In his unending crusade to shame Wall Street into submission, New York Attorney General Andrew Cuomo has released a detailed report of bonuses paid for 2008 (link opens rather large .pdf of report). You might recall, it wasn't a very good year for Wall Street -- much like the year that giant asteroid hit the earth wasn't very good for the dinosaurs. But the dinosaurs didn't have Bruce Willis and a team of misfit oil drillers to save the day like Wall Street bankers had Hank Paulson, Ben Bernanke and Congress to bail them out. Cuomo's report shows, despite a year of pure ugly, bankers can still afford to party like it's 2006.
Here's a great chart that kind of sums it all up (click on pic for more legible version):
If I may, I would like to direct your attention to Citigroup and Merrill Lynch. Each had disastrous years. By disastrous I mean they lost more than $27,000,000,000 each. And yet, their bonus pool sizes were a positive $5,330,000,000 and $3,600,000,000, respectively. Huh? Exactly.
Other banks have bad numbers too. Almost all of them paid out more in bonus compensation than they earned.
I understand the need for banks to attract and retain good talent. I can sympathize with that more than the average journalist. Yet, I have a very hard time shrugging off numbers like this. Even if these banks didn't receive billions of dollars in a government bailout, if I were a shareholder, I would be rather livid. If this is a bad year, one can only imagine what a good year would look like.
Another fun thing to note is the last column of the above chart. That's the number of bonuses per firm that exceed $1 million. For JP Morgan that was 1,626 people. For Goldman it was 953 people. Remember, that's for 2008: the year the financial world nearly collapsed.
The solution? Well that's obvious. We could have let them fail. Allow every major investment bank to fail? Well it wouldn't have been every one, just the large American investment banks. Boutique (smaller) American investment banks and foreign banks like Credit Suisse, Deutsche Bank, HSBC, Barclays, etc. all would have absorbed much of the talent and went on their merry way.
Sure, there would have been some mess to clean up, like what we saw with Lehman. Would that mess have been bad enough to put up with behavior like the chart above shows? If you think so, then the bailout was justified and you can't complain about the bonus numbers. Without the bailout, none of those bonuses would have been paid.
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