Bonuses for What?
Time has an article in posted on January 22, 2011 by Zachary Karabell titled The Big Bad Bankers, and Their Bonuses, Are Back.
The money quote:
“There was a period of remorse and apology for banks. I think that period needs to be over.”
This is from Barclay’s head Bob Diamond. He is expected to take home a $13 million bonus this year. Because he deserves it.
His shareholders have received meager dividends (if any) since 2008.
Goldman Sachs employees won’t go hungry either. The bank’s fourth-quarter earnings may have been hurt by weak trading results, but it is still hugely profitable. Like many other Wall Street firms, Goldman responded to public outrage over its billions in profits by adopting a lower profile when it comes to bonuses, instructing its executives to take more of their pay in deferred stock grants rather than cash and conducting internal reviews (the result of one such 63-page tome can be abbreviated to “We didn’t really do anything wrong”).
This is the kind of thing I reflect on when I get the talking point from the right that most rich people worked hard and deserve the amount of money they make.
Most is incorrect.
The blatant examples of compensation with no accountability and no ties to actual performance are the rule, rather than rare aberrations.
They are making money by holding tightly on to their capital and lending almost nothing to anyone. They deserve multi-million dollar bonuses for that?
Huge banks have their fingers in every aspect of our diverse economy. Unfortunately, their failure would inevitably lead to economic collapse. They are, indeed, too big to fail.
Three firms alone — Bank of America, JPMorgan Chase and Citibank — now control as much as 30% of all deposits in the U.S.
But the arrogance and swaggering irresponsibility exhibited by these asshats makes me wonder if letting the big bankers fail might not be a blessing — a clearing of the slate to rebuild on a stronger, better-regulated foundation.
It’s apparent these giants of finance haven’t learned a damn thing, so it’s likely we’ll get a chance to test this out.
I agree with Karabell’s proposed solutions to this mess:
The bottom line is that the financial reforms of the past year need to be revisited. One solution would be to break up large banks into discrete parts, creating a new Wall Street of boutique banks without as many conflicts of interest. If we aren’t prepared to do that (and there’s a good chance we aren’t, given the likely cuts in pay and staff that would impede regulators and other public-sector workers), we need to create incentives and mandates to lend. Period. It would have been easy to make those part of the bailouts of 2008 and 2009; now it will require carrots like allowing banks more latitude in accounting for bad loans. That will be seen as extending another hand to already flush banks. Unfortunately, it may be a price we need to pay.
- Barclays boss Bob Diamond to overhaul bonuses (dailymail.co.uk)
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