http://online.wsj.com/article_email/SB124896891815094085-lMyQjAxMDI5NDM4MTkzNjE4Wj.html
http://dealbook.blogs.nytimes.com/2009/07/31/cuomos-bonus-peep-show/?emc=eta1
So, what we have here are nine "lenders" that got U.S. aid and paid out $1 million (or more) each to 5,000 employees. The nine "firms" had combined losses of nearly $100 billion. The government injected $175 billion into those nine "firms" through its Troubled Asset Relief Program.
Now, there are all sorts of caveats that fly fast and furious here. Goldman and JP Morgan Chase have already paid their money back...keeping "talent" is critical (what "talent"?)...but the issue is what are the stockholders paying for? At Citi, what were the CEO and his direct reports getting bonuses to do? What were we "incentivising"? We were obviously "incenting" the wrong things. So, you fail and what happens? You get a bail out from the government, a "bonus", and you get to run a "zombi bank": too big to fail and to incompetent to improve...what happened to "creative destruction"? To use a continuing example, without intervention, Citi would have failed...its good assets would have been purchased by JP Morgan Chase (which already had a plan to purchase Citi before the "crisis"), and less people would have been "unemployed" than the government's assumptions because Chase would have saved 50% of Citi anyway (the use of 50% is just for the sake of this good bank/bad bank example).
So, again we ask, what were we paying for?
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I agree.
ReplyDeleteIf millions can lose their jobs, these people can lose their bonus.
Those executives are just trying to cover their mistakes with government funds. Citi and Bofa should have shrunk, and more capable players should have bought their assets.
This a serious game people are playing to the detriment of America's long term success. I just hope these days strike fear into these people to never allow such a financial fiasco to persevere again. Without the fear of failure, the arteries of capitalism might harden.