Big Paychecks Return for Wall Street Execs
The 4/26 New York Times reports that Wall Street firms have set aside large sums for bonus payouts. First quarter 2009 results were up at banks like Goldman Sachs and Morgan Stanley. If the trend continues, 2009 could rival 2007 as the biggest payout year for Wall Street bonuses.
Of course, in 2007, these firms were not taking taxpayer money to run their businesses. And these payouts are the subject of a wave of criticism from Congress and a firestorm of protests from outraged citizens who felt that taxpayer money should not be paid out in what many consider exorbitant bonuses.
The firms take a different position: they have to pay their people well to retain them. It's the skills of their people that drive the profits.
But the nature of these "profits" is questionable. If these were legitimate profits, the balance sheets of the banks should improve. Yet, we also read in the same day's Wall Street Journal that, after those well-publicized "stress tests" the Fed conducted on the nation's big banks, "Federal officials are pushing several of the country's largest banks to bolster capital reserves, people familiar with the matter said, as regulators try to repair bank balance sheets and the public image of the U.S. banking sector."
If the banks balance sheets were healthy, they wouldn't need to raise more capital.
Which is it? Are the banks balance sheets sick enough to require more capital? If so, why are they paying out their profits in bonuses and not repairing their balance sheets?
Could it be that they're using taxpayer money to deal with their balance sheets (and therefore we shouldn't be surprised when they ask for more taxpayer money), even while they take whatever profits they make and "reward" themselves handsomely?
(Since those initial announcements, Goldman Sachs states that indeed 2009 should see the biggest bonuses paid out in their history.)
Does that sit right with you?
Of course, in 2007, these firms were not taking taxpayer money to run their businesses. And these payouts are the subject of a wave of criticism from Congress and a firestorm of protests from outraged citizens who felt that taxpayer money should not be paid out in what many consider exorbitant bonuses.
The firms take a different position: they have to pay their people well to retain them. It's the skills of their people that drive the profits.
But the nature of these "profits" is questionable. If these were legitimate profits, the balance sheets of the banks should improve. Yet, we also read in the same day's Wall Street Journal that, after those well-publicized "stress tests" the Fed conducted on the nation's big banks, "Federal officials are pushing several of the country's largest banks to bolster capital reserves, people familiar with the matter said, as regulators try to repair bank balance sheets and the public image of the U.S. banking sector."
If the banks balance sheets were healthy, they wouldn't need to raise more capital.
Which is it? Are the banks balance sheets sick enough to require more capital? If so, why are they paying out their profits in bonuses and not repairing their balance sheets?
Could it be that they're using taxpayer money to deal with their balance sheets (and therefore we shouldn't be surprised when they ask for more taxpayer money), even while they take whatever profits they make and "reward" themselves handsomely?
(Since those initial announcements, Goldman Sachs states that indeed 2009 should see the biggest bonuses paid out in their history.)
Does that sit right with you?
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