Bonuses compound insanity
Published 3:05 pm Monday, August 3, 2009
Americans can be forgiven for being hyper-cynical and super dubious and for bringing the existing health care system to its knees after suffering a collective concussion from banging their heads against walls after reading the unsurprising yet unbelievable news that: “Bailed-out banks gave millions in exec bonuses, report shows.”
On Thursday, New York Attorney General Andrew Cuomo announced the findings of a nine-month investigation, which revealed nine Wall Street banks generously gave a combined $33 billion in 2008 bonuses to employees despite losing billions of dollars and receiving an unprecedented government bailout.
The report offers straightforward observations, such as: The investigation found that even though banks tout the importance of tying pay to performance, compensation has become “unmoored from the banks’ financial performance.”
And: “When the banks did well, their employees were paid well,” the report said. “And when the banks did very poorly, they were bailed out by taxpayers, and their employees were still paid well.”
The report said that Citigroup and Merrill Lynch, which is now owned by Bank of America, received combined government bailouts of $55 billion and lost $54 billion last year, but still paid out $9 billion in 2008 bonuses, USA Today reported. Goldman Sachs, Morgan Stanley and JPMorgan Chase shelled out more in 2008 bonuses than they earned, the investigation found.
Scott Talbott, a senior vice president at the Financial Services Roundtable, which represents large banks, defended the bonuses, telling USA Today that banks have “already moved to strengthen reliance on deferred compensation plans that provide long-term incentives to employees.” And, during a recession, banks’ ability to “attract and retain qualified personnel is all the more important,” Talbott said.
Qualified personnel? Where? Isn’t all the evidence to the contrary? Long-term incentives? To do what? The same bad job, because that “earned” a big bonus the last time?
As Yale University law professor Jonathan Macey told USA Today, the banks’ argument that they need hefty pay packages for workers “depends on an erroneous assumption that these people are irreplaceable.”
Exactly. How hard is it to find someone who can lose money and at the same time dole out a government bailout as bonuses … or receive one?
Just remember to wear your helmet before banging your head again. Because there are no bailouts for brains. And apparently no bonuses for them, either. But worth protecting, just in case.
