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Bonuses Return to Wall St.

Published 07/03/09 Dustin Ensinger, with video by Market Watch - Print Article
E-mail - editor@economyincisis.org

Happy days are here again for Wall Street, although that may not be music to the ears of inhabitants of Main Street.

According to the Wall Street Journal, Wall Street executives may soon be rewarded once again with exuberant pay packages tied to short term performances - the same kind that enraged lawmakers and average Americans earlier this year and helped cause the financial meltdown.

In response to that outrage, the Obama administration and congress passed legislation limiting the bonuses of the top 25 executives for any company that was bailed out with taxpayer dollars.

This forced many companies - including Goldman Sachs and Morgan Stanley - to pay the government back as quickly as possible to avoid being constrained by the new regulations.

According to The Journal, Goldman Sachs is on pace to pay out $20 billion to employees in 2009. That is roughly $700,000 per employee, up from $363,000 per employee in 2008.

Morgan Stanley is poised to pay out roughly $11 to $14 billion to employees in compensation this year. That equates to roughly $340,000 per employee.

Other companies have found loopholes in the government’s regulations. According to The Journal, Citigroup and Bank of American are simply raising the base salaries of employees. The Obama administration’s regulations covered only bonuses.

Those bonuses were capped at a third of an employees salary, however, there was no cap on salaries.

“The American public should be outraged with what’s going on,” Dan Schaffer, President and CEO of Shaffer Assets Management, told Fox Business.

Wall Street executives say that the bonuses are necessary to attract and retain the necessary talent and expertise.

That argument, however, is extremely hard to make given the fact that similar bonuses were commonplace in the years leading up to the financial crisis.

“They were paying huge bonuses to retain top talent a few years ago and look where it got a lot of these institutions,” Steve Ellis, vice president of Taxpayers for Common Sense, told Fox Business.

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