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Ka-Ching!

| Wed Jul. 22, 2009 9:55 PM PDT

I'm glad to see that things are back to normal:

Wall Street, helped by improving profits, is on track to pay employees as much as, or even more than, it did in the pre-crisis days. So far this year, the top six U.S. banks have set aside $74 billion to pay their employees, up from $60 billion in the corresponding period last year.

....Some analysts and investors had especially sharp words for Wall Street rival Morgan Stanley, which reported Wednesday that it had set aside $6 billion so far this year for compensation expenses even as it recorded its third straight quarterly loss. In reporting its second-quarter results, Morgan Stanley said it lost $1.26 billion, after accounting for one-time charges including an $850 million expense related to paying the government back after its bailout. Still, the company set aside $3.9 billion in compensation expenses, representing 72 percent of its revenue for the quarter.

As long as bankers are paid obscene salaries and bonuses, all is right with the world. I'm sure we'll all rest easier tonight knowing this.

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Kevin Drum is a political blogger for Mother Jones. For more of his stories, click here.

Comments

Green with envy is no way to

Submitted by MacGruber on Thu Jul. 23, 2009 6:14 AM PDT.

Green with envy is no way to go through life. As long as the banks have paid back their bailout money, how they compensate their employees is of no concern to you. If you are a stockholder in said financial firm, you can always voice your displeasure at the regularly scheduled meetings.

I swear, I need to start buying stock in the firm that makes feinting couches. Liberals sure use a lot of them these days.

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Submitted by MacGruber Green

Submitted by Luther on Thu Jul. 23, 2009 7:06 AM PDT.

Submitted by MacGruber

Green with envy is no way to go through life. As long as the banks have paid back their bailout money, how they compensate their employees is of no concern to you.

Now that we have a precedent of bailing out the stupidest businessmen with taxpayer money, such poor business practices are of everybody's concern. A crony to crony bailout could happen again! Selfish pigs are always fair game anyway. You don't have to be a Korean to criticize KIM Jong Il .

Higher Marginal Tax Rates

Submitted by Tigershark on Thu Jul. 23, 2009 7:21 AM PDT.

We need a return to the days of Ronald Reagan: 50% tax rate on income over $1 million. Call it the Ronald Reagan Tax Act.

return to the income tax rates of Eisenhower

Submitted by tpx on Thu Jul. 23, 2009 7:43 AM PDT.

America should return to the income tax rates of Eisenhower, which not only helped to expand the middle class demographic to include most Americans, but also made it politically dominate.

Luther - you compare bankers

Submitted by MacGruber on Thu Jul. 23, 2009 7:32 AM PDT.

Luther - you compare bankers to oppressive dictators? I find that comparison lacking. As I stated earlier: if the bank has repaid its bailout, how they compensate their employees is not important. If it still irks you, either sell that company's stock, or complain at the next shareholders meeting. if this isn't an option, take your money to a credit union.

Why liberals hate profits, and the employees that create them, is beyond me. I know in the liberals Perfect World there would be no winners and losers - just winners. There would be no rich or poor people - just people. There would be no profits - just profit sharing amongst everyone, deserving or not.

But this is the real world. Many people want to make profits. Luckily, we still live in a system that allows this to happen (for the most part). The best part is, people who make the profits usually reinvest the monies into the economy, helping those who didn't receive the profits. Funny how that works.

Take away the profit incentive and you'll have a socialist quagmire.

all taxpayers are paying the insurance premiums

Submitted by Jeff S. on Thu Jul. 23, 2009 8:00 AM PDT.

MacGruber, we backstopped their losses months ago. They are now engaging in the same high risk, high reward strategy that led to them needing taxpayer bailouts, secure in the knowledge that they have that infinite goverment backstop. In other words, they are gambling with our money. Heads they win, tails they win. It's everyone's concern.

Executive pay isn't really a "market choice" anyway!

Submitted by Neil B ♪ (not verified) on Thu Jul. 23, 2009 8:01 AM PDT.

tagged as:

solution

I came late to a previous thread about rising share going to execs etc. so I'll repeatish here:

The pay of entertainers is far more directly related to actual market demand than is the pay of executives. The customers who pay to see concerts, games, movies etc., are paying to see those specific individuals in action. It is that persons direct "product" that is sought after, and payer basically "knows what he pays for" very directly. But considering the interlocking roles of various people in a company, it is harder to know how much objective "contribution" is from this person rather than that person (like, how valuable is your liver compared to your lungs? You need both.)

Furthermore, the compensation Boards etc. don't have to pay from their own scarce resources, so the pay isn't really a market product. The Board decides how much money will be paid, out of company money. OTOH, if I have to pay more for something myself, I have less for myself left over. That presses me to make a thrifty decision and consider how much value I'm actually getting. There is also mutual back-scratching involved (even plutocracy-symp George Will said these people are "each others' poodles"! This process should be reformed. Ironic, that conservatives who claim to support "property rights" don't really want shareholders to have more say about executive compensation! (Just like, true conservatives would support States rights about concealed carry laws and vote *against* the recent Federal bill demanding cross-state acceptance of concealed-carry permits.)

Another point: apologists like John Hansen are indulging a ratchet fallacy when they defend things like high pay or low taxes. The "normal, logical assumption" is that there's likely an optimum value for things like tax levels, inequality etc - (e.g. Laffer curve - even if flawed, its optimality assumption is on the right track) - not that less or more gets endlessly better (that's right, central tendency and so not shilling for either left or right assumptions.) But the trick is, to use the same argument that "it would be bad to reduce X (or increase Y) because yadda yadda" regardless of which side of the hump X or Y is on.

So suppose we can imagine reasons why too-low executive pay would inhibit trying enough etc., and envision a "hump" of roughly optimal value to solve that. That makes sense, given the pros and cons and trade-offs various parameters actually consist of. The ratchet fallacy is to take the case where the pay is even more than that level, and think it follows that we could never argue to go back the other way towards the optimal "hump." Such arguers can't imagine that a concept of "too little" should be paired with a concept of "too much" or vice versa.

Re: "As long as bankers are

Submitted by EvilPoet on Thu Jul. 23, 2009 8:02 AM PDT.

Re: "As long as bankers are paid obscene salaries and bonuses, all is right with the world. I'm sure we'll all rest easier tonight knowing this." - Yes indeedy! I'll try and keep this in mind while I try and make the $15.00 I will have left after paying bills stretch till the 16th of next month. *wanders off looking for the bright side*

Jeff S. - stop bailing out

Submitted by MacGruber on Thu Jul. 23, 2009 8:13 AM PDT.

Jeff S. - stop bailing out these firms and let them stand by their own decisions. That's the answer. Telling them how to run their company while giving them money is not the answer.

I like how simple stuff is in your world Jeff.

Submitted by Mark Robbins (not verified) on Thu Jul. 23, 2009 8:55 AM PDT.

When we allowed AIG to fail the money market accounts broke the buck, and short term corporate lending went to nil overnight. Considering that the Fed's borrowing window was already at 0% how could you recommend allowing more banks to fail? Does more failure pull us back from the precipice?

I guess now we talk about going back on the gold standard? Or do we talk about abolishing the Fed outright?

If we lived in Shangri-La, we could act like we lived in Shangri-La. As we live in the real world, we act like we live in the real world.

How about a compromise? Everything in the world is split up evenly between everyone in the world, then we attempt the Libertarian experiment. Level playing field, fair rules, I'm in.

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