Word: goldman
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Dates: during 2000-2009
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Paying a $25 million or $30 million bonus to a Goldman Sachs or JPMorgan Chase or Morgan Stanley higher-up this year is obscene because none of these firms would exist if our government and others hadn't stepped in to save the world financial system. If these companies have all that money around, largely courtesy of us, they ought to send it to the U.S. Treasury. But paying a $250,000 bonus on top of a $150,000 salary to a worker bee is a different story...
...different story at intelligently run companies like Goldman. They make money by understanding risk and managing it. If the firm as a whole doesn't make money, the traders and risk takers don't either...
...when the likes of Goldman Sachs or JPMorgan Chase, which were well capitalized and well run, say they didn't really need TARP money in the first place, that's more or less accurate. However, that doesn't mean that Goldman, JPMorgan and every other bank in the country weren't bailed out. Had the world economy melted down and more giant institutions failed, even strong firms like Goldman would have gone under. In July, Goldman acknowledged this, more or less, when it graciously - yes, graciously - paid a full price of $1.1 billion to redeem stock-purchase warrants it gave...
...more macro way, Goldman and Morgan Stanley in particular were facing the equivalent of a bank run in September 2008, as fear-stricken hedge funds for which they were prime brokers pulled out their assets. The firms would have been toast if the government hadn't allowed them to become bank holding companies overnight, giving them access to almost unlimited funds that the Federal Reserve makes available to banks...
Then there are the blinders. Goldman Sachs, everyone's favorite piñata these days, explains that its bonus pool is so high because it sets aside half its profits for compensation (which includes salaries and benefits as well as bonuses.) Other firms have similar formulas. Well, excuse me. This isn't a normal time or a normal year. Just because you've done something in the past doesn't mean you have...