Banks' 2008 Stock Options Turning Out To Be Most Lucrative Payouts Ever

The New York Times:

Banks cut bonuses last year and shifted more pay into stock and options from cash, a tactic that lawmakers supported for its emphasis on long-term performance. Within months, the financial system began to mend -- partly with the help of billions of dollars in government aid -- and that stock began surging in value. Some of it can be cashed in starting in just a few months.

Read the whole story: The New York Times

Comments

[TradeLosses]

Lets all pray that the health care bill doesn't get stonewalled in the Senate...

good articles; http://financeopinions.blogspot.com

This is just one step in a staircase of much needed reforms after 8 years of destruction.

[StockMarkets]

No more bailouts. No more too big to fail. more effort needs to be done to make work. Instead, unemployment keeps climbing as well as the deficit. Tax cuts and toehr stupid gimmicks aren't the answer.

hat tip to http://financeopinionss.blogspot.com

[S E Martin]

If he believes he's doing "God's work", then he must also believe....

That a camel is more likely to pass through the eye of a needle, than a rich man is able to enter heaven.

(I hope I didn't paraphrase that too clumsily. I seem to remember some such passage in the bible.)

[MadHeart]

No bonuses until TARP funds are fully repaid--and no more "bailouts." These people can rise or fall on their own--we have to.

[PhilipTaylor]

When you OWN the FED Reserve you get:

1. Level 1: Ability to get the signals on rate changes FAR in Advance to plan your Harvesting PLANS
2. Level 2: You can Recommend what the FED's Next moves should be
3. Level 3: You can order the FED to make a move you can profit from - Paulson/G0LDMAN apporach

Yes an Independent Privately Owned FED Reserve System is a WONDERFUL THING for the BANKS!

[cwindy2]

My husband has a bunch of stock options...they are not the same as cash. Can be better, and can be way worse. I don't know why anyone would be suprised by this...tell them they can't pay folks with money, they surely were going to compensate them somehow. Didn't expect them to pay-out in cheese crackers, did you?

[PhilipTaylor]

So INCOMES 400 to 550 times the Average Worker is OK with you!

[S E Martin]

Phillip, your positions throughout the posts on this website confuse me.

What is your position on this?

It sounds like you want strict regulations on the "free market" yet elsewhere you sound like you have conservative positions.

I agree with you on the CEO pay idea. Did you know that FDR wanted to put caps on salaries, but Congress killed the idea??

[cwindy2]

Not everyone getting stock options makes 400 to 550 times the average wage. NOT EVEN CLOSE. That's the part of compensation that people consistently seem to not understand. There are upper-middle class families receiving some of these. They are not all filthy rich...and even not all rich.

[drymartini1]

"Didn't expect them to pay-out in cheese crackers, did you?"

Hilarious and very much on the point.

great post.

[DrRoberts99]

Of course neither Goldman nor Wells wanted or needed any stinkin' TARP injection in the first place but that is lost on the neo-populists. Both firms have payed dividends on the preferred stock that was issued to the Treasury. Goldman has shed itself of Government shackles by paying the money back in full and Wells is expected to do so by mid 2010, all $25 billion which was forced upon the bank by Paulson. There is no place in American style capitalism for Government to regulate pay packages. Those at the top of the heap get the highest rewards. That is the way it has always been in this country and that is the way it will be in the future. The genius of the system is that upward mobility exists for those with ability and a strong work ethic. Those of us that have played by the rules, have educated ourselves, have worked hard, have saved and invested wisely are getting a little sick and tired of all the whining from the peanut gallery.

[LunaPark]

Government never should have given out the TARP. The public was frightened into accepting TARP just like they were frightened into war with Iraq. All of the propped up banks should have gone through an orderly bankruptcy process like any other business. NO MORE OFF BALANCE SHEET toxic assets either. The "profits" are BS. FANNIE and FREDDIE (private businesses!) are disasters foisted on the American public and they are still making toxic loans. AIG should have been gone a long time ago. Anyone who invested in AIG or purchased their insurance products, TOUGH $#!T, you lost your money. Sorry if that includes pension plans. You should have been more careful with your money.

[DrRoberts99]

In actuality Luna Park, the neo-populists that tend to frequent this site, and the teabaggers of all people, have the same notion regarding TARP. Pretty scary huh? The reality is that the actions taken by former Treasury Secretary Paulson and Ben Bernanke at the Fed saved this country from not only Great Depression II, but perhaps even saved Western Civilization as we know it. Money Market accounts were in immediate danger of not being worth a dollar a share. If that had indeed happened, panic would have resulted and the entire financial system would have collapsed. Be thankful that there are individuals that understand American Capitalism just a "wee" bit better than the typical HP blogger or demonstrating teabagger.

[vinny]

-socializing the risk and privatizing the gains.

i don't see how obama can apologize enough for that, or expect liberals to continue their support for his financial policies...

[brady61995]

the shellgame they get stock instead of money and then sell stock. until every penny is paid back there should be no stock or bonus given. the us gov should sieze stock values at whats owed and sell it repay the tax dollars.

[venusvictrix]

If they're so healthy now then let those banks repurchase the toxic loans they sold to the Fed. They can tie their bonus income to the long-term performance of those assets.

[hypnotoad72]

I'm sure God(tm) is jumping for joy right now, just as Lloyd Blankfein might attest to.

[jojony]

Ok, you folks need to make up your minds.

Either you pay folks in cash or you pay in stock (or options). Stock is a much better choice. If a company does well and the stock doesnt vest for three years its a much better way to award good behavior.

Unless you want the government to take over "Wall Street", which wont happen, how do you suggest people who work for these firms ( and please note that many do not get paid huge bonuses, etc) get paid.

Its doesn't seem that many of you will ever be satisfied.

[hypnotoad72]

Yeah. Stocks are really great. Just ask while people kept their stock in while those at the top took out -- money didn't magically vanish. The stock was devalued as the top cashed in.

It seems like a double-whammy. When they don't stack the system against the people who pay into it in good faith, they then set up a catastrophe and still get people to pay into it -- via tax money.

The day Wall Street does more than cater to the shareholders (which is why prices go up, quality goes down, jobs are cut or devalued, and "profits" are claimed to rise -- and how are they anything except false profits) is the day we'll have real progress again. Thankfully, shareholders also happen to be customers and employees and people do remember what Enron execs told their employees to do (buy their stock) while they quietly sold it behind their employees backs.

That's my perception, please correct me where I'm wrong. All I know is, plenty of people - republicans AND democrats - are wary of this system, and many have pulled out entirely. They don't want to be fooled again. I don't blame them. While some minor amount remains...

Lastly, we'll forgive you if you forgive us. We are not dispassionate. That is a strength, believe it or not.

[hypnotoad72]

Oops. "we'll forgive you" referring to those at the top who are robbing people of money and their livelihoods, of which their dignity logically follows.

[jojony]

What I am suggesting is the stock vest over several years. Your missing that. Clawbacks if necessary, as well.

Actually, simply requiring the banks to have more capital on hand (say 15%, which would by default, would reduce the banks bonus pool tremendously) and requiring that a bank have more skin in the game though the life of a transaction (meaning in the case of a loan, keeping a portion of the loan on the BANKS books, for life of the loan), would make a tremendous difference in protecting the taxpayer and the shareholder while keeping the banks more risk conscious. Both would go a long way in improving the system, which, I too, am very weary of.

Stock, rather than cash, right now, is best option, until the system changes.

The problem today with the system, is that risk/reward model is out the window because due the legislation by both dems and repubs, as well as actions by the Treasury and Fed under the Bush AND Obama administration, the risk part of the equation has been taken out of the equation and handed to the taxpayer.

[maxhardon]

I've got a better idea. Have the gov't take over a significant equity stake in all banks too big to fail. Insist on a guaranmteed dividend. Pay little or nothing for the stake.

[jojony]

Excellent idea, if your a Socialist and if you know nothing about how the markets work (or dont work).

There are better solutions than this.

Your idea would put more taxpayer at risk that they're already is.

[1088]

My retirement never look so good! Thank you!!

[PhilipTaylor]

"I refuse to live in a Country LIKE THIS and I am NOT LEAVING!"

Signed, Every American on Main Street and in Urban Centers!

It is Time to DOWNSIZE G0LDMAN, M0RGAN, JPM, BofA, and C!tigroup!

"Too B1G and EV1L TO FAIL" is a thing of the PAST!

[AuntWilma]

The right way to fix this problem is to reinstate the 94% upper tax bracket that was in effect sometime back in the 50s or early 60s. It was put there for some pretty good reasons, and those reasons apply today as they did then.

[PS9]

Sure, lets just drive Apple, Microsoft, Google out of the country to make you feel better.

[jojony]

Whats seems to get lost here is that over the top 5% income earners ( I am not one of them) do pay over 75% of the taxes the Treasury brings in every year. Top earners, whether it be entrepreneurs or Wall Street types, will flee to other locations to work.

With less of a high end tax base, taxes will be raised on lower tax bracket workers .

[cwindy2]

Dear Mr. President - PLEASE don't listen to AuntWilma....PAH-LEASE!