Keep Dancing, Chuck

"As long as the music is playing, you've got to get up and dance. We're still dancing."

These now-immortal words of former Citibank President Charles "Chuck" Prince were uttered in July, as Citibank was about to lose billions in everything from mortgages to credit cards. Prince departed with a reported $68 million good-bye package. Stanley O'Neal, who led Merrill Lynch to write off a record $9.9 billion in last quarter, departed with a $161 million severance package.

Now the top five Wall Street banks - three of whom racked up record losses - have announced that they are paying their employees a record $39 billion in year-end bonuses. Hemorrhaging losses, Morgan Stanley, Merrill Lynch and Bear Sterns had to increase the percentage of revenue they devote to pay to ladle out these bonuses. So much for pay for performance.

Bank spokesman were not exactly lining up to justify this, but Jeanne Branthover, managing director of a global search firm, helpfully explained: "It's essential that pay is still there or you're going to lose really good people."

Well. Is she talking about the really good people whose feckless speculation is now pushing the global economy into recession and will cost hundreds of thousands of Americans their homes? The really good people whose "dancing" got so risqué that the somnambulant Federal Reserve just issued new regulations requiring bankers to assess whether the borrowers they are lending money to actually have a blue moon chance at repaying the loan? The wizards who, as Allan Sloan points out in The Washington Post, spent the last couple years buying back their stock at the top of the market, only to be forced to sell it off to foreign investors at the bottom in the desperate effort to keep from going belly-up?

Merrill, Sloan reports, bought back stock at $84 per share earlier in the year, only to sell over $12 billion in common and preferred stock at roughly $49 a share in the last weeks. Citibank, Sloan notes, purchased $20 billion of its own stock over the past two years, paying around $53 bucks a share last year, and just was forced to raise $20 billion from the sovereign funds of Abu Dhabi and Singapore in complicated options that price around $30 a share.

Stock buyback plans do help elevate the stock price. And that, of course, makes executive stock options more valuable. And that is likely the next thing we'll learn about these really good people. They've pushed the economy over the cliff, led their banks to the verge of bankruptcy, fed the folly that will cost families their homes - but they pocketed the stock options at the top, and walked away with bonuses at the bottom.

No wonder Martin Wolf, economics editor and columnist at the establishment Financial Times, is now calling on the U.S. government to regulate banker pay. But don't worry, Congress and the Fed are too busy dealing with the mess to even consider such heresy. Keep dancing, Chuck.

Comments

[DrDooit]

Back in the late 40's through the early 60's, when America really was the richest copuntry on earth, Corporate America was responsbile for the majority of the country's tax burden. Today, Corporate America and the Top 1% of the wealthiest, account for only 15% of that burden. The rest is paid for my John and Jane Middleclass. We have to get back to that kind of thinking.

[ChimpmasterDJ]

Well the old trope about a democracy getting the government it deserves, also holds true for the financial arena. You get the regulatory investment environment you deserve. As a shareholder, executive pay in outrageous multiples of average employee pay should send me rocketing to the office of the nearest class action lawyer. Similarly, big bonus payments in periods of record losses should trigger complaints of looting and fraud.
But you'll notice that shareholders aren't saying boo...
Consequently, they get what they deserve.

[NicoleAnonymous]

Where is Elliot Spitzer when we need him?

I thought he was going after these guys but really he talks all badass but he didn't do much of anything.

[sheila]

even worse than this outrageously non-meritorious bonus program is the fact that sooooooo many people, including so-called "democrats" blame IMMIGRANTS for every problem of our country. like good little doggies, when reagan, rove, and friends tell them to LOOK DOWNWARD for the cause of all their problems, they obey and kick the other 90% of people fighting for the 10% of scraps tossed down by these fat men with cigars.

when will people start to LOOK UPWARD for the source of their struggles and poverty instead of adoring, stockholm-syndrome-style, these rapacious hogs who bleed them dry? especially self-proclaimed liberals?

the manipulated, gamed, fake "free market capitalism" is a PYRAMID SCHEME, and the problem is ALWAYS AT THE TOP, and never at the bottom, where all the losses are. wake up!

[cognitorex]

SEC and FASB Mull CEO Salary Accounting Change.
America's Financial Accounting Standards Board (FASB) and the Securities and Exchange Commission (SEC) chiefs are close to deciding that salary and perks exceeding five million dollars annually can not rationally be deemed pay for work expended. Payouts of five million to hundreds of millions would quite boggle the minds of both Adam Smith and Karl Marx, said one insider, "off, off, off the record."
Going forward, the recommendation will be that executive remuneration exceeding five mil annually will be construed as a disbursement of corporate capital. Henceforth these deductions from a company's capital account must be subject to a public vote and agreed to per amounts by boards, directors, trustees and not so trust-ees as the case may be.
The new accounting Pronouncement will reflect that mega salaries in excess of the maximum five mil will be considered as an allocation of corporate capital which will no longer qualify for accounting treatment as a corporate expense.
A number of CEO's have formed a study committee particularly in response to the IRS position of "You can call it capital or you can call it Swiss cheese, we're still taxing exec' pay at the highest personal rate possible."
"There's a fundamental lack of fairness here," whinged the corporate CEO's.
They, the potentially afflicted CEOs, vociferously pointed out that, "This change is counterintuitive, even embezzlement is treated as a deductible expense."
Shareholders, mostly wearing Abu Ghraib style hooding to protect their identities, were cautiously pessimistic.

(Reprint 10.14.06 post)
Craig A. Johnson

[NicoleAnonymous]

I like it when they claim it's way too expensive to lose good people and how it costs about $200,000 just to find a replacement.

This is complete garbage. I've worked at those companies - they have in-house recruiters who help with most jobs except maybe very senior level people. The fact is the most bankers can be replaced easily and this latest fiasco is only more proof that even the "geniuses" at respected companies like Conman Sachs really aren't doing anything that amazing. I wouldn't care if these companies were privately owned because then they can do what they want but shareholders should demand these companies stop paying these exorbitant bonuses.

I have to stop talking about it. I'm getting bitter and nasty...........

[Gelbert]

So the identity of the real welfare queens becomes clear. These welfare queens live in the Hamptons or Malibu or Jupiter, Florida and drive cars that make a cadillac look like a roller skate. Oh yeah, and we celebrate all these fine, upstanding, capitalists because we want to be just like them.
These are the leaches in our society. They can't be eliminated but they can be controlled. They never change but they are great actors. They live for profit at any cost to us. They destroy society and wreak havoc in their own families as well. These welfare queens need to be caged.
But our leaders fear them or are part of them.
Have a nice day, welfare queens!

[NYDamien]

I keep asking, to no avail, what is the function of the "Banking Commitees" in Congress? I realize the main function is to reward the banks for their campaign "contributions," but wasn't there supposed to be a tiny slice (for show only, of course) for consumer protection? I believe 2006 was the first year that the obscene "fees" banks charge for one day late or one dollar over limit actually exceeded their operating profits.
I understand that "greed is good," but we have long since passed greed and are now slopping in the stench of avarice. At some point, and the stars seem to be aligning now, with the election and all, that the long slumbering "consumer" snaps out of his/her hypnotic state and demands reform.....and retribution. The smart (oxymoron?) Presidential candidate (Edwards?) can produce an ad, split screen, showing on one side the jubilation and high fiving of the executives waving their multi million dollar bonus checks, and the other side showing the foreclosed and bankrupt consumer being told by their attorney how the new bankruptcy law their "representative" signed, sealed off their last hope for relief and a fresh start.
The looting, plundering, and rape of our Treasury, begun with Reagan and completed under Bush, will be a case study of what happens when citizens abrogate their duty to be informed, and will be a case study taught in schools for centuries to come.

[AkiraBergman]

Maybe these clowns are the ones behind the curtain. Don't tell me they had no influence on taking USA to the Iraq war. It is all coming out now. This recession is the one USA had to have in 2001. Iraq war delayed the inevitable and stimulated the economy but only the war mongering parts of it. Vultures come out when the prey is too sick for the predators.

[falco]

The banking industry is shaped like a pyramid. Accusing the little CEO's is akin to stabbing the monster at the knees. We need to go for the head shot. We need to peel back layer after layer and get to the people at the top. The layers are in place so that we do accuse the bottom layers who are paid well to insulate those at the top. It's like having a problem with your phone bill and getting on the phone with a $10 an hour employee to resolve it. Going above their head will only get you to a $15 an hour line manager. That is where help stops, usually without the resolution you would want. All our institutions use the same model, including trying to get access to your congressmen and women (who will not come to your rescue because they are bribed and blackmailed by these very same bankster people). The Bank of London. The Federal Reserve (the use of "federal" is intentionally misleading, they are actually a private bank). Study the formation of these entities and the gazillionares who started them and who's families run them, at the top, today. Between them, bailing out our economies would be chump change. They created the situation though, so bailing us out is out of the question. It's how they keep us in the fuedal state they feel we should and deserve to be in, lesser human beings that we are. Also check out the families who are behind environmental movements. Reduction of population is the goal. Then wonder how things like aspartame and flouride become something we need to ingest.

[polackinidaho]

it all comes down to immemorial words of Ivan Boeski (a chief Wall Street honcho at beginning of Ronnie's tenure) - greed is good! The American "elites" are so hopelessly misguided in this view, that one simply does not know where to start. I came to this country as a devout admirer of America, God bless and all - and received a shock of my life. Ivan, and his IMMENSELY STUPID remark, were paraded on magazines' covers - and NO ONE stopped to point out, how dumb it is to say that. Leaving aside the morals, ethics, decency, etc. - if intellectual (supposedly) elite does not understand what DANGER arises from following the most primitive and ugly instincts, what can you expect? There is a very simple rule in life: if one does not have a well-being of one's neighbour in heart, EVERYTHING that a person does, will turn into shit. Greedy people become living caricatures of king Midas... The whole point of living a decent life is to try to suppress primitive, animal urges that push us to seek personal advantage in everything we do - and instead to compete on a friendly level, not trying to destruct any real or potential competitor. I think America needs to look long and hard at itself - and the coming years of misery and hardship (that have not even started yet) provide a perfect opportunity to do just that. I still believe in people of this country - after all, so many Americans remained decent human beings, after so many decades of brain-washing and propaganda, and the insanity of ruthless capitalism, that it never stops to amaze me.

[BlueBoomer]

That this manages to be legal, and that these people are being rewarded for forcing regular, hard-working Americans out of THEIR jobs/homes is a testament to just how f**ked up this country is.

Corsica 2012 (sooner, if I could manage it)

[bertisbert]

I guess it's easy to understand the compensation if you look at it differently. Most of us are compensated to perform our jobs well, which in turn, means that our respective companies perform well. In some industries, however, there is a much bigger picture, and nothing is as it seems. Remember in the '90's when all these Wall Street types were touting the dot com startups that had no business plans nor any revenues? It seemed strange, but they were the experts. They must have known something we didn't, so we bought those stocks, and, guess what? The prices went UP! Of course. Once the "bubble" burst, we peeled back the facade and exposed the real scam that was going on the whole time.
Those brokers and executives (the ones that didn't go to jail) were still grossly overcompensated. Why? For perpetrating the scam. Same story here, just a new set of rules to bend and a new set of rubes to swindle. The big dollars are there for anybody that is willing to knowingly lie, cheat, and steal from their fellow Americans. No matter how you spin it, or convince yourself otherwise, it's a scam, a fraud, and dishonest. Sell your soul to Wall Street. As you are seeing, it is a mighty valuable commodity.

[WilliePilgrim]

In Jared Diamond's book "Collapse" he notes how societies in collapse, at least those without foresight, do something that makes no sense. Instead of banding together to combat or deflect (or, heaven forbid, understand) the common threat,which in "Collape" was largely brought about by unsound and unsustainable practices that impacted the environment, the most powerful and affluent encouraged the continuation of those traditions, despite the mounting evidence, and infact devoted larger and larger portions of their powers and material wealth towards building themselves more massive personal defenses against the encroaching threats; sturdier walls, more defnese against the enemy (who in all likelihood was also feeling the squeezing effects of the same poor choices regarding their common plight)and increased piety as they sought to appease angry supernatural powers. Sound familiar?
I think it was Mark Twain who noted that while history may nor may not repeat itself, it surely rhymes.

[pennyfortheguy]

Clap them in irons and place them in the Bastille.