Tuesday, October 20, 2009

Wall Street Bonuses

I'm appalled by the level of bonuses on Wall Street. Goldman Sachs is talking about a $23 billion bonus pool. I'm as free market capitalist as anybody. Indeed, if bankers make lots of money I'm usually fine with with it. But this is just heinous.

Yes, Goldman paid back its loan from the government. But it's not as simple as that. Goldman would have been completely screwed if it weren't for loans to other institutions, such as AIG, that haven't been paid back. In fact, the very idea that they needed a crutch for a short-time should humble them.

And protestations that Goldman and other banks were strong-armed into taking the loans even though they were sound themselves, doesn't hold too much water from me. They are still indebted to the government for mitigating huge counter-party losses.

All told, when the government just bailed out your industry and the rest of the country is having trouble it might be prudent, or just simple good manners, not to give out record bonuses. Some bonuses, most of us could live with, but record bonuses present such a political tone deafness and lack of introspection that the Democrats will be right to smack you around.

Oh, and I don't want to hear that if we didn't pay the bonuses, then our people, our most valuable asset, would go elsewhere as if there were some sort of irresolvable collective action problem. When, in point of fact, there isn't really any place for them to go.

It takes a lot to offend me, but Wall Street finally did it. The bonuses written into contracts from before the government bailout, okay I can deal with those being paid, and I could even deal with, as I said above, some bonuses. But record bonuses are too much to stomach. Something really is rotten up there.

I think it may be the meritocracy. They believe they deserve this money. Indeed, I think a good portion of the problem is that many of these meritocrats have never failed at anything. They went to Princeton. Then Wall Street. Then a Harvard or Wharton MBA. Then back to Wall Street. They've never known real failure and to some extent can't even comprehend it. Failing is something other people do.

4 comments:

Withywindle said...

Goldman seems to be a Democratic organization nowadays. I doubt the Dems will smack them around.

Anonymous said...

Dittos FLG.

I'm glad you think Princeton is behind this. You'd be surprised how often it really is.

Mrs. P

Andrew Stevens said...

Goldman Sachs gave most of their money (60%) to the Democrats in 2006, even though the Democrats hadn't yet taken Congress and 76% to the Democrats in 2008. Their top recipient in '08 was Obama who they gave $1 million to. In 2006, it was Hillary Clinton. Even more surprisingly, they gave more to the Democrats (60%) even in 2004, when Republicans controlled the Presidency and both houses in Congress. (Though George W. Bush was their top single recipient for funds, just barely ahead of John Kerry.)

Withywindle is correct that Goldman has little fear from the Democrats.

Andrew Stevens said...

Looking further back, there is only one election cycle (1996) when Goldman gave more to the Republicans. This isn't that surprising. Despite what people seem to think, banking has long been a business more likely to support Democrats than Republicans, particularly the big ones.

 
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