Deaf, dumb, blind and stupid

Wall Street readies 7 and 8 figure bonuses. Average Goldman employee to get $595,000. They take taxpayer money to stay in business after their own recklessness exposed them to ruin, they get 100% back on their bad bets, including AIG bets, then rake in billions using taxpayer-provided free money and congratulate themselves on their genius and throw themselves a party at our expense. I m not a populist and I am a supporter of the free market and capitalism but I’m pissed as hell – imagine the reaction of those who don’t share my enthusiasm for the present system. Eighteen months ago I thought we should let these bastards crumble and see whether something better took their place. I am convinced now that I was right.

Even some industry veterans warn that such paydays could further tarnish the financial industry’s sullied reputation. John S. Reed, a founder of Citigroup, said Wall Street would not fully regain the public’s trust until banks scaled back bonuses for good — something that, to many, seems a distant prospect.

“There is nothing I’ve seen that gives me the slightest feeling that these people have learned anything from the crisis,” Mr. Reed said. “They just don’t get it. They are off in a different world.”

What really infuriates me is that these greedy, grasping morons are inviting a populist backlash that will wreck our economy and they’re just too arrogant to understand that or care.

36 Comments

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36 responses to “Deaf, dumb, blind and stupid

  1. Teri Buhl

    Wow – Chris those are some strong words – of which I pretty much agree with and totally love hearing you print. But I don’t think it’s Goldman that would have failed instead they would have been the last man standing and that would have been a disaster to not have the likes of Morgan Stanley or hopefully a remade Barclays out there trying to clock them out of business. It’s clear they got a deal from the gov who really should have asked for more of a haircut when they ‘lent’ them billions through TARP but isn’t that the governments fault not the banks. Shouldn’t we instead be pissed Paulson didn’t make a better deal for us.

    • christopherfountain

      Yeah, but Geithner should have demanded more too, instead of paying back the AIG bets 100%.

  2. Greenwich Ex-Pat

    AIG, Goldman and other financial institutions should have been just let fail. Period. That is the free market. Other, more prudent institutions could have then come to the fore and cleaned up. There is no justification for the bailouts, none. Government bailouts are not any part of a free market, IMO.

    Most of these bailed out entities are parasitic, extractive and non-productive, anyway. Merely just fancy gaming operations that couldn’t get away with their shenanigans in Vegas. There is no argument for their continued existence, except for their shakedown about how the system would have collapsed without them.

    I would welcome a little French Revolution style backlash. It would beat the heck out of American Idol.

  3. Zillion $$ Goldman bonuses bother me far, far less than a single cent paid for AIG bonuses.

  4. Arouet

    Goldman would not have survived without the govt money provided to its counterparties.

  5. Anonymous

    Would greatly prefer to see GS, JPM, etc pay massive bonuses (usu ~50% of revs) and tell Wash to go screw itself: a game of chicken which Manhattan will most likely win

    Lots of blame to go all around: politicians, regulators, IBs, housing industry, consumers, etc etc; presumably all those billions in taxes paid by IBs and their employees in boom times are partly insurance premia for gvt bailouts of system in event of meltdown (sort of like car insurance premia paid by those drivers who go yrs w/no claim); US needs a powerful, innovative cap mkts industry to fuel rest of economy….innovation is always risky

    Top 1% of taxpayers pay some 50% of all taxes

    Community organizers and welfare recipients (who tend not to pay any taxes) need the wealthy (who include many allegedly “evil” IB/PE/HF guys) to keep US economy and gvt afloat

    Many of the most wealthy can retire to Geneva for a while if US swings too far in favor of communism….and return after Wash comes back to its senses and realizes who earns the most, creates jobs and pays most in taxes

    Would be cautious about casting moral aspersions against any industry because of its wealth creation; there are plenty of overpaid/inept/criminal doctors, school teachers, priests, charity execs, etc etc who victimize innocent and not-so-innocent customers/taxpayers

    And many IBers individually earned a decent risk-adjusted profit for their co. (and its shareholders; no one is forced to be a shareholder of a specific co.) and are free-agent capitalists who can move to HFs anywhere if they feel underpaid and/or overtaxed….mark-to-market, mobile talent is inevitable in any globalized, liquid market

  6. Walt

    Weasel Boy –
    Are you acting like a little school girl now that this Buhl chick is actually corresponding with you? I can just picture you prancing around your computer holding your pee pee. You know you did Dude. Just admit it. I can read you like a book. You load.
    And I assume Teri is a girl, right Dude? Not that there is anything wrong with that.
    Your Pal,
    Walt

  7. Lars Toomre

    Andrew Ross Sorkin’s book Too Big To Fail is quite insightful in the event that you have not read it.

    Goldman Sachs was incredibly exposed (through other counter-parties, not AIG itself) to the possibility that AIG might not make good on its various derivative/insurance obligations. Paying 100 cents on the dollar probably was a bailout to Wall Street, but also helped the other counter-parties in an amazing web of linked derivative contracts too.

    Given what was going on at the time, Goldman Sachs probably never would have withstood the mother-of-all financial sunammis. And yes, Geithner and Paulson could have demanded much more on behalf of the tax-payer.

    However, the lack of sleep that all key participants involved experienced during a week (after one involving the take-over of FNMA and FHLMC) that included the bankruptcy of Lehman Brothers, the hasty sale of Merrill Lynch, the Fed rescue of AIG, and the near death liquidity experiences of both Morgan Stanley and Goldman Sachs, are you really surprised that their primary concern was based on saving the system, rather than getting the best terms possible?

    As much as I am sad to express the thought, I am not sure I could have done much better in such circumstances. Paulson’s decision to not give support to Lehman Brothers brought on an unexpected sunnami.

  8. Red

    Maybe those Goldman folk were smart to get those pistol permits for self-defense (which I think I read in this blog a while back……).

  9. DINK

    But wait, aren’t these greedy grasping morons coming to Greenwich to buy homes? If the concept of the taxpayer-provided free money doesn’t sit well with you, do you pass on representing one who wants to spend that bonus on North Street? If you participate in the deal, don’t you then become a recipient of his ill-gotten gain?

  10. Greenwich Ex-Pat

    When these thugs come to Greenwich or similar places, people just about mess themselves slobbering over them. They’re feted at clubs, bowed to, served, etc. And they’re essentially humanely bankrupt. I despise them because they have, although indirectly, made my life and those of many others, harder in ways large and small. And they do this, with malice aforethought and take pleasure in it. If you don’t think so, all you have to do is listen to the old tapes of the Enron traders that NBC played a few years back, laughing over the human misery they caused. These characters are no different. As I’ve said, the idea that the man on the street might get ahold of two nickels to rub together, makes them foam at the mouth and gnaw the rug. It’s that bad, believe it. I’ve known a couple of these characters. But oh, let’s not look at them, but rather look at Harry, the retired public servant, walking his Shih-tzu outside a modest little shack in Coconut Creek, Florida. That’s the real villain, right?

    Da Boyz are lower than the lowest drug cartel thug rapist, IMO. They just wear different clothes and perpetrate human misery with different weapons. What really gives them away, is that by their actions, it’s obvious they don’t even care what sort of world they’re leaving to their own children. Shows you how low they really are.

    I have no problem with people being rich. If they’ve done something good, built a decent company with a decent product or service, provided employment, and thus made life better for others, etc, I hope they make millions, billions. But those who extract and don’t give back, who make their money on human misery, well, that’s the definition of a criminal.

    Does that mean I have it in for hedge funds, private equity groups, etc.? No. For example, there’s one group that has invested heavily in some entertainment properties around the country, for example. They’re turning around some tired old parks and attractions, beefing them up, making them better and providing local employment and some pleasant moments for their customers. I’m 200% behind them and I hope they make a mint for themselves and the investors.

  11. Jack Martin

    God help the Wall Street guys if middle America decides to go hunting.

    The government and Wall Street are inciting the people to violence.

    In the meantime it’s just another day.

    If this does spill over to violence everyone will lament, why. In the end we are all responsible for this, every last one of us, rich and poor alike.

  12. DINK

    Good point. I give you that one.

  13. Greenwich Ex-Pat

    I second your point, C.

    Jack, I agree with you about the violence aspect. That would not be pretty. Although I’m sure many wouldn’t hesitate to do a disservice to one of DaBoyz if they had the opportunity, I’m thinking more along the lines of a passive sort of thing, like neglect. As I’ve said before, DaBoyz should and probably will at some point receive some sort of medical care, public services, legal work, workmanship, car care, etc. equivalent to their “financial services”. Oh, the humanititty!

    Come on, all you would-be trophy wives out there! Get busy! Americans are depending on you to avenge us.

  14. whatever

    congress was interested in growing the home ownership rate regardless of ability to pay

  15. Peg

    Free markets only work if you allow them to do so. Once you start propping up this industry or that one, or asserting that some companies are “too big to fail” – or you keep ’em going because they’re your buddies or cronies or God knows what … the whole system starts to break down. Everyone will begin to want their own protection and bonus – and, why shouldn’t they?

    Part of why we’re not seeing as much recovery as we might is because people only will commit and take risk in markets that make some sense and have some semblance of equity. If, however, they think that the rules of the game will be changed randomly, or that some politician’s buds will be saved if they screw up – but they will not – then they’ll sit on the sidelines with their capital and wait.

    In an attempt to make everything “safe” – they’ve gone and seriously wounded one of the greatest engines for growth and wealth creation ever.

    Mazel tov.

  16. Red

    IMHO, Greenwich could regain its former cachet it kicked out the financial types & their spawn and brought back the old “Mad Men” Madison Avenue and Time Inc crowd. The Bruce Museum and the Boys & Girls Club wouldn’t raise as much money, but the town would be a much more interesting place to live. (There, I’ve said it, but only after a martini.)

  17. Greenwich Ex-Pat

    Spot on, Red.

    I guess Greenwich is sort of high crime area now.

  18. There's always more to a story

    Let’s get something straight once and for all.
    An “average” bonus doesn’t mean anything. That is like taking the earnings of an agent in a realtors office and for the purposes of such a calculation, dividing the total revenue and commissions between all the agents and getting the average. Some agents won’t have earned anything and yet are ‘accused’ of being a high earner.
    In the company in question, some departments will have ‘performed’ extraordinarily well and their ‘top producers’ within that department are the individuals who receive the large revenues when their colleagues do not. Similarly, some departments will not have performed effectively this year and the total bonus pool in no way matches the lucrative teams alongside which they work. Moreso, the bonus pool is massively weighted to those at the top of their career, the 200 or so partners in charge of the successful department (not managing directors), out of a firm of 30,000. This equates to the managing partner of a realtor.

    Secondly, Goldman Sachs were ‘forced’ to accept the bailout. They had no choice. They had already received backing from Warren Buffet and were consequentially financially sound. The government or namely the Treasury Secretary endeavoured to hide which financial organisations were actually collapsing, so forced all to accept the TARP money. It’s like all the students confessing to throwing the eraser, so that the teacher doesn’t know who it really was. This prevented a major, even bigger withdrawal of financial support from the institutions who really were in trouble as was demonstrated only after the fact.
    It is true that if all the financial institutional cards had collapsed then the domino left standing would have had its’ assets undermined and that is why the stable companies complied with the tarnishing. However, the less competition the better for the stable ones would maybe have been preferred by them.

    As I have said before, Goldman Sachs had all its liabilities in AIG hedged with derivatives and so if AIG had collapsed, Goldman Sachs would have been paid by whomever they had hedged the derivatives.

  19. Cos Cobber

    I really couldnt disagree with you more on this. Its not Goldman’s fault the government settled up their AIG liabilities at 100 cents on the dollar.

    After the AIG issue, what else is there to be pissed about? Do you want them to voluntarily pay more in taxes? They make money just like alot of hedge funds, vc funds, pe funds, etc. so what.

    In case you didnt notice, it was a phenominal year for equity trading….the market is up big and therefore so is pay.

  20. Greenwich Ex-Pat

    “As I have said before, Goldman Sachs had all its liabilities in AIG hedged with derivatives and so if AIG had collapsed, Goldman Sachs would have been paid by whomever they had hedged the derivatives.”

    Chris, could you get the listing for the Brooklyn Bridge? Because I think you have a serious prospect here.

  21. Greenwich Ex-Pat

    Oops, I’m sorry, I just realized that “there’s always more” wouldn’t be a serious client for the Brooklyn Bridge. However, anyone who believes that last paragraph might be.

    Sigh. Literacy is such a burden sometimes.

  22. Greenwich Ex-Pat

    “Its not Goldman’s fault the government settled up their AIG liabilities at 100 cents on the dollar.”

    DING DING DING! Bidding war on the Brooklyn Bridge! Step right up!

  23. Arouet

    “Whomever had hedged the derivatives” was a hapless AIG counterparty. GS would be gone without taxpayer money.

  24. There's always more to say

    Ex-Pat,
    Firstly, thank you for getting to the end of my comment. What a priviledge to have you, Ex., the real Ex., read my thoughts. I am honoured.

    Secondly, I’m yours. I’ll buy the Brooklyn Bridge.
    I always thought it looked so grand. I am a sucker for anything (non-human) from the 20’s and 30’s. I know, I’m not that ignorant, the bridge was built in the 1880’s, but you must admit that they were quite forward thinking with the architecture. I just love Meg Ryan, and it looked so great in the movie. I could take it home, so to speak. I don’t think that they will let me put a chalet on it though, because it might violate the ‘property of historic importance’ guidelines. Which postcode would I have, it’s important to avoid Brooklyn, isn’t it?
    Also, how would all the Manhattan workers get across if I close the bridge? I can’t abide any property next to the I95 (cough, cough) so the Brooklyn Bridge traffic would be intolerable.
    Also, I would be so upset if those Ali-quidi people left me a package when I was out, so I really would have to close the road. For safety, you do understand.
    I didn’t tell you that I’m from London, did I? Well, I am, and my claim to fame, apart from being a true Cockney (by heritage, not accent), is that I bought Tower Bridge, Oh, way back when. I never lived on it though, because the apartment on the bridge is so high up in one of the towers, and I’m frightened of heights. Yes, I know, an unreasonable phobia, but nonetheless, still present. No more a phobia, than my phobia of flying and I’m here aren’t I? So I can overcome it for a short time, but you would never get me up to see the Liberté torch. It is a shame because they said I could see it when I bought the penthouse at the top of ‘la Liberté éclairant le monde’.

    Anyway back to the bonuses and our discussion, which bit of my last paragraph seems inaccurate? I’m a little bit of a blonde when it comes to thinking. Do explain.

    Please excuse my forwardness, but are you a girl or a boy, and do you live in Greenwich and are from elsewhere, or are you elsewhere and used to live in Greenwich? I have always wanted to know. Do tell.

    If you want to view my tower on the Bridge in London someday, just call me, Chris knows who I am.

  25. out looking in

    a good deal of misinformation out there…some light:

    average bonus is skewed to high earners…however, the calculation includes secretaries and gofers and ALL employees…a mid-level phone clerk (sorry, junior trader) on a trading desk will knock down seven figures…

    if AIG went down, with no backstop, the entire system would have failed because of the layers of hedges and LEGAL actions taken by counter parties to avoid payments..and some firms would have declared force majure…Goldman’s “other hedges” would most likely “exist in limbo” and they too would have succumbed to a liquidity crisis

    what I find most interesting, and I have heard nary a word on this issue, is that Congress had no problem sticking oil companies with a “windfall profits tax” (remember that?) years ago, yet no proposal has been forthcoming…indicative of the clout WS and their fat wallets carry with our free market Congressmen

  26. Greenwich Ex-Pat

    Good morning, there’s more. First of all, please note that I corrected my statement to reflect that you would NOT be the client for the Brooklyn Bridge. That would be the yacht-less customers. Apologize for the misunderstanding. As to what part of the last paragraph I felt was inaccurate, see Arouet’s statement above. There is a bit of a cynical joke that goes something like “Q: What are the last three words you hear just before a fund tanks? A: We’re all hedged.” Or something to that effect. (If anyone knows the exact wording of the joke, please help me out here). It’s sort of like “sub-prime is contained”.

    I didn’t mean to be insulting, I was mostly horsing around yesterday and I haven’t been on the blog all that long. But I do think, given what’s taken place, that Wall Street would be better off relegated to Vegas and I’m serious about that. It’s gaming, not finance we’re looking at. Congress is getting its collective bloomers all in bunch about financial regulation and waste a lot of time, money and wind, when Vegas already has an excellent system all set up to handle things. In this way, we can avoid situations like some single parent with three children working a low or even medium wage job pulling up to the gas pump and sinking into despair because some traders decided to have a bit of a go in the energy markets.

  27. Greenwich Ex-Pat

    Excellent post, out looking in. Good clarification and observations.

    Indeed, where are “windfall” profits taxes?

  28. Cos Cobber

    Windfall profits is an interesting question. It probably hasn’t been raised because investment banking is chiefly a human capital business as oppose to a commodity extraction business. Since banking ultimately relies on people and not tangible goods (ie oil/gas leases) its not really possible to tax a singular firm as those singled out would obviously walk across the street and join a competitor to avoid the tax. The employees of oil companies do not have the same opportunity. Interestingly, its the same dynamic (portability of workskills and book of business), that keeps wall street incomes elevated. When a salesperson has a stellar year at Boeing, there are few places to go to for leverage on pay….Where to; Airbus? you get to do that just once at comm. airlines sales. Not true on wall street.

    The best cure to reign in on wall street profits is to ensure that the financial markets remain open for broad competition and to accept the idea that banks/financial shops do become to big for the general safety of the system. We have allowed our top 10 financial institutions to get to large.

    Actually CF, the world of real estate brokers has much in common with wall street; i) you eat what you kill, ii) the good brokers have superb job portibility that works in their favor on pay, staffing and other perks, iii) its almost universally agreed that RE brokerages are over paid, yet 5 and 6% commissions live on (i dont agree RE brokers are overpaid, just as on wall street, the right broker can bring valuable benefits to the transaction).

  29. Sanjay Bigglesworth

    To quote W, “Fool me once, shame on your dog. Fool you twice, everybody in the pool!”

    The banks got away with a fast one. Shame on them. It’s what they do for a living. I wouldn’t expect anything less. But to not re-institute Glass-Steagall and create a central clearing house for derivatives falls into the “Shame on me” camp. Why Obama and co. are having any problem with this is beyond me.

    Commercial bankers don’t make outrageous sums, but have job security. Investment bankers make big $ but will most likely blow up every fifteen years and disappear by the side of the road without the average joe knowing or caring what happened.

    What gives?

  30. out looking in

    update…

    something akin to a windfall profits tax is actually making its way through the House, according to the WSJ…CC- I agree with your points…however, the “windfall” emanates from govt subsidies..as it is a tax on profits, only those who generated such would pay…the big joke is the Boards of these large public financial institutions and their utter lack of accountability to the owners (aka shareholders)…notice how Sir Lloyd has reduced GS profit share for comp from 50% down to 43% in the past quarter..any takers on a wager that it reclaims at least the 50% level within 12 months?

    It is a nasty but virtuous (and profitable) circle for the WS Fat Cats…indexers have to own financials…closet indexers have to keep pace with the indexers…traders could care less…so a large slug of shares are held by those who either don’t or couldn’t care less..add insider holdings and beholding boards and the deck is stacked against any meaningful chnages from within to the WS comp game…and of course, they are worth it- right Stan O’Neil, Chuck Prince et al?…..Ponzi finance rules!!!

  31. And just HOW MANY Goldman Sachs alums populate the upper reaches of the BOZ administration?

    Well at least there’s some transparency on that point.

  32. Cos Cobber

    but 50% of the profit is fair. how many GS employees at all levels leave each year to get better terms on their own or in private funds? Many. Somehow GS pays the best on wall street, yet it remains an employee puppy mill. Why is that?

    Its the stress of the GS sweat shop and its also the fact that private organizations can offer even better compensation terms than the ‘outrageous’ compensation at GS.

    Sure wall street needs a clearing house for derivatives pronto. It also needs better accounting and some limitations on derivative holdings. the top employees at these banks should also be subjected to pay rules that require a huger portion, say 75% of their comp to be deferred for 5 years so that its available for clawback. After that, what else needs to be done?

    As for

  33. pulled up in OG

    “As Paul Volcker . . . said recently, there is not “one shred of neutral evidence” that any financial innovation of the past 20 years has led to economic growth.”

    http://www.nytimes.com/2010/01/10/opinion/10rich.html

  34. pulled up in OG

    Paul Volcker also noted that DPW guys leaning on shovels, Cos Cob plow jockeys and Babe Ruth all outperformed Wall St.

    http://news.bbc.co.uk/2/hi/8410489.stm