and their complacency.
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Response by Topper
about 17 years ago
Posts: 1335
Member since: May 2008
You don't like, "heads I win, tails I win?!"
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Response by anonymousbk
about 17 years ago
Posts: 124
Member since: Oct 2006
"Think a couple steps ahead."
perhaps the bankers should have done that.
dismantle the system. there are VERY few people in the world who are not replaceable. almost 100% of that tiny cohort is full of inventors or do-gooders (mlk, gandhi, etc)...
the threat "no more genius college graduates will be available for wall street and world will collapse" is bullshit! truth is most of their so-called complicated math is basic differential calculus and only a few of them even know how to do that. the CFA exam is a joke and most can't pass that! i'm sorry but if our american wall street divas can't do it for less than a million a year, i'm pretty sure the "smart" portion of it can be sent to high-schoolers in 3rd world countries (no joke).
i am a doctor and to be honest with you i've heard doctors with the same attitude - if they don't pay me i'll walk - let them find someone as smart as me, etc. bullshit. 99.9% of all jobs can be done by just about anyone with over 115 IQ and there are hundreds of millions of people in the world that have not yet entered the global workforce with that requirement.
this credit crisis is not going to push shit to chicago or south carolina etc it is going to push it to 3rd world countries where educated labor is cheap. the few rich kids can remain in manhattan so that deals can be closed between appropriate surnames........that won't change for 20-30 years until balance of power is fully shifted.
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Response by anonymousbk
about 17 years ago
Posts: 124
Member since: Oct 2006
obviously i am replaceable as well so don't get any ideas that i consider myself to be in that tiny cohort!
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Response by w67thstreet
about 17 years ago
Posts: 9003
Member since: Dec 2008
FlatBank1 should a broker doing a $100MM deal receive $3MM? Does it in any way reflect "value"? And that's when taxpayers aren't pulling up the broker's house with tax money. I also don't think Britney should make a life's income based on "Hit Me Baby One More Time." Stupid copyrights laws that only enrich the system and let more assets flow into a "non-productive" sector of the economy... same is true for professional sports... complete waste... tax money for them... me thinkz not :)
anonymousbk... agreed. People often mistake the rising tides with their sailing skillz.. Oh well...
For Matt :Dildo :)
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Response by nyc10022
about 17 years ago
Posts: 9868
Member since: Aug 2008
"you don't want to pay, well then you get what you pay for"
Uh, we paid... and we got lousy middle managers and incompetent execs.
If bonuses are cut all over the place, no one is moving... they'll be happy to just have jobs.
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Response by nyc10022
about 17 years ago
Posts: 9868
Member since: Aug 2008
BTW, the smartest kids out of the ivies don't go to investment banking... and VERY few of the smartest make it more than a few years out.
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Response by wishhouse
about 17 years ago
Posts: 417
Member since: Jan 2008
Hey dude, I'm going to give you a new car but you have to take your elderly neighbor to the grocery store on Saturday mornings. Hm? You like to sleep in on Saturdays? That's cool, don't take the deal. What? You NEED me to buy you a new car? Great, than I guess you won't be sleeping in on Saturday's anymore.
We have every right to set conditions for the bailout $$$.
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Response by wishhouse
about 17 years ago
Posts: 417
Member since: Jan 2008
ugh, Saturday's -> Saturdays.
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Response by McHale
about 17 years ago
Posts: 399
Member since: Oct 2008
Wall Street geniuses? Give me a fucking break, all they do is move money.....creatively. Fucking morons! Con men who could have easily been working mob scams!Read about the blowhards who cooked the world economy.In fact, what we are living through is the worst financial scandal in history. It dwarfs 1929, Ponzi's scheme, Teapot Dome, the South Sea Bubble, tulip bulbs, you name it. Bernie Madoff? He's peanuts.
BTW guess what firm cooked up derivatives, the company that put the basic hardware and software together for pricing and clearing derivatives?
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Response by w67thstreet
about 17 years ago
Posts: 9003
Member since: Dec 2008
wishhouse... m'okay... but does the elderly neighbor smell bad? LMAO.
Yo... McHale! I actually got an email from the upper-ups of SE to cool my rantings :) LMAO.... substitute fucking with copulating :) Later dudes....
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Response by skippy2222
about 17 years ago
Posts: 202
Member since: Jun 2008
Who really cares if the talent leaves the IBs and starts small firms. Does it rally matter? ie does it really pose a threat to society if we don't have the big IBs? (Actually I am posing that question for real.) I believe that the talented individuals don't leave because they know that their butts(and their own money) would be on the line day in and day out, and not the backing from the big firm. They would have to prove themselves and think twice about the risk that they take. If they fail, then their small firm closes. And there's no bailout of small firms. That's a good incentive to watch your risk profile.
So yes, I am frustrated that the guy who made profits for the firm did get his bonus, because he knew the inherent risk and benefit of being in the large firm. This was not just a bad year where the firms made a small profit or took a small loss. They had a catastrophic year. We needed the bailout to prevent further calamity, but we do not need to pay bonuses with bailout money. That is what we are essentially doing. If the bailouts of the firms did not occur, and they simply went bankrupt, THERE WOULD BE NO BONUSES!!!!
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Response by newbuyer99
about 17 years ago
Posts: 1231
Member since: Jul 2008
I am somewhere in the middle of this debate. FlatBank makes all good points. I do think one of the results of recent events will be more boutiques.
However, SO much of the *profits* in recent years were driven by easy credit (M&A, trading, internal hedge funds, internal PE groups, derivatives, etc), which is now gone. Sure, there will be people like FlatBank and his firm who still make money and still pay high bonuses. But I think they will be the exception rather than the rule.
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Response by nyc10022
about 17 years ago
Posts: 9868
Member since: Aug 2008
"That is what we are essentially doing. If the bailouts of the firms did not occur, and they simply went bankrupt, THERE WOULD BE NO BONUSES!!!!"
I think thats the big point. Yes, much of the profit would never have been earned in the first place. And, yes, most of that profit GOT LOST.
But, yes, if you do an awesome job and your dotcom fails, you get ZIP. If you have a 10 year contract as CEO and the company dies, you get nothing. Thats the risk you take...
the democrats have too many friends and contributors, Robert Rubin, etc. on wall street to do anything serious about bonus money. They'll make a lot of noise but then a year or two it will be the same old way.
I work for a small company on Wall Street. We do the things that were a bit too small for the big firms. But we make real fees. We had nothing to do with the financial crises or the overleverage of the market. We still make fees, and we still pay bonuses.
Not paying bonuses at BofA, etc. will just drive more people to doing what I'm doing at similar type places. Of course I had wanted a bit to get away from the people at the big firms for numerous reasons. But you take those people away from BofA, Morgan, Goldman, etc. because you won't pay them a bonus, well, then you take away valuable revenue from those companies. So you end up with a BofA, Morgan, Goldman that are just cesspools of liability covered over by federal money and no prospects. Go outrage away, but think two steps ahead about what you are truly asking.
Where do you suppose all those BofA, Morgan, and Goldman folk would go, Flatbank1?
I don't think anyone would argue against rewarding good performance - with bonuses. But this has gotten crazy. I work for a tech company and I can tell you that regardless of my personal performance, if the company has a bad year my bonus will be small.
"The problem with socialism is that you eventually run out of other people's money."
Margaret Thatcher
Patient - you are entirely correct. And if you think of a valuable employee who generates revenue, he goes to work for a firm to share the revenue, so some of the money is the firm's, some is the employees (the bonus). If the valuable, revenue generating employee is put in the position where his money is always held back because the firm has done poorly and wants to stake a claim to all of this employee's revenue, well, out the door he'll go. Who ends up the loser?
Topper - These folks will start small firms, whether they be for advisory or brokerage or trading activities. Eventually you'll have crippled legacy firms on Wall Street with no good employees and no way to generate revenue. They'll end up selling their platforms and systems to the newer firms full of smart, revenue generation capable employees who will go and raise funds of their own to buy assets at a steep discount.
As for tech companies, when it gets old working at Yahoo and the promises of riches aren't there anymore, people go off to Google and when it gets old working at Google and the promises of riches aren't there anymore, people go off to Facebook, etc.
People will rail on about the executives making money at the firms in trouble. Well, the legacy guys responsible should be tarred and feathered so to speak. But, if you are a troubled airline (or automaker, or steelmaker, etc.) and you need someone to manage what is essentially an essential company but that is effectively a nightmare (labor costs, legacy issues, etc.) and you don't want to pay, well then you get what you pay for. And then we get government bureaucracy.
Think a couple steps ahead.
"The problem with socialism is that you eventually run out of other people's money."
Margaret Thatcher
Funny, seems like the same problem with capitalism recently.
FlatBank, these banks have already been effectively socialized. We already have 'government bureacracy' running the show. The only question is whether the government will be a good steward of taxpayer money.
To say that NOTHING should be done about compensation structure because the best and the brightest will jump ship is a little too black and white. I don't think Treasury should gut all these executives completely, but should they trim the fat? Absolutely -- none of these guys is worth the money they've been paid for the last seven years. None of them are that smart or hard-working. None. And compensation structure going forward should reflect that.
I bet you can get very, very good talent for $2 million a year. Could you get better at $20 million/year? Maybe. I don't think you can know. You can effectively guess. If all these 'geniuses' start boutique firms, my guess is that that will just open the door to new, fresh talent that's willing to work hard for the measly sum of a few million a year. You can actually tie compensation to performance on a more or less individual basis. You don't have to say - as you seem to suggest - "We think you're so great that we'll guarantee you $20 million/year (or more) and we don't care how you perform."
It's the difference between the Detroit Tigers and the New York Yankees. Detroit's better right now with a much smaller payroll. How's that possible when all the 'best' talent plays for the Yankees? In your world, it's not possible because you set up an equation that compensation somehow determines performance.
If Rubin, et al. want to go boutique, I say let them. They'll just need to leave my money in the desk when they go.
What is interesting about the investment banking model is that many people who earn millions per year only do so because they work AT an investment bank and can leverage the bank's balance sheet without taking any personal risk. If everyone lowered comp scales, where would those people go?
exactly. when their unit screws up big time they should be liable. right now, they not only demand a bonus but they can re-start their careers as if nothing had happened. my take: make them pay, and if they cannot, bring back the debtors jail. that will surely purge the profession and fix long term incentives.
what i don't get at all is how after the damage they had created they believe they are entitled to a bonus. shouldn't they be entitled to the food pantry and unemployment insurance? that's the way it works on other industries. ok, society needs banks, i get that. but should the taxpayer reward them with a bonus given the incompetence of the industry had showed?
it would be far better from now on not allow for asymmetric compensation. that will help to lower their egos and their complacency.
You don't like, "heads I win, tails I win?!"
"Think a couple steps ahead."
perhaps the bankers should have done that.
dismantle the system. there are VERY few people in the world who are not replaceable. almost 100% of that tiny cohort is full of inventors or do-gooders (mlk, gandhi, etc)...
the threat "no more genius college graduates will be available for wall street and world will collapse" is bullshit! truth is most of their so-called complicated math is basic differential calculus and only a few of them even know how to do that. the CFA exam is a joke and most can't pass that! i'm sorry but if our american wall street divas can't do it for less than a million a year, i'm pretty sure the "smart" portion of it can be sent to high-schoolers in 3rd world countries (no joke).
i am a doctor and to be honest with you i've heard doctors with the same attitude - if they don't pay me i'll walk - let them find someone as smart as me, etc. bullshit. 99.9% of all jobs can be done by just about anyone with over 115 IQ and there are hundreds of millions of people in the world that have not yet entered the global workforce with that requirement.
this credit crisis is not going to push shit to chicago or south carolina etc it is going to push it to 3rd world countries where educated labor is cheap. the few rich kids can remain in manhattan so that deals can be closed between appropriate surnames........that won't change for 20-30 years until balance of power is fully shifted.
obviously i am replaceable as well so don't get any ideas that i consider myself to be in that tiny cohort!
FlatBank1 should a broker doing a $100MM deal receive $3MM? Does it in any way reflect "value"? And that's when taxpayers aren't pulling up the broker's house with tax money. I also don't think Britney should make a life's income based on "Hit Me Baby One More Time." Stupid copyrights laws that only enrich the system and let more assets flow into a "non-productive" sector of the economy... same is true for professional sports... complete waste... tax money for them... me thinkz not :)
anonymousbk... agreed. People often mistake the rising tides with their sailing skillz.. Oh well...
For Matt :Dildo :)
"you don't want to pay, well then you get what you pay for"
Uh, we paid... and we got lousy middle managers and incompetent execs.
If bonuses are cut all over the place, no one is moving... they'll be happy to just have jobs.
BTW, the smartest kids out of the ivies don't go to investment banking... and VERY few of the smartest make it more than a few years out.
Hey dude, I'm going to give you a new car but you have to take your elderly neighbor to the grocery store on Saturday mornings. Hm? You like to sleep in on Saturdays? That's cool, don't take the deal. What? You NEED me to buy you a new car? Great, than I guess you won't be sleeping in on Saturday's anymore.
We have every right to set conditions for the bailout $$$.
ugh, Saturday's -> Saturdays.
Wall Street geniuses? Give me a fucking break, all they do is move money.....creatively. Fucking morons! Con men who could have easily been working mob scams!Read about the blowhards who cooked the world economy.In fact, what we are living through is the worst financial scandal in history. It dwarfs 1929, Ponzi's scheme, Teapot Dome, the South Sea Bubble, tulip bulbs, you name it. Bernie Madoff? He's peanuts.
http://www.villagevoice.com/2009-01-28/news/what-cooked-the-world-s-economy/1
BTW guess what firm cooked up derivatives, the company that put the basic hardware and software together for pricing and clearing derivatives?
wishhouse... m'okay... but does the elderly neighbor smell bad? LMAO.
Yo... McHale! I actually got an email from the upper-ups of SE to cool my rantings :) LMAO.... substitute fucking with copulating :) Later dudes....
Who really cares if the talent leaves the IBs and starts small firms. Does it rally matter? ie does it really pose a threat to society if we don't have the big IBs? (Actually I am posing that question for real.) I believe that the talented individuals don't leave because they know that their butts(and their own money) would be on the line day in and day out, and not the backing from the big firm. They would have to prove themselves and think twice about the risk that they take. If they fail, then their small firm closes. And there's no bailout of small firms. That's a good incentive to watch your risk profile.
So yes, I am frustrated that the guy who made profits for the firm did get his bonus, because he knew the inherent risk and benefit of being in the large firm. This was not just a bad year where the firms made a small profit or took a small loss. They had a catastrophic year. We needed the bailout to prevent further calamity, but we do not need to pay bonuses with bailout money. That is what we are essentially doing. If the bailouts of the firms did not occur, and they simply went bankrupt, THERE WOULD BE NO BONUSES!!!!
I am somewhere in the middle of this debate. FlatBank makes all good points. I do think one of the results of recent events will be more boutiques.
However, SO much of the *profits* in recent years were driven by easy credit (M&A, trading, internal hedge funds, internal PE groups, derivatives, etc), which is now gone. Sure, there will be people like FlatBank and his firm who still make money and still pay high bonuses. But I think they will be the exception rather than the rule.
"That is what we are essentially doing. If the bailouts of the firms did not occur, and they simply went bankrupt, THERE WOULD BE NO BONUSES!!!!"
I think thats the big point. Yes, much of the profit would never have been earned in the first place. And, yes, most of that profit GOT LOST.
But, yes, if you do an awesome job and your dotcom fails, you get ZIP. If you have a 10 year contract as CEO and the company dies, you get nothing. Thats the risk you take...