Problems? What Problems? Wall Street's Five Biggest Firms Dish Out $39 Billion in Bonuses in 2007
Forget about the fact that most of these firms were absolutely taken apart in 2007 due to the subprime mortgage mess and related quant fund problems.
Forget about the fact that the combined market capitalizations of Goldman Sachs, Morgan Stanley, Merrill Lynch, Lehman Brothers and Bear Stearns dropped an estimated $80 billion dollars in 2007.
Forget about the fact that many of these firms have had to go begging to foreign "sovereignty" funds in order to shore up their capital that was tapped by writing off huge subprime losses.
Forget about all of that. It's time for the people who work at these companies, especially the high-level executives, to get paid!
These five firms dished out $39 billion in bonuses in 2007, topped the $36 billion dollars that was doled out in 2006. How do you justify these bonuses when the market caps of these five companies have dropped a combined 25% in 2007? How do you justify these bonuses when workers are being laid off at these companies? (low level workers of course) How do you justify these bonuses when the economy is slowing and unemployment is rising, and people are losing their homes left, right and center? You don't justify it of course, which is why these bonuses were an absolutely brainless move on the part of these five brokerages.
You could justify the bonuses in 2006, as these firms all had great years. But after 2007 and all of the carnage that took place? Are you kidding me?
According to Bloomberg, Merrill Lynch and Bear Stearns both dropped 40% in 2007, while Morgan Stanley fell 21% and Lehman Brothers dropped 16%. Goldman Sachs, due to profiting from the collapse of the subprime mortgage market, actually rose 7.9% on the year. If Goldman Sachs wants to give out a big bonus to their employees, that's fine. But the other companies? I don't think so.
Lehman Brothers cut 2,450 jobs last year, yet decided to award Richard Fuld with a $35 million dollar bonus in 2007. Bear Stearns lost 1550 jobs, and Merrill Lynch lost 1000 jobs, yet they still decided to dish out lavish bonuses to some of their employees.
I realize that certain departments within these brokerages might have done really well and deserved bonuses, but the message being sent to Wall Street is the wrong one. These firms could have significantly pared back their bonuses in 2007, starting with the top-level executives, but they chose not to. Certainly the "Age of Greed" is alive and well on Wall Street.
Filed under: The Economic Meltdown | Stock Market Scandals