Another breathtaking article from the New York Times this morning:
Goldman Sachs paid Lloyd C. Blankfein, its chairman and chief executive, a bonus of $53.4 million in 2006, the highest ever for a Wall Street chief executive.
What the Times didn't say is that other traders in the firm were getting whopping $100 bonuses, a fact which is being bandied about by partners at Goldman and by others on the street. And that the biggest earners work in Hong Kong and London. Perhaps the reporter relied too much on a handout from the Goldman PR department and another from the State Comptroller's office. The story was just phoned in.
The New York Post reported earlier this week that Morgan Sze, a head trader in Hong Kong, and Pierre-Henri Flamand in London and Raanam Agus are all in the $70-100 million range. A Goldman spokesperson told me that the figures were absurd, but refused to name the traders that made more than the CEO.
"We don't disclose such figures." The Government does not require them to. The financial services industry is terrified of the backlash -witch-hunt -- that such disclosure might cause. See earlier post: The Other Side of the Coin.
There is a real problem with growing income equality in this country. See Paul Krugman's article in Rolling Stone.
How can we justify such enormous payouts on Wall Street when millions are losing their jobs in the Rust Belt, and when 40 million Americans can't afford health insurance?
It is an absolute scandal that many in the financial industries are getting rich without doing anything to benefit society, their companies or their investors. They make millions when their companies lose money.... they make millions when their Hedge Funds underperform the market,
In these cases and other instances, income inequality becomes institutionalized, unrelated to performance.
But there are nuances. Superstars at investment banks earn huge payouts by producing phenomenal profits for their companies and their clients. Most of the top earners earn 1-10 percent of corporate profits they, or their divisions, produce. These big investment banks are not stupid.
As I wrote earlier -- Richie Rich: When a Two Million Dollar Xmas Bonus is Chump Change -- globalization is here to stay. The human costs of change --- lost jobs, disrupted broken lives --- are enormous and must be alleviated, but if we outlaw or tax these moneymakers out of existence, they will move out of town, just like the shoe makers moved out of New England to Brazil, so many decades ago.
London, Toronto, Hong Kong, Shanghai, Bombay and Greenwich are already nibbling away pieces of our financial services industry and are waiting in the wings like vultures ready to pounce. Because of stringent regulations and taxes, most of the larger IPOs have been offered overseas in the last couple of years.
The dustbins of history are littered with once successful economies and nations that that were unable, or unwilling, to adapt.
Meanwhile John Tepper Marlin, former top NYC economist in the Comptrollers Office, wrote me:
"This may be the last year of the party. The housing-value-decline recession coupled with a couple of trade-and-budget deficit crises - with the Asian central banks switching from dollars to euros, will have a great effect on the United States.
NYC is fighting for its life - like White Fang being torn apart by an ugly bulldog (remember Jack London, the only American to ever have appeared on a Soviet stamp?).
NYC is being attacked by electronification - it is the end of the old open outcry system. It's the end of the big money for the specialists and the beginning of a fairer deal for small traders.
London is doing better than NYC right now, as you observe. Will it get worse or can NYC fight back? If NYC lives and dies on the success of Wall Street, what are the odds?"