It’s been a tough couple of years for the economy.
Unemployment has been at record post-Depression era highs. Income has been falling relative to the cost-of-living. Credit for individuals and businesses has been a rare and diminishing commodity.
The only guys who seemed to have flourished were the knuckleheads who tossed us under the hell-in-a-hand-basket express.
According to figures just released by the New York State Comptroller, Wall Street banker bonuses were up 17 percent in 2009 over a year earlier. One year after a massive and unprecedented taxpayer bailout, Wall Street’s elite financial firms have doled out $20 billion in “incentive pay.”
Thanks to our help, profits at the nation’s biggest banks could exceed $55 billion.
For 2009, the average taxable bonus on Wall Street grew to $123,850. Payouts at the three biggest banks – JP Morgan Chase, Morgan Stanley and Goldman Sachs – rose a whopping 31 percent.
Even still struggling Citigroup got into the act.
Citigroup’s board decided that Chief Executive Officer Vikram Pandit, along with several of the struggling bank’s other upper echelon executives, deserved bonuses last year for stabilizing the books.
Citigroup only lost $1.6 billion in 2009, compared with the record $27.7 billion net loss during the previous year. The bank is 27 percent owned by the U.S. government following a $45 billion bailout in late 2008. The stock price is down more than 90 percent from the end of 2006.
Grounds for a Reward?
Bonuses for Citgroup executives ranged from $9.5 million for the head honcho in its overseas trading and investment banking division to $8 million for the bank’s chief financial officer.
Citigroup’s compensation committee also decided that CEO Vikram Pandit deserved a bonus for his steady hand in guiding the bank through the financial minefield of the past two years. To his credit, Pandit declined.
In February 2009, Pandit promised that he would not take any compensation other than one dollar per year until Citigroup posted a profit.
Don’t fret too much for poor old Vikram. Although he collected about $125,000 for 2009 – salary for the period before he made his pledge – Pandit pocketed nearly $34 million in compensation for 2008.
In fairness, Goldman Sachs Group Inc., Morgan Stanley and JPMorgan Chase & Co. slashed their compensation in the fourth quarter of 2009. The three Wall Street firms set aside only $39.9 billion for pay in 2009, below the 2007 record of $44.7 billion.
Irresistibility of Bristling
From the outside looking in, it is hard not to bristle at the apparent greed and indifference of the Wall Street banks. The President has been among their most vocal critics.
While the bankers may have a heightened level of sensitivity because of the events of the past two years, any criticism of their compensation practices falls on deaf ears. Wall Street’s success always has been predicated on the Pirate’s Code, “Take what you can. Give nothing back.”
Presidential pressure or threatened punitive legislation will do little to alter the compensation culture on Wall Street. The bankers and their lawyers know that any attempt to impose legal limits on their compensation will be keel-hauled by the courts quicker than you can say Jack Sparrow.
Only a shareholder mutiny can alter the way in which these executives are paid. As long as the banks continue to improve the bottom line, even with taxpayer help, the chances are slim of a shareholder uprising at any of the nation’s major banks rejecting their compensation practices.
Arrr!
John Cohn is a senior partner in the Globe West Financial Group based in West Los Angeles. He may be contacted at www.globewestfinancial.com
