Bonus Bloodbath On Wall Street
The NY Times features a truly nauseating article this morning on Wall Street’s cult of the bonus. During the high times of the Greenspan Era and the Bubble Boom, the whiz kid traders were mad, absolutely mad for bonuses. Everything was about making your bonus as big as you could, damn the consequences. That meant doing or saying or buying and selling anything that would pump up the balance sheet in the short term–even if you were risking the viability of your firm, your industry, hell the entire economy, in the long run:
… Merrill [Lynch]’s record earnings in 2006 - $7.5 billion - turned out to be a mirage. The company has since lost three times that amount, largely because the mortgage investments that supposedly had powered some of those profits plunged in value.
Unlike the earnings, however, the bonuses have not been reversed.
…
Critics say bonuses never should have been so big in the first place, because they were based on ephemeral earnings. These people contend that Wall Street’s pay structure, in which bonuses are based on short-term profits, encouraged employees to act like gamblers at a casino - and let them collect their winnings while the roulette wheel was still spinning.
“Compensation was flawed top to bottom,” said Lucian A. Bebchuk, a professor at Harvard Law School and an expert on compensation. “The whole organization was responding to distorted incentives.”
You’d think the big financial firms like Merrill would have learned their lessons. But no. They’re not going to let the fact that they are essentially wards of the bailout state now stop them from lathering themselves in cash once again:
Scrutiny over pay is intensifying as banks like Merrill prepare to dole out bonuses even after they have had to be propped up with billions of dollars of taxpayers’ money. While bonuses are expected to be half of what they were a year ago, some bankers could still collect millions of dollars.
Poor guys. They’re only going to get half as much this year. Oh well, seems everyone is having to sacrifice some during these lean times. All of you people out there clutching pink slips and choosing between paying the rent or keeping the lights on, you can feel some sense of comfort. Your tax dollars are going to a good cause.
FORCE CONGRESS TO IMPEACH GEORGE BUSH AND DICK CHENEY, call Nancy Pelosi @1-202-225-0100 and DEMAND IMPEACHMENT. DC business hours only, call often, and spread it around.