Ward on Words

This story about the hurdles catching the heels of anyone interested in reining in Wall Street pay had me thinking about compensation. According to that story in yesterday's NY Times, Wall Street has not long endured life without the reward of the "guaranteed bonus." (In fact, I doubt it's endured even a second without such a perk.) Though unemployment has grown exponentially in the last year, though the recovery is looking to be a "jobless" one for those outside of Wall Street, the investment bankers who've been propped up and well-fed at the trough of TARP are planning a lot of "ironclad, multimillion-dollar payouts – guaranteed no matter how an employee performs." Guaranteed no matter how the economy performs. And, as we saw last winter, guaranteed by the feds no matter how the company performs. And when I was thinking about compensation, I starting thinking about something a very wise man said not too long ago about Wall Stree...

On the same day we learned of the bleak June jobs report , with its grim news of nearly a half million lost jobs, the Wall Street Journal is reporting that the firms on Wall Street are on track for one of the biggest bonus payouts ever . 2009 has been particularly good for Goldman Sachs, the Journal reports: "Based on analysts' earnings forecasts for 2009, Goldman Sachs Group Inc. is on track to pay out as much as $20 billion this year, or about $700,000 per employee. That would be nearly double the firm's $363,000 average last year, and slightly higher than the $661,000 for the average Goldman employee in fiscal 2007, according to analyst estimates reviewed by The Wall Street Journal." Ahh, the riches that come from having friends in high places! What good would Paulson’s TARP have been if it hadn’t been profitable for his friends and former colleagues at Goldman? He cleared out its competitors, fed it TARP money directly and indirectly through AIG. They’re ...

"Despite the vast outpouring of commentary and outrage over the financial crisis, one of its most fundamental causes has received surprisingly little attention. I refer to the perverse incentives built into the compensation plans of many financial firms, incentives that encourage excessive risk-taking with OPM -- Other People's Money." That's how Alan Blinder's article in today's Wall Street Journal opens - by calling the Wall Street method of compensating its employees "perverse." Is the world coming to an end? Am I dreaming? A smack-down of Wall Street salaries in the WSJ seems too good to be true. Not clear if we are nearing Armageddon, but I'm definitely not dreaming. The WSJ is running an article attacking the compensation plans of the financial community. Now THIS is change we need! And Blinder isn't just talking about the highly publicized federally-funded bonuses granted to AIG and Merrill Lynch. He's talking about how...

Since learning of the massive bonuses earned by the Wall Street execs who drove their firms (and the economy) off a cliff last fall, I've been wondering a lot about what happened to the English language to render a "bonus" something granted to a highly paid executive - no matter what. I had always thought (and had always experienced) a bonus to be a reward for superior performance. Not, as we've seen this year, something expected in return for running a business into the ground and taking the nation's economy down with it. So I was thrilled to read an essay by Jon Danielsson and Con Keating on Vox explaining just how the bonus culture took over the financial community. Once upon a time in finance, according to Danielsson & Keating, bonuses were rewards for success. That changed when the financial partnerships that once were the norm in finance were replaced by limited liability corporations: "Partnerships have disappeared over time, and the p...

He was dead. He was worse than dead. He was ruined. Ruined by greed, by ego, by lust. I'm referring to former Governor Eliot Spitzer, who resigned in disgrace after it was revealed he invested thousands of dollars on an industry - prostitution - that he had sought to shut down. And now he's back - bringing us a message from the dead about the scandal known as AIG. In an op-ed piece appearing in Slate, Spitzer warns that the $165 million in bonuses paid to AIG execs is not what we should be protesting right now. His issue is with the fact that the recipients of TARP funded AIG payouts are the same banks who've capitalized nicely from TARP investments - the investments made by the government to protect those firms from the fact that AIG would not be able to make such payments. It is a circular flow of money that is at first confusing. But if true, we've sent out nearly a trillion dollars so that firms like Goldman Sachs could get twice the money out of thei...