Wall Street to give $140B in bonus - a new record

 

Wall Street recently announced that it would distribute bonuses worth  $140B (that's "140" followed by 9 zeroes), most of which will go to its top executives for a "job well done." This is a record amount for Wall Street. Put into perspective, it's:

• 10% of the entire US deficit ($1.5Trillion);
• how much the UN wanted to give poor countries to fight climate change;
• as much as the American Society of Civil Engineers estimates the entire US water infrastructure needs over the next 20 years to ensure safe drinking water;
• enough to pay 3.9M US workers their annual (average $18/hours for 2,000 of work);  it's as much as Congress, through the American Recovery and Reinvestment Act,
• as much as the Federal government is providing over a two-and-a-half year period to help states pay for education, health care, public safety, and other key services, all of which have been severely curtailed as a result of the economic crisis;
• slightly more than the US budget for the war on terror ($145B);
• twice as much as the budget for the US Department of Health and Human Services;
• more than 3 times the amount budgeted for education ($45.4B);
• more than 4 times the amount budgeted for the US Department of Homeland Security;
• almost 10 times NASA's budget;
• it could prevent 200M foreclosures;
• the amount needed to rebuild New Orleans, fourteen times over;  
• finally, it's almost a fifth (i.e., 20%) of what, we the taxpayers, "loaned" Wall Street to bail them out of the whole they had dug themselves.

The bonuses were announced despite the severe economic crisis which most people, if not most experts, believe was caused by the uncontrolled greed of Wall Street, including large banks (i.e., Citi; Bank of America; now-defunct Washington Mutual; Wells Fargo, et al.); insurance companies (i.e., American International Group, or AIG); and brokerage houses (i.e., Bear Sterns; Merrill Lynch; now-defunct Lehman Brothers, et al.).

According to a Wall Street Journal ("the Journal") analysis, employees at 23 top investment banks, hedge funds, asset managers and stock and commodities exchanges can expect to earn even more than they did in 2007 ($130B), a peak year in Wall Street history. In fact, total compensation and benefits at the publicly traded firms analyzed by the Journal should see increases of 20% from 2008 bonuses of $117 billion . This year, employees at the companies will earn an estimated $143,400 on average, up almost $2,000 from 2007 levels. However, that is a somewhat misleading figure. For example, at Goldman Sachs, the average compensation per employee should be about $743,000, double last year's $364,000 and up 12% from about $622,000 in 2007. Meanwhile, at Morgan Stanley revenues are down 6%, but bonuses are up by 33%, up to $16B.

One is left to wonder what these highly paid individuals do to merit such princely, nay, make that Royal even though the Queen of England is only worth $35B) sums. That is, other than push paper from here to there.  By all estimates, they certainly are not providing much needed credit to small and mid-sized businesses. Neither are they busy preventing foreclosures. They are, however, busy raising interest rates and fees on credit cards while getting money at 0% interest from the Federal Bank. "Greed is good" said Gordon Gekko, a fictitious character played by Michael Douglas, in the movie "Wall Street." Today, more than ever, that seems to be true among the Wall Street elite.

In their defense, these institutions claim that they must pay high salaries and bonuses in order to keep these individuals employed. Of course, these are the same individuals who got the US, and the rest of the world, in this economic chaos and require us, the taxpayers, to bail them out. Moreover, one has to wonder where exactly these people would go with their "skills." It's highly unlikely that there are many jobs requiring their expertise and they can't all go to work for the same company!

So what is a regular Jone/Jane Doe to do? Well, often forgotten is the fact that Gordon Gekko, in a different scene, excoriated a company's management ("You own the company. That's right -- you, the stockholder. And you are all being royally screwed over by these, these bureaucrats, with their steak lunches, their hunting and fishing trips, their corporate jets and golden parachutes. [The company) has 33 different vice presidents, each earning over 200 thousand dollars a year. Now, I have spent the last two months analyzing what all these guys do, and I still can't figure it out. One thing I do know is that our paper company lost 110 million dollars last year, and I'll bet that half of that was spent in all the paperwork going back and forth between all these vice presidents." (Mind you, this was back in 1987!).

So, wake up and demand accountability. Why are these individuals "worth" so much? What have they done for you lately? And whether or not you're a shareholder, perhaps it is time to think about cutting up those credit cards and sending the shreds to the company's CEO with an appropriate note. While you're at it, you might also think about opening an account with your local credit union.

Now for the other side of the coin. What difference does it make to everyone else? Logic would dictate none. While we have a right to be angry, let's be honest. The fact that most of us would do the same if it were offered to us. Moreover, from an economic sense, if these individuals pay their fair share of taxes (say 40% for a $40MM bonus), this will represent sorely needed income for the local community and federal government. Is it all a case of envy?

Which side are you on? Before you decide, two last points. $140B is the amount that the banks "received" when former Treasury Secretary, Henry Paulson, made sweeping changes to the tax codes without advising Congress back in 2008. Lastly, New York State's Comptroller, Thomas DiNapoli, estimated the decline in tax collections from Wall Street-related activities next year could be 5 to 20 percent. Meanwhile, New York state is struggling with a deficit in excess of $14B.

Perhaps Wall Street's elite could borrow a phrase from Clark Gable, playing Rhett Buttler, in "Gone with the Wind" and simply state that: "Quite frankly, my dear, I don't give a dam."

For more info: EcoStar Consulting, LLC: www.ecostarconsulting.com; EcoStar Law, PLLC: www.ecostarlaw.com; $140B tax bonus: www.nowpublic.com/tech-biz/banks-get-140-billion-tax-break-top-bailout-money; Federal budget: en.wikipedia.org/wiki/2009_United_States_federal_budget; cost of rebuilding New Orleans: www.allbusiness.com/finance/3596904-1.html; Queen of England's new worth: www.luxist.com/2008/09/11/queen-of-england-far-behind-uae-on-richest-royals-list/.