
Banks Paid $32.6B in Bonuses Amid U.S. Bailout (2009) - sjcsjc
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aHURVoSUqpho
======
tormeh
>“When the banks did well, their employees were paid well. When the banks did
poorly, their employees were paid well,” Cuomo’s office said in the 22-page
report. “When the banks did very poorly, they were bailed out by taxpayers and
their employees were still paid well. Bonuses and overall compensation did not
vary significantly as profits diminished.”

Waaat. I think the government should stop bailing out businesses. Either you
let the company go bankrupt or you nationalize.

Also I clearly need a job in banking...

~~~
jheriko
> Either you let the company go bankrupt or you nationalize.

I vaguely agree with that sentiment, but the problem in practice is that
government sucks at running things. They introduce layers of infrastructure
that business doesn't and turn things into political footballs.

Although thinking about that for a moment, its a big problem on its own...

~~~
mattgibson
> the problem in practice is that government sucks at running things. They
> introduce layers of infrastructure that business doesn't

Actually, there is no evidence of this. See this report that compares the Govt
run industries before and after privatisation:
[http://www.psiru.org/reports/public-and-private-sector-
effic...](http://www.psiru.org/reports/public-and-private-sector-efficiency)

"The results are remarkably consistent across all sectors and all forms of
privatisation and outsourcing: there is no empirical evidence that the private
sector is intrinsically more efficient"

Even if it was more efficient, $31 billion of corrupt bonuses on top = no
different from an inefficient government.

~~~
jasonwocky
> "The results are remarkably consistent across all sectors and all forms of
> privatisation and outsourcing: there is no empirical evidence that the
> private sector is intrinsically more efficient"

Exactly this. I've spent years in both sectors. People suck at running things,
not governments.

~~~
ahallock
At least those inefficient companies could be disrupted by startups, and at
least they don't get to take my money by force (apart from subsidies and
bailouts). No such mechanism exists for government. That people suck at
running things is the very reason we need this rise-and-fall structure.

------
uptown
While the data is accurate - the messenger, in this case, is Andrew Cuomo - a
politician who aspires to run for President in the near-term. He had very
little problem accepting campaign contributions from the financial services
industry - they were his second-largest contributor by-sector.

[http://influenceexplorer.com/politician/andrew-
cuomo/d83c545...](http://influenceexplorer.com/politician/andrew-
cuomo/d83c5450d5604928ad35103ae2588e6f)

~~~
eli
Well, hey if we're just going to ad hominem attack Andrew Cuomo, it'd probably
be much more effective to point out the recent scandal where he disbanded an
anti-corruption task force because it was too effective and started
questioning his friends, and that there's allegedly an active federal
investigation into his affairs.

Doesn't have much to do with the bank bailout though.

------
smoyer
At the time these banks were claiming that they had to pay the bonuses to
retain these employees ... I think this is logically false for two reasons:

1) Why do you want to retain the executive that helped run the business into
the ground?

2) What other corporation in their right (collective?) mind would hire one of
these executives (given their inflated salaries and poor performance).

I still think the right way to fix this would have been to send those who
propagated the whole financial scam to jail.

~~~
orbifold
Unless I'm mistaken it is not like the people handing out bonuses and the
people who screwed up are completely separate. Also it is safe to assume that
any organization of a sufficiently large size will have a fixed amount of
incompetent people at any level, simply as a matter of statistics. Maybe the
percentage will be less where the people come from field with a
(different/harder) selection process like the natural sciences/law/medicine as
opposed to business administration. The banking crisis also seems more of an
institutional / regulatory failure than a failure of individuals.

The pseudo-democratization of credit availability was something explicitly
wanted by the government as a means of stimulating consumption. That this
policy was completely misguided wasn't really the fault of the banks
themselves who mainly took advantage of the admittedly ridiculous situation.

~~~
collyw
Are banking jobs given out based on meritocratic ideals, or who your dad
knows?

~~~
rayiner
Most people are there because they got excellent grades at excellent colleges.
These criteria objectively select for people who are sharp, though not
necessarily geniuses, and have a demonstrated track record of working very
hard and paying a lot of attention to detail and deadlines.

In many ways, banking hiring is more "meritocratic" than tech hiring. There is
less emphasis on "fit" and "culture" and because new hires are viewed as
_tabula rasa_ there is less emphasis on criteria that might be gender-biased
(e.g. high-school extra-curricular activities).

~~~
tptacek
It's funny that this got downvoted grey: my sense is that it _really_ gets
under nerd skin that tech isn't a great example of a meritocracy.

------
sjcsjc
OP here. Given the current story re HSBC's misbehaviour, I thought it worth
reminding everyone of the scale of the theft that took place during the bank
bailout.

~~~
themartorana
This, HSBC lending money to rouge nations and drug cartels, the LIBOR scandal,
and not a single person is in jail.

Not to mention that the Fed made available and lent up to $7T to banks
(without telling Congress) right before TARP was rushed through.

Smoke some weed, go to jail.

Do it three times, go to jail for life in CA. MANDATORY. Especially if you're
black.

If these and other ongoing similar "crimes" don't convince you that we're
living in an oligarchy, and our precious democracy/republic is a farce at
best, well, I don't know what will.

~~~
rayiner
California's three-strikes law was supported by a 72-28 vote in a public
referendum. At the time of the vote, nation-wide, the public supported keeping
marijuana illegal by an over 70-30 margin: [http://www.people-
press.org/2013/04/04/majority-now-supports...](http://www.people-
press.org/2013/04/04/majority-now-supports-legalizing-marijuana).

Our drug and sentencing laws are the result of democracy, not oligarchy.

~~~
themartorana
But we don't live in a democracy, and expect better from the Republic bound by
the Constitution, which is pretty clear about unjust punishment.

If a democracy and majority rule were the true rule of the land, we may still
have segregation, slavery, illegal mixed-race marriages, and so on, and so
on...

Now look at what class our electorate is largely made up of. Mix that with a
little Citizens United and it becomes clear again that money controls
government (and now rather blatantly) and it's not often that decisions are
made that benefit the weakest among us - drug policy and the war on drugs
being just one example.

~~~
rayiner
You're trying to tie-together two narratives that make no sense in
conjunction. Do we have the drug war because of tyranny of the majority, or
Citizens United money overriding the will of the majority? I'd posit the
evidence shows that the majority strongly supported making drugs illegal and
meting out harsh sentences, at least at the time the laws were put into place.
If that's the case, the whole "oligarchy" narrative is superfluous.

~~~
themartorana
The majority is often in support all sorts of policies that are against their
best interests.

That has nothing to do with what agenda is moved forward by the oligarchy.

------
harmonicon
I don't think the bonuses is a problem per se. Companies should be allowed to
pay their employee however they want, being true to the contract the employee
signed, of course.

The bailout is the problem. If there was no bailout, these banks would have
totally reduced the payout. They would feel the hit and have to adjust
accordingly to keep the company afloat. Bailout gave them the go ahead to
disregard all the losses.

It is extremely cynical for the same players to be crying for free enterprise,
woe is regulation and the market always work its magic. But hey it's not their
problem. We just had to be the sucker, pony up and bail them out.

------
motters
In other words taxpayers money was redistributed into the personal bank
accounts of some of the richest people.

~~~
isaacremuant
IIRC, The official narrative from politicians, news anchors and think-tanks
was that:

\- If the bailouts didn't happen, it would be mayhem, "too big to fail", etc.

\- You got your money back with interest. It was all payed back (disregard
economic theory and value of money in hand).

\- Why are you complaining, you banjo-playing hippie? You can't be in OWS if
you have an iphone! (In Erin Burnett's voice)

\------

Many people will talk situations that forced the banks to hand out these
bonuses and maybe they're right but the deeper problem is that when
companies/banks/people suffer no consequence (and even worse, benefit from)
doing illegal/harmful things then they're going to keep up doing them. profit
vs "cost of infraction".

~~~
maxerickson
Significant new regulations were enacted:

[http://en.wikipedia.org/wiki/Dodd%E2%80%93Frank_Wall_Street_...](http://en.wikipedia.org/wiki/Dodd%E2%80%93Frank_Wall_Street_Reform_and_Consumer_Protection_Act)

In particular, the orderly liquidation authority created a legal framework to
liquidate a broader range of financial institutions:

[http://en.wikipedia.org/wiki/Dodd%E2%80%93Frank_Wall_Street_...](http://en.wikipedia.org/wiki/Dodd%E2%80%93Frank_Wall_Street_Reform_and_Consumer_Protection_Act#Title_II_.E2.80.93_Orderly_Liquidation_Authority)

Dodd Frank is at least toothy enough that banks are constantly whining about
it now (and working to dismantle it).

------
jostmey
Funny, that's about the same amount of money as the budget for the NIH. Sadly,
their research budget has remained stagnant for years as inflation has gone
up.

------
JoeAltmaier
Its simple. People in the money chain-of-custody always take some. Corporation
board members vote one another stock. Company executives (originally normal
positions like secretary and treasurer, paid a normal salary) pay one another
exorbitant sums. And bank employees always get paid.

------
jim_greco
Banks are a collection of loosely related business that are only tied together
by their participation in the capital markets. The equities derivatives desk
has little to do with the mortgage desk which has little to do with the health
care investment banking group.

As such, front office Wall Street bonuses are primarily based on personal and
desk performance. In 2008 a handful of desks 'blew up' which took down the
entire firm. Meanwhile equity and govie desks had a banner year. Does every
desk deserve to get shafted? Do the back-office developers deserve to get
shafted? I'm not here to defend the banks, but I can understand both sides of
the argument. The Government should have just nationalized the banks if they
wanted to control this.

------
daenz
Hey, wealth redistribution is OK if it's going from bottom to top.

------
Symmetry
I don't really think that this is that surprising or the worst thing about the
recent financial crisis.

One thing about financial markets is that if everybody thinks you're doing
badly suddenly they don't want to lend you money and this might do you in even
if your problems had been survivable. And Lehman Brothers waited until the
very last moment before telling the Fed they had a problem. So the Fed
insisted on throwing money at every financial institution - even the ones that
were hugely profitable during the crisis.

And if your company is short on money or dying the last thing you want to cut
is bonuses. If your employees smell blood they'll be thinking about jumping
ship. If you stop paying salary but leave bonuses intact you'll do better at
keeping people at their desks until until they've finished wrapping the
company up. And if somebody screwed up in a way that contributed to the crisis
they should be fired and replaced, not have their bonus cut.

THere were a _lot_ of things that should have been done differently in the
crisis. Investors in insolvent companies really needed to be wiped out to
encourage them to take better care in the future. Interest On Reserves was
really not needed to prevent the economy from overheating the way the Fed
feared (the Fed works with numbers months out of date and they still thought
the larger economy was fine and that inflation has highish when the crisis
hit). The bonuses are at best a distraction but one that's easy for
politicians to make sound bites out of.

------
jheriko
an industry driven by greed is greedy... why am i not surprised.

that stuff needs some regulating. its all well and good making everyone richer
and deregulating to encourage it, but if the gap widens, because of how the
economy works, the poor get poorer in real terms :(

also we have big explosive crashes...

~~~
neonhomer
It was properly regulated before, see
[https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_Legisla...](https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_Legislation).
Until people go to jail for the crimes (see Iceland) nothing will get fixed.

~~~
hnnewguy
> _Until people go to jail for the crimes (see Iceland) nothing will get
> fixed._

This is such a bizarre argument. You don't think there were/are oodles of
prosecutors frothing at the mouth to throw some bankers in jail? Look around
the internet! They'd be heroes! The public would rejoice, yet it hasn't
happened, because proving that some of the perceived corruption and missteps
are _actual crimes_ is, apparently, more difficult than you think. And I don't
want to live in a country when the government can decide, willy-nilly, to
throw corporate executives in the slammer.

Second, tthrowing here are far more effective means of "punishment" than some
low-ranking employee in white-collar prison (which costs us MORE money). Fines
have been used, which punish earnings, executive pay, and shareholders.

------
RRRA
Everyone should watch this documentary by Adam Curtis about the history of
extremism and the rise of the banks...

[http://en.wikipedia.org/wiki/Bitter_Lake_%28film%29](http://en.wikipedia.org/wiki/Bitter_Lake_%28film%29)

------
mathrawka
This is also some good reading material:
[https://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program](https://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program)

------
bborud
Well, this is obviously the way we want it since we keep electing people who
make this possible.

------
oooooops
It's only a matter of time until the scheme crashes again.

135 comments and not one mention of Bitcoin?

~~~
oldpond
Because bitcoin is no different. Virtual currency speculation is not the
answer.

