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November 12, 2008
Investment Banks Use Bailout Money for Executive Pay??
Goldman Sachs will pay $12.4 billion in executive bonuses after receiving $12.5 billion in bailout funds from TARP. Morgan Stanley and Merrill Lynch will pay another $8 billion in bonuses and Citigroup will pay $26 billion. Each bank received $12.5 billion in bailout money. The banks say the bailout money did not go to bonuses because they have "traced" the bailout money, but money is fungible -- funds are funds. Would the banks have paid the bonuses without the equity cushion provided by the bailout money?? One has to wonder. What are they thinking at these banks?? http://blogs.wsj.com/deals/2008/11/12/mean-street-the-painful-path-to-fixing-goldman-sachs/; http://www.dailymail.co.uk/news/worldnews/article-1081624/Goldman-Sachs-ready-hand-7BILLION-salary-bonus-package--6bn-bail-out.html; http://blogs.moneycentral.msn.com/topstocks/archive/2008/10/31/50-billion-of-bailout-going-to-pay-exec-bonuses.aspx; http://www.bloomberg.com/apps/news?pid=20601039&sid=aKAH9t4l3dnw&refer=home
November 12, 2008 | Permalink
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Comments
You forgot the best part; the comparison between these executive bonuses vs how much the automakers are asking for in their own bailout (which is the centerfold of executive attention at the moment). If 4 companies: Citi, Goldman, Merril Lynch, and Morgan Stanley had been forced to forego executive bonuses (how the bailout should have been drafted), then we’d have the cash to give to GM, Ford, and Chrysler (not that I’m saying we should bailout the automakers, we shouldn’t because it won’t help, like it hasn’t in the past.)
Here is the language of the steadfast restriction on bailout money being used for corporate bonuses: “[bonuses will be limited when they are] … found to have been based on inaccurate statements of earnings or when they are deemed to encourage bankers to take "unnecessary and excessive risks." Wow, no way around this one.
My favorite comment is from an interview Bloomberg did with Citi:
``We've responded appropriately to the attorney general's request for information about 2008 bonus pools,'' a Citigroup Inc. spokeswoman told Bloomberg News recently, ``and confirmed that we will not use TARP funds for compensation.'' But as the Bloomberg report noted, ``she declined to elaborate.''
As well she might! For if the Citigroup spokeswoman had elaborated she would have needed to say something like this: ``We're still trying to figure out how the $25 billion we've already taken of taxpayers' money has nothing to do with the $26 billion we're planning to hand out to our highly paid employees in 2008 (up 4 percent from 2007!). But it's a tricky problem because, when you think about it, it's all the same money.''
Yes folks, money is fungible, and yes, taxpayers are funding discretionary bonuses for executives who have run thier company into the ground.
Posted by: Mike Rosemeyer | Nov 12, 2008 5:53:13 PM
Looks like Goldman Sachs' CEO and 6 other executives at Goldman just voluntarily opted out of receiving bonuses becuase it was "the right thing to do." Pretty impressive actually, considering the CEO earned $54 million last year, of which $53.4 million was bonuses consisting of cash bonuses, stock, and stock options. Thats a voluntary 99% pay cut as based on 2007 figures (not that he is struggling financially though). I suppose its better than being fired.
Posted by: Mike Rosemeyer | Nov 17, 2008 12:25:52 AM
