Friday
Jul312009
Bank Bonuses = Carpet Bag
Friday, July 31, 2009 at 8:21AM
NYTimes today: "Big Banks Paid Billions in Bonuses Amid Wall St. Crisis"
Translation: Bankers pay themselves more when their banks are about to fail.
Regulators, such as New York Attorney General Andrew Cuomo, are shocked and dismayed that financial firms receiving the largest share of federal bailout money last year paid about 5,000 of their traders and bankers bonuses of more than $1 million apiece for 2008.
In fact, for reasons regulators can't seem to figure out, bank executive's bonuses were much higher during the worst years of the crisis than they were during the boom years just before.
"At Morgan Stanley, for example, compensation last year was more than seven times as large as the bank’s profit," according to the NYTimes. Of course, back in 2004 and 2005, during the bull market Morgan Stanley spent only two times its profits on compensation.
How could this be?
It's called a pyramid scheme. Once the pyramid begins to crumble, the people at the top pay themselves whatever remains in the system. In fact, big bonuses to executives is a better leading indicator than insider stock sales. Once the bonuses increase from 2 times to 7 times earnings, it's a good bet people at the firm are paying themselves money they know won't be there for long - if ever.
If we come to understand the underlying assumptions of centralized monopoly corporatism for what they are (hint: read my book) none of this behavior remains so confusing, or even anger-producing. I understand why messages like mine may appear screechy or angry to people who can't see me while I'm writing.
But I'm not mad or agitated. I'm not particularly angry at the people who are stealing your money right now (if you are invested in the stock market or banks). These folks are simply following the rules of the game that was set in place five centuries ago, and no longer happens to serve our interests as people, nations, or a civilization.
Banks, like any other corporation, are instruments for extracting value and wealth - not creating it. They are more like vacuum cleaners than factories. That's what they were created for: to replace local banking and commerce with institutions that could extract wealth and value from the periphery and pay it back to the center.
The only thing surprising to me is that so many people should expect Morgan Stanley to act like anything other than the mob-front it was. Like some of those restaurants off Route One in South Jersey, the real business plan isn't even on the menu.
Translation: Bankers pay themselves more when their banks are about to fail.
Regulators, such as New York Attorney General Andrew Cuomo, are shocked and dismayed that financial firms receiving the largest share of federal bailout money last year paid about 5,000 of their traders and bankers bonuses of more than $1 million apiece for 2008.
In fact, for reasons regulators can't seem to figure out, bank executive's bonuses were much higher during the worst years of the crisis than they were during the boom years just before.
"At Morgan Stanley, for example, compensation last year was more than seven times as large as the bank’s profit," according to the NYTimes. Of course, back in 2004 and 2005, during the bull market Morgan Stanley spent only two times its profits on compensation.
How could this be?
It's called a pyramid scheme. Once the pyramid begins to crumble, the people at the top pay themselves whatever remains in the system. In fact, big bonuses to executives is a better leading indicator than insider stock sales. Once the bonuses increase from 2 times to 7 times earnings, it's a good bet people at the firm are paying themselves money they know won't be there for long - if ever.
If we come to understand the underlying assumptions of centralized monopoly corporatism for what they are (hint: read my book) none of this behavior remains so confusing, or even anger-producing. I understand why messages like mine may appear screechy or angry to people who can't see me while I'm writing.
But I'm not mad or agitated. I'm not particularly angry at the people who are stealing your money right now (if you are invested in the stock market or banks). These folks are simply following the rules of the game that was set in place five centuries ago, and no longer happens to serve our interests as people, nations, or a civilization.
Banks, like any other corporation, are instruments for extracting value and wealth - not creating it. They are more like vacuum cleaners than factories. That's what they were created for: to replace local banking and commerce with institutions that could extract wealth and value from the periphery and pay it back to the center.
The only thing surprising to me is that so many people should expect Morgan Stanley to act like anything other than the mob-front it was. Like some of those restaurants off Route One in South Jersey, the real business plan isn't even on the menu.
Reader Comments (5)
Really enjoying this series -- keep 'em coming!
always great to read - keep it up
trying to spread the word as well
Well said. "Greed" is not the word for it; "greed" allows people to make the problem one of human character, a few bad apples. The apples aren't bad; they're growing on a poison tree.
Well Said Rocky!
Poison Tree ..... an accurate figure.
I must remark, however, there are still plenty of folks who know the characteristics and the functioning of the tree. Actually, one of Douglas' favourite characters once, offering discourse and interpretation, paraphrased some of the operations of a tree. Are we to suspect that only Douglas and the money laundering Medici understand what later Renaissance kings and merchants bought into to lock in their gains? It is merely a kind of physics, the reality and substance of which eventually grows thin as a soap bubble in a garden party, then pops. It is a poison tree, fashioned by man and still understood as useful. Huge lobbies daily operate on assumptions that the poison tree remain as central pillar in our economic garden.
http://en.wikipedia.org/wiki/File:Duchamp_LargeGlass.jpg
Great commentary, but isn't Route 1 in NORTH Jersey?