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.

---

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.

[tbuckl]

2008 Preamble to Declaration of Independence
We the rich hold these truths to be undeniable; that all rich people are created above all others & that from our superiority is created by our God, that we derive our rights inherent & inalienable, above anyone else, we decide what the preservation of life, & liberty, & the pursuit of happiness is; that to secure our position to these ends, our token government is instituted by the rich, deriving their just powers because they have the armies and from the consent of the rich; that whenever any person shall become destructive of our rules, it is the right of the rich to destroy, alter or to abolish any rule, law that interfere with the rule of the rich, & to institute new definitions at will and without notice , laying ours foundation on the backs of the not rich. We shall organize our powers in such a form, as to keep all non-rich at bay and shall protect our safety & happiness by force should the poor rise up due to the heavy yoke around their necks.

[tbuckl]

Perhaps the Government would think different if all the home owners who are loosing their homes were to blockage their houses and take a stand, Use any and all force nessary to hold law enforcement off. One or two homeowners would not make a difference, but if 1 mil home owners put up a resistance then the police force would not have the man power to remove us all. If we band together, the Government will have to deal with us. Stand alone and they will take us one by one just like Nazi did. If it is the banks policy to rip us off, make us homeless while enjoying the bailout money for vacations, then take our homes and sale them for less than what we owe, it should be the policy of the citizens to repeal any and all government official attempt to effect this national swindle upon us. Again Thomas Jefferson saw that these tyrants would continue to rise up and we would need to forced them back down in order to maintain our liberty. He said, "I sincerely believe, with you, that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale."

[tbuckl]

The Preamble to his original draft of the Declaration of Independence, he wrote, "We hold these truths to be sacred & undeniable; that all men are created equal & independent, that from that equal creation they derive rights inherent & inalienable, among which are the preservation of life, & liberty, & the pursuit of happiness; that to secure these ends, governments are instituted among men, deriving their just powers from the consent of the governed; that whenever any form of government shall become destructive of these ends, it is the right of the people to alter or to abolish it, & to institute new government, laying its foundation on such principles & organizing its powers in such form, as to them shall seem most likely to effect their safety & happiness."

[tbuckl]

Hasn''t this government and the banking system proven to be destructive? Do the people now have a right to alter or abolish it and institute a new government? Thomas thought that "Rebellion to tyrants is Obedience to God." He further said, "The tree of liberty must be refreshed from time to time with the blood of patriots & tyrants." Perhaps we have reached that point where it is time to refresh the tree of liberty and deal with these tyrants now destroying American. Now that I have said my thoughts about this swindle, showed myself as a Son Of Liberty should I stand out front of my home and wait for the black van to pull up and take me to Guantanamo Bay?

[dennaberri]

The fact that ANY employee of these financial institutes could get a bonus makes me very angry! Why do any of them deserve a bonus? What have they done to earn one? Help drive their company to a point of needing tax payer money, that''s what!
While working for my last employer, I went almost 3 years without even a cost of living raise (in an environment where everything around me was costing more). And shortly after I got a raise, I was let go. Both my husband and I have been out of work since Jan. of this year, we have used our entire savings; we are out of unemployment benefits and are now whittling away my husbands 401k - a sum that was already hit by this financial crisis. We can not even get help to stay in our house or pay our bills right now so I do not think these cheating banks that are practicing bad business should get any tax payer money - ESPECIALLY since they seem to still have enough of their own money "set aside" to pay bonuses to their underachieving employees!

[whatithink10]

Xyno,

You should learn about a thing called DERIVATIVES. Mortgages were a small portion of the problems. DERIVATIVES created the monster and this was created on Wall Street.

[xyno-2009]

The Americans that are stuck with unreasonable mortgages were conned by the ''''experts'''', their ''''advisors'''' into thinking it would be OK and and that it was in their best interests to go forward with these committments. Sure, they are paying for it now, but the sleaze-bags at the top are still raking in the tax-payer dough.

Posted by oleander8 at 12:25 PM : Nov 13, 2008

===========

The majority of those mortgage loans were made by independent mortgage brokers, not Wall Street. And the only reason they continued to make those loans was because Fannie Mae and Freddie Mac were buying them up.

People don''t make suspect loans unless they''re sure they can sell them to someone else.

[xyno-2009]

Yet my retirement savings are down nearly 50%. Whose fault is that ?

Posted by libra217 at 02:56 PM : Nov 13, 2008

=================

If you don''t understand that the market goes up and also goes down then you shouldn''t be in it.

But to answer you question, the first place you should look is at Fannie Mae and Freddie Mac.

[dvet1]

THE EXCUTIVES SHOULD BE FIRED ALOT OF PEOPLE CAN DO THIER JOB, INFACT BETTER, FOR ALOT LESS MONEY PEOPLE, YOU ALSO HAVE TO BE ACCOUNTABLE FOR YOUR ACTIONS,IF IT LOOKS TO GOOD TO BE TRUE, THEN IT IS

[libra217]

You can''t start fixing the problem until you know the cause - LOOK IN THE MIRROR. Even AMEX is panicking now because people are defaulting on their payments of consumer credit card debt.

Posted by iblefty32 at 08:56 AM : Nov 13, 2008

I have defaulted on NOTHING. I have never paid a finance charge in my life, paying off EVERY credit card bill in full each month. Yet my retirement savings are down nearly 50%. Whose fault is that ?

[libra217]

Why is it that everyone of the States facing bankruptcy are run by Democrats?

Posted by rohink at 12:54 PM : Nov 13, 2008

Oh, you mean like California ? Arnold is a Republican.

[rohink-2009]

trishzeinert

Excellent post. How many billions from taxpayers are going to bailout failing States. Why is it that everyone of the States facing bankruptcy are run by Democrats?

[bckrd1]

Yank in nam.... while some of your statements may have a point... Obama isn''t even President yet so can not be blamed for the Socialist society we are now getting into. He is inheriting it from a bunch of crooks which I would venture to say you helped elect.

[oleander8]

"Bank CEO''s and other executives didn''t cause this - YOU DID AMERICA - WAKE UP! Share the blame and stop pointing fingers." [Posted by iblefty32]

The heck they didn''t. I''m sick and tired of being blamed for the excesses of corporate America. The Americans that are stuck with unreasonable mortgages were conned by the ''experts'', their ''advisors'' into thinking it would be OK and and that it was in their best interests to go forward with these committments. Sure, they are paying for it now, but the sleaze-bags at the top are still raking in the tax-payer dough.

[whatithink10]

iblefty32,

This mess is not 100% the fault of homeowners. Yes, homeowners share some of the blame. But, banks, etc. hold a lot as well.

They hold a large part of the blame for TWO MAJOR REASONS.

1. They stopped focusing on long-term stability and started focusing on short-term bonuses. They should have worked as the gatekeepers but instead gave $800K home loans to $17K strawberry pickers because the $800K meant a large bonus and they told the strawberry picker he could sell in three years for a huge profit.

2. DERIVATIVES. This is what is the major cause of this problem and this is 100% Wall Street''s fault. This caused a multiplyer effect on the housing crisis. It made a $1 issue a $10 issue. It''s very complex and easier to blame homeowners, but this was what pushed everything over the edge.

[bakhshu-2009]

In case people don''t know, the Fed is NOT a government bank. It''s a private organization run by private bankers, many of whom happen to be involved at the top most levels of the same institutions as Wall Street. The system is flawed, and unless enough common people mobilize in large numbers to pressure their congressmen/women, this will never change.

[trishzeinert]

Nothing will change as long as the majority of the electorate receive a hand out and that covers a huge spectrum. We have the low income entitlement groups and the high income entitlement groups with those of us in the middle carrying the load. Blame lies with both of the major parties but oddly the Republicans have faced the ire of the electorate more so than the Democrats. I ponder why when so much more of the damage is linked to the Democrat party. Then I realized the importance of the entitlement groups in the voting booth. Dems have historically been quick to establish dependency on the federal trough which builds voting allegiances to the provider.
It is time for the those in the middle to wake up and smell the coffee. We carry the burden and not complain which has gotten us where? Time for us to exclaim "we''ve had enough and we are not going to take it anymore".

[kmatt9]

Hmmm ... let me get this straight ...

"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. "

So the top talent were there - and this is what happened ... WHY WOULD ANYONE WANT TO "keep them around"?

[iblefty32]

It amazes me that almost every comment on here is focused on the bankers and executives as villains.

There is absolutely ZERO sense of accountability among the American public.

Who are all you kidding? This mess is 100% due to the rampant defaults on mortgages by the HOMEOWNERS. Not the banks. All they did was invest their money the same way people buying the homes did. The banks are no different than anyone else - caught up in the speculation that homes would continue to appreciate.

You can''t start fixing the problem until you know the cause - LOOK IN THE MIRROR. Even AMEX is panicking now because people are defaulting on their payments of consumer credit card debt.

Bank CEO''s and other executives didn''t cause this - YOU DID AMERICA - WAKE UP! Share the blame and stop pointing fingers.

[trishzeinert]

Nothing will change as long as the majority of the electorate receive a hand out and that covers a huge spectrum. We have the low income entitlement groups and the high income entitlement groups with those of us in the middle carrying the load. Blame lies with both of the major parties but oddly the Republicans have faced the ire of the electorate more so than the Democrats. I ponder why when so much more of the damage is linked to the Democrat party. Then I realized the importance of the entitlement groups in the voting booth. Dems have historically been quick to establish dependency on the federal trough which builds voting allegiances to the provider.
It is time for the those in the middle to wake up and smell the coffee. We carry the burden and not complain which has gotten us where? Time for us to exclaim "we''ve had enough and we are not going to take it anymore".