Bonus Burnout

To the Street elite the stock market is a wealth manufacturing machine, and as the housing bubble swelled that machine revved up to high gear, all engines ran all ahead full and fast to get it while it lasts. The business plan was concise, cheat. The M.O. was the simple, base the bonus on bogus paper profits, on assets like risky, high yield mortgage backed securities that paid hefty fees up front, but would not implode until the bonus check was cashed. It was like playing black jack and calling hit or hold after the dealer turned his cards.

Wall Street’s pay structure, in which bonuses are based on short-term profits, encouraged employees to act like gamblers at a casino

Even Wall Streeters concede they were dazzled by the money. To earn bigger bonuses, many traders ignored or played down the risks they took until their bonuses were paid. Their bosses often turned a blind eye because it was in their interest as well.

And this year as any the top heavy incentive design is on course to hand the worlds wealthiest people $1.6 billion of the remaining peoples money. Not because of the industry's great profits, of course.

Banks that have their hands out in Washington this year were handing out multimillion-dollar rewards to their executives last year.

he 116 banks that so far have received taxpayer dollars to boost them through the economic crisis gave their top tier of executives nearly $1.6 billion in salaries, bonuses and other benefits in 2007, an Associated Press analysis found.

That amount, spread among the 600 highest paid bank executives, would cover the bailout money given to 53 of the banks that have shared the $188 billion that Washington has doled out in rescue packages so far.

The AP review of annual reports that the banks file with the Securities and Exchange Commission found that the average paid to each of the banks' top executives was $2.6 million in salary, bonuses and benefits.

The banks are not just shameless, but fearless, with Goldman Sachs CEO Henry Paulson the US Treasury Sectary and other Goldman underlings like Neil Kashkari in charge of TARP, and the fox watching the hen house. The Goldman gangster's gangster's made out like bandits.

Lloyd Blankfein, president and chief executive of Goldman Sachs, took home nearly $54 million in compensation last year. The company's top five executives received a total of $242 million.

This year, Goldman's seven top-paid executives will work for their base salaries of $600,000, with no stock or cash bonuses, the company said. Last spring, before Wall Street's staggering losses and layoffs mushroomed, Goldman described its pay plan as essential to retain and motivate executives "whose efforts and judgments are vital to our continued success, by setting their compensation at appropriate and competitive levels." Goldman spokesman Ed Canaday declined to comment beyond that written report.

The New York-based company, after gains last year, on Dec. 16 reported its first quarterly loss since it went public in 1999. It received $10 billion in taxpayer money on Oct. 28.

Perhaps more impressively the Goldman gangster's ex-gangster's made out like bandits too.

John A. Thain, chief executive of Merrill Lynch, topped all corporate bank bosses with $83 million in earnings last year. Thain, a former chief operating officer for Goldman Sachs, came to Merrill Lynch in December 2007, avoiding the blame for a year in which Merrill lost $7.8 billion. Since he began work late in the year, he earned $57,692 in salary, a $15 million signing bonus and an additional $68 million in stock options.

Like Goldman, Merrill tapped taxpayers for $10 billion on Oct. 28.

Unlike Goldman Merrill Lynch has imploded, but never before have so few taken so much from so many. Years of gluttonous pay outs to the top tier, based on boom and bust credit manipulation, the sale of every kind of junk paper or toxic asset and ephemeral earnings reported as real takes it's toll on the real economy as the easy earnings eventually run dry. The bonus system was the greatest act of piracy in history and it wasn't until the CEOs and big brass began to decline their bonus that you knew the rats were leaving the ship.

Morgan Stanley’s three top executives — John J. Mack, the chief executive, and the co-presidents, James P. Gorman and Walid A. Chammah — will not be paid bonuses, the firm said. Bonuses for the bank’s 14-person operating committee will be cut by 75 percent.

The announcement came on a day when another Wall Street giant, Merrill Lynch, also announced that its senior executives would forgo bonuses this year. Several other major firms have announced similar moves as the public outcry over pay has escalated.

Merrill Lynch's CEO John Thain was especially insensitive to the plight of the common man in ruthless pursuit of his own higher purpose, demanding to receive a $10 million bonus for driving Merrill Lynch into the ground. The $10 million was about equal to the entire amount of the little peoples donation to Merrill at the time.

Merrill’s chief executive, John A. Thain, had requested a $10 million bonus this year, but the firm’s compensation committee balked at awarding him any payout, according to someone familiar with the situation but not authorized to discuss it.

Mr. Thain inherited a mess at Merrill when he became chief executive a year ago, and some argue that he prevented the firm from collapsing, as did Lehman Brothers, by selling it to Bank of America in September. Even so, some officials viewed his request for a bonus as ill-timed given the continuing troubles at his firm and the industry at large.

But Thain kept playing roulette, doubled down on mortgage backed securities and leveraged buyouts, kept collecting the fees for bonus time and kept Merrill in debt for all time. He was manufacturing his bonus and made no pretense otherwise, nor was he shy to ask for what he thought was his.

Mr. Thain has said he deserves a bonus because he helped avert what could have been a much larger crisis at the firm, The Journal said, citing people familiar with his thinking.

Committee members are also weighing the fact that other Wall Street firms, including Goldman Sachs, which did better than Merrill this year, are not giving out bonuses to top executives, according to the report.

And John boy might have a point if he didn't pilfer anything of Merrill's the John Mack hadn't chained to a truck and carried away. So Merrill unbelievably wasn't going to give him his precious bonus. But Thain cold as a snake, without even the veneer of sincerity asked that he not receive a 2008 bonus.

Merrill Lynch & Co Inc said on Monday that Chief Executive John Thain, who agreed to sell the brokerage to Bank of America Corp earlier this year, has requested that he not receive a bonus for 2008.

Thain told a board meeting Monday the decision was appropriate "given current economic and market conditions."

Well we did say especially insensitive, right!