Hard Times, But Big Wall Street Bonuses

The Early Show: Mystery Shrouding How Much Of The Money Will Come From The $700B Gov't. Bailout

(CBS)  It's no secret that investment bankers are well-compensated, mostly through year-end bonuses, especially during bull markets.

But can they still count on those big bonuses this year, in the midst of the financial crisis and market freefall?

CBS News correspondent Priya David spoke with several compensation consultants who said that, even in this economy, firms are worried that, if they don't pay out the bonuses, they'll lose their top talent -- people they want to keep around for when pastures turn green again.

On The Early Show Wednesday, David reported that lawmakers and taxpayers alike are concerned about where the money for those bonuses will come from.

For Wall Street workers still employed, there could be a hefty bonus in their checks next month.

According to a report from financial news agency Bloomberg, Goldman Sachs, for example, has set aside $6.8 billion for bonuses, and Morgan Stanley, $6.4 billion.

And the chairman of the House Financial Services Committee, Massachusetts Democrat Barney Frank, isn't happy. "These are people who lost enormous amounts of money," Frank observes. "How do you give a bonus to someone for having failed so badly as many of these people did?"

What's got many on Main Street and Capitol Hill angry, David says, is the possibility that some of the $700 billion government bailout package could go into the pockets of Wall Streeters to pay their bonuses.

"All of the money is to go into new loans," Frank points out. "None of it is to go into compensation of any kind for the employees."

New York State Attorney General Andrew Cuomo has opened an investigation into the Wall Street bonuses. He sent a letter to nine financial institutions, demanding "a detailed accounting regarding your expected payments to top management in the upcoming bonus season."

Cuomo told CBS News, "These are tax dollars that are going to these institutions, and I believe the taxpayers have a right to hold the institutions accountable for what they're doing with their money."

The bailout package specifies that the top five executives of a company cannot get a golden parachute, but doesn't limit compensation for any other employees. Some observers, such as financial expert and reporter Stephen Gandel, say bonuses are expected to be down, but not as much as they might have been without the bailout.

Gandel, who's a Money magazine senior writer and contributor to Time.com says, "Compensation should be down 70 percent but, because all this new money is coming from the government, the firms are now saying they can pay more, and so they're only going to cut bonuses by 40 percent."

Even without bonuses, the mean annual salary for a securities industry employee was just under $400,000, David notes, ten times more than the average U.S. worker.

One woman in New York's financial district remarked to David, "You have people losing their houses, people on the street, they can't feed themselves, while these people are just banking on (their bonuses)."

There's a shroud of secrecy around hundreds of billions of government dollars that have been given to Wall Street outside of the bailout money. The Federal Reserve has refused to say which banks are getting how much of that pie, and now one financial news agency, Bloomberg, is actually suing to get that information.

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Editor's Note: This story was updated to clarify that the Bloomberg lawsuit pertains to funds given in addition to, but not a part of, the bailout package.

[brsecu]

Is ANYONE surprised? If you are you are easily misled. These bail outs are sooooooo stupid. Good gracious. Look at HalfPad.org

[hobo825]

I am not going to argue for or against the point of this article, but one of the KEY facts presented here is dead wrong and misleading. I have worked in the securities industry for more than 5 years and my father worked in it for more than 20. I know what I am talking about. As base salary, only the very, very top, CEOs, CFOs, etc. may earn US$ 400,000+. Most are closer to one quarter of that number - and that is to live in New York City, paying New York City rent, etc. Moreover, these salaries are to work 80 hour weeks and be available 24/7/365. Again, I am not justifying large bonuses in this environment, but people do not have perspective when all the media and govt. does day in and day out is villify bankers. 99% of us are hard working people just like everyone else who chose this career path understanding its risks and rewards and doing something TOTALLY unrelated to what got us in this mess (most of which can be blamed on perverse govt incentivization begun in the 70''s).

[dzemog1]

This is unacceptable!!! The American TAXPAYERS are picking up the tab for all these bailouts, and many of us are laid off and out-of-work because of the fall-out from them. Not only are we not getting any bonuses, we don''t know how we''re going to pay our bills or have any kind of Xmas for our kids. I really hope this generates outrage in Congress, and enough of it for them to do something about it. We didn''t dig these guys out of the ditch so they could pay out their year-end bonuses to people who''s corrupt work dug them into it. I expect NO BONUSES...period, and I''d like to see something put into place that immediately terminates the employment of any employee, exec or otherwise, who has the balls to accept a bonus. It''s clear these Wall St guys only care about themselves. I think it''s time we let them experience first-hand what it feels like to have the rug yanked out. This seriously pisses me off.

[pfhobson]

Gee, I wonder if any of the big brokerage houses have made substantial contributions to the parties in congress?? Term Limits Folks, Term Limits!!

[goldkate]

I think we should all just stop paying our bills. That''ll keep ''em busy and earning their "bonuses" --
GIVE OURSELVES BONUSES!!

[portle441]

Good grief is there no one left on Wall Street who is normal?

[starykozel]

no bonuses = no money for the politicians; therefore, the politicians secretly support the bonuses

[xazoola]

if they don''t pay out the bonuses, they''ll lose their top talent...

Is this the same "Top Talent" that got them into this mess?

[brsecu]

"CEOs, CFOs, etc. may earn US$ 400,000+. Most are closer to one quarter of that number - and that is to live in New York City, paying New York City rent, etc. Moreover, these salaries are to work 80 hour weeks and be available 24/7/365."

Yeah so we should set aside 6.8 BILLION? no. What is a bonus based on? Why do they get the same amount they did last year? Your argument hods ZERO water.

[ljheidel-2009]

There''s this guy down in Dallas named Mark Cuban. I hear he knows a few things about how to run a business. This is what he says about bonuses:

"I pay bonuses based on the FINANCIAL success of the company first. If the company is making money. Actually cash flow positive, then I''m always going to be open to paying bonuses that reward those that have earned rewards."

(http://blogmaverick.com/2006/07/22/paying-bonuses-and-managing-some-thoughts/)

So, lemme get this straight: Wall Street is going to pay bonuses when the companies are hemorrhaging cash? These guys should be thinking about their pay *cuts* and firings, not bonuses. This is ridiculous.

They can make all the excuses about retaining talent they want, but look at it this way: I run a fancy business, and in order to run that fancy business, I have to maintain an expensive asset, like a nice office or what have you. If the company doesn''t excel, I can''t afford that office. I have to give it up. Somebody else who can make money can rent it.

If these guys really are that good (which I highly doubt) let them go to work for a successful company who can pay their high salary and let the companies that can''t afford them die out or find another niche in the market. It''s called competition.

The thing is, the guys saying saying that they have to pay bonuses and large salaries to keep talent...well, they''re the talent! It''s disingenuous BS at its finest.

[bshemancik]

Everybody is sacrificing for the global financial crisis. A lot of people are struggling to survive. If you are getting money from the government for more than survival, you should be nailed to a cross and I will be happy to use the hammer.

[onagros]

The whole mess is so corrupt it is asinine. The real estate market, lending, immigration/unemployment, manufacturing base, energy and the freaks still want to believe it%u2019s what they%u2019ve defined it to be: a game, their game and their rules.
The government is corrupt; our culture and business culture is ridiculous. Work smart not hard has proven to be a huge pile of an excuse for winning at all cost.

[starykozel]

posted by HOBO: "Most are closer to one quarter of that number - and that is to live in New York City, paying New York City rent, etc. Moreover, these salaries are to work 80 hour weeks and be available 24/7/365."

I say - nobody is forcing them to stay and live in the NYC. After all we need to replace all the illegal workers. What an opportunity to live simple and healthy life tilling the fields! Rednecks would rule!

[brsecu]

Bwhahahahaha. Did you really think they were going to use the money for anything eles than lining their pockets. I understand them dems doing this but not repubs. Oh how far we''ve come. Look at http://www.HalfPad.org

[robindallas-2009]

This type of "in your face" theft, while many are truly struggling because of the actions of the very same pompous rooster fellators, invites violence upon persons.

[hobo825]

@ halfpad -

bonuses are based on financial success, as the person who quoted mark cuban noted. The thing is, most of the businesses in these banks ARE profitable and doing just fine. Nonetheless, many of their staff have been fired as well and those left behind have picked up the business and kept it profitable. The problem was that a couple of businesses were DEEPLY problematic and lost tons and tons of money. So, unfortunately, it is not quite as cut and dry as you make it out to be.

@ starykozel - I honestly do not even understand your comment.

[czbrat63]

Since most financial institutions are "embattled" none of them should be giving out large bonuses this year. Where is their talent going to go? They are all in the same boat. Award success -- not failure. All these companies need much better risk managers.

[deadzone45]

These guys made tons of money off of home loans to illegal aliens. I don''t mind if we redistribute all their assets.

Look at these current videos of illegal aliens pouring across the border every day and night. More money for big corps.

http://www.borderinvasionpics.com

[hoosierdad41]

Barney Frank, Chris Dodd, Franklin Raines, Jim Johnson and Jamie Goerelik. These are the folks who blew up the finance industry, these are the people who mandated that banks give out high risk loans. Their idea was that everyone should be able to obtain financing for a home but, guess what, nobody considered the little part about paying it back.

Now Barney Frank has the nerve to criticize the industry that he greatly profited from and that he help bankrupt. He should be in jail. Instead our willing media goes right along with the blame game and keeps up the notion that the evil bankers did all this.

As a bonus, the government now owns significant amounts of stock in every major bank in the country and guess who controls these new stocks? That''s right, Barney Frank and Chris "Countrywide" Dodd.

[omega40]

Since most financial institutions are "embattled" none of them should be giving out large bonuses this year. Where is their talent going to go? They are all in the same boat. Award success -- not failure. All these companies need much better risk managers.

Posted by maggier3


A few weeks ago I heard that so many people from the finance sector are out of work that they are sending their resumes overseas to try and find work. I agree with you that bonuses at this point in time are unwarranted. It would be better if those that had jobs were played against those that don''t in order to drive wages down. You know, what Wall street has demanded from every other industry to maximize profits.

[greeneyes222]

"firms are worried that, if they don''t pay out the bonuses, they''ll lose their top talent"

Top talent, my a$$. They should all be lost as quickly as possible. Let''s show them the same pity and respect they''ve shown the taxpayers.

[djsteil]

Barney Frank should clean up his own back yard before he trash talks the banks. Barney Frank as Finance Committee Chairman was the idiot that changed the banking credit policies to include less than qualified people to obtain adjustable rate mortgage.

[retiree94]

That Sen. Chris Dodd and Rep. Barney Frank continue on as congressional overseers of US financial affairs is a disgrace. It is unlikely they will ever be held accoubntable for their official actions - and inactions. This is a sad time for America; I expect the worse with the leaders we have just elected.

[djsteil]

Barney Frank should clean up his own back yard before he trash talks the banks. Barney Frank as Finance Committee Chairman was the idiot that changed the banking credit policies to include less than qualified people to obtain adjustable rate mortgage.

[starykozel]

HOBO said: "@ starykozel - I honestly do not even understand your comment."

I will make it simpler for you to understand: if they (and you) cannot make it w/o bonuses in the NYC, move to a small town and get some manual labor job that will not unduly tax your/their intelligence. There is plenty of better people to replace those who failed so utterly.

[Rafeh1]

don''t you love the free enterprise system. The whole world should follow our great free enterprise system.

[bjiggs]

How is it possible that Barney Frank and Chris Dodd are still involved in US Economic policy at all?

Those two clowns bear more responsibility for this mess than anyone else. We SHOULD be talking about tossing their crooked arses in jail.

[eskieville1]

A BONUS? YOU HAVE GOT TO BE KIDDING! THIS IS ENOUGH TO MAKE ONE AT LEAST PUKE IF NOT CONTEMPLATE A REVOLUTION.

[hobo825]

@ starykozel -
to be crystal clear, reread my post - it is with regards to salary numbers, NOT bonuses.

Secondly, to reiterate, since you appear to read and comprehend selectively, there were areas that failed miserably, but certainly not every facet of the institutions did. Thus, you should be careful in your sweeping accusations.

@ all those blaming the relevant congressmen - bravo! It is nice to see that some people acknowledge the root of the problem. Some short-sighted bankers were certainly complicit, but that is where it all began.

[bikerb54]

Who''s giving the homeowners, retirees, and blue collar workers who have lost just about everything a bonus?? Why in the hell are these people being rewarded for *** up? If they still have their jobs, that should be all they get. At least they still have incomes to pay their mortgages, retirement funds, health care and vacations. They should be thankful that the taxpayers are relegating where this "bailout" money goes. Let their vacations be on the streets, homeless and begging for any kind of help for their families. Maybe that would humble a few, but I doubt it.

[element51]

At first I was just pissed...Now I''m angry! I had a feeling when the so called "bail out" package was passed so quickly that there was something rotten in Denmark. These Wall Street fvcks have been sticking it to us for years and as soon as they sucked the well dry along comes the government with another bucketfull of cash. No one knows where that money will go and no one ever will know. After all, we, the middle class are only here to generate the wealth of the country, not to share in the wealth. And when they have bled us dry they will start to bleed us some more by taking our tax money. This is an outrage and something must be done. But what? By rewarding the rich and powerful with massive tax cuts the current administration has effectively started the demise of the middle class. They don''t want us. They want it to be the rich and the surfs. Nothing in the middle. Obama promised to work for us...the middle class. I hope he keeps his promise.

[incog-nito]

THIS is what''s wrong with Corporate America. Bonuses no longer bear any relationship with performance. Regular employees MIGHT get a bonus if they perform well or if the company does particularly well, otherwise they don''t get anything. Corporate executives get huge bonuses no matter what. They get even bigger golden parachutes if they quit or are fired. What incentive is there for them to perform and look out for the company''s best interest? I''ve been working in corporations long enough to know that ALL they''re concerned about is making the numbers look good for the next quarter, in order to prop up the stock prices so that they can cash in on their stock options.

[spinproof]

Hard Times, But Big Wall Street Bonuses

Any Business who gives out a LARGE BONUS should not be eligible for Federal Bail Out Money, if the Business can afford to give out LARGE BONUSES then that should be used as an indicator that they don''t need help.

[robearbeach]

The banks are worried they are going to lose their top talent if they don''t pay bonuses that are not deserved by any rational standard of performance? Tell me, where is this "talent" they are so afraid of losing going to go? Moreover, how talented are these people who presided over the worst self-inflicted wound in business history? This is beyond absurd.

[hoosierdad41]

By the comments on this board, it is very clear that most of you have no idea how this mess really happened. Nice to see that the major media outlets have led so many of you to the ridiculous conclusion that the banks did all of this to you. Nice to see how many of you display blind hatred towards all these financial institutions and believe that they want to destroy the middle class. Now I understand how a boob like Obama gets elected.

Democrat 101 - Keep Americans dependant on government, control the media, create class warfare. Do these and you control the whole game.

[hennighg]

HoosierDad41, yeah, I''ve heard of you. You''re that fella who knows everything. Just like all the other neo-cons, everybody is to blame except you. I get it already.

Bonuses for boobs from the tax-payer fits in well with Bush the 2nd''s trickle down economics. Once again, however, it isn''t money that is trickling down. Good riddance to the conservative nonsense.

[armydog2]

where is the oversight that was supposed to come with this bailout? F@ck their bonuses.they do this then take the money back.

[robearbeach]

Well, Hoosier, enlighten us. Your going to tell us that the government pressured the banks to make loans that shouldn''t have been made, right. Well, that''s true. But personal responsibility dictates that we hold the drug addict responsible for using drugs even though the pusher got him hooked. These banks could refused to make loans that shouldn''t have been made and/or forseen what was going to happen just as Republican''s did when they attempted to stop these practices. Had they anticipated this outcome, even as they participated in the circumstances that created it, they certain could have planned for it''s invetibility. There is no talent worthy of bonuses in this mess.

[Michael Arnold]

"if they don''t pay out the bonuses, they''ll lose their top talent -- people they want to keep around for when pastures turn green again"

Beautiful. The same loser-criminals will be running things "after this is over"?

Stock your pantry with food. Keep watch on gas, its going to rise again right after Christmas.

[logino33]

The reason we''re in this mess does involve banks. But guess what, it also involves bad democratic policies put in place by the Clinton administration that allowed people to get loans in the housing act that had no business getting them. Check your facts before you let the one sided liberal media fool you. It''s typically a good practice in life.

[usedeqbroker]

We the People, Our Money, Our Say so... what happend to that? What happend to our Constitution? What happend to COMMON SENSE? Let''s put Limits on re -election of Congressmen and Senators... We can''t keep letting the same good ole boy, whether it be Democrat or Republican to stay up there and live there until they are too old to get around... Where is the common sense of the voters who keep re electing these long term encumbants... Stevens, Byrd, Kennedy, and many more... We need new blood people! These people use their "safe" positions to plan their on agendas and they are not looking out for us... or we would not be in this situation...

[jt_lancer]

Aren''t all of you voters happy that YOUR party (Dems AND Repubs) supported the $700 Billion taxpayer bailout of Wall Street against the wishes of the majority of Americans?

And you actually think the politicians work for YOU.

Get back to work, wage slaves. The government has to bail out someone else this week.

[randijojo-2009]

where''s the bailout for the single mother who works 60 hours a week?!? banks...loan companies...automakers... what''s next???

[jt_lancer]

Get back to work, wage slaves. The government needs your tax money so they can bail out someone else this week.

[hoosierdad41]

usedeqbroker -
You hit the nail on the head - term limits. One six year term for the president, senators and congressman. No re-elections and a whole bunch less of lobbyists. We have way too many federal politicians on both sides that have way too much power. They gotta go, everyone of them. We are going to end up with a government that owns trillions of dollars of stock across every major industry in the country and has the most corrupt politicians in history controlling it all.

[hoosierdad41]

robearbeach -

1. Don''t know how you heard of me when I have never, ever posted here before.

2. Don''t drug dealers end up doing way more jail time then the addicts?

[realetybytes]

Hey robearbeach, do you really think the banks could refuse. Are you willfully ignorant of Janet Reno attacking the industry and threatening them with the full weight of the justice dept. if they refused? Are you willfully ignorant that the CRA of 1997 under Clinton gave the force of law against banks not loaning to people on welfare and unemployment? Are you willfully ignorant of Barack Obama and ACORN flooding banks and calling them racist for trying to make sure a person COULD actually pay back a loan?
Sometimes, sir, it is better to remain silent and be thought a fool, then to speak and remove all doubt!
Ron Reale
[e-mail]
realetybytes.townhall.com

[jt_lancer]

Aren''t all of you voters happy that YOUR party (Dems AND Repubs) supported the $700 Billion taxpayer bailout of fatcats on Wall Street - against the wishes of most Americans?

And you actually think the politicians work for YOU.

Get back to work, wage slaves. The government has to bail out someone else this week.

[sayso2]

Here''s the deal:

If you rob a bank, steal a car or jaywalk, you will be caught, punished and imprisoned. But, if you fleece millions of investors out of their hard earned money, you will be rewarded with a multi-million dollar bonus. Never really thought about it much before but I wonder: has white collar crime outpaced the more typical crimes of the past? And, if so, who is in a position to do anything about it?

[redwing1953]

Is it any different with any of the buyouts? We pay and they play....Byron