"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.
But you'll notice that shareholders aren't saying boo...
Consequently, they get what they deserve.
I thought he was going after these guys but really he talks all badass but he didn't do much of anything.
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!
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
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...........
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!
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.
Corsica 2012 (sooner, if I could manage it)
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.
I think it was Mark Twain who noted that while history may nor may not repeat itself, it surely rhymes.