Making sense of the banking industry…


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A while back I posted about The Big Business of America and, in particular, about the idea of a businessperson being the best candidate for president.  If you don’t want to go back and look at the post, basically I said that I have never understood the reasoning behind a “business” person being someone who can run the country.  The country is not a business for profit and should not be treated as such.  Okay, so back to this post…

I recently watched a video (at bottom) about income inequality and bank bonuses that got me thinking about…well, Goldman Sachs.  I have always known that employees of Goldman Sachs were paid extremely well (staggering – just watch the video) but I often wondered why.   Well, let us start at the very top with Mr. Lloyd Blankfein.

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Mr. Blankfein’s salary went up nearly 15% to $16.2 million although Goldman Sachs will argue that it looks that way because of stock awards from previous years that vested last year.  You can read about it in this Reuters article from last month.  Regardless…it is a lot of money to pay one person.  Okay, so Mr. Blankfein made a lot of money…great.  What did he do to actually earn that much?  Goldman Sachs actually saw their profits dive and the share price went from $174/share in January 11′ to $94/share in December.  Now, math may not be my strongest subject, but I can see a drop of nearly 50% in a year (and there was no stock split).

Now yes, Goldman Sachs makes a ton of money…billions in profits, but since they had a tougher year this is what they did…

Management reduced the average employee’s pay by 15 percent in 2011, to $367,057. That compares with a pre-crisis high of $568,732 per employee in 2007. The median household income in the United States is about $50,000.

Goldman Sachs does not just have a few people working for them…they employ in excess of 38,000 people.   That computes to a lot of money.  Okay, back to my point.  Goldman Sachs continued:

Goldman also reported compensation for its four other named executive officers: Gary Cohn, president and chief operating officer; David Viniar, chief financial officer; J. Michael Evans, vice chairman and head of emerging markets; and John Weinberg, vice chairman and co-head of investment banking.

Each of these executives received performance-based pay of $11.85 million last year, which included a $1.85 million salary and a $3 million bonus.

Using the SEC’s calculation of 2011 pay, which includes previous years’ awards that vested in 2011, Cohn, Viniar and Weinberg received $15.8 million last year, while Evans received $15.7 million.

Performance-based pay???  For a stock that slid nearly 50%?  Wow!  Those guys must be great at what they do!  Okay, is there something wrong with this picture?  I wonder how much they would have made had the company improved profits and share price.  The point is that the banking industry is so crooked right now that it is simply staggering.  We have a financial meltdown in 2008 where our “capitalist” cronies on Wall Street ask for a “socialist” bailout.  These people should be being compensated, they should be put in jail.  Running the financial industry into the ground…asking taxpayers to bail them out…and then walking home with bonuses….

Maybe they just have this whole thing figured out……..

Great video by the Young Turks:

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2 responses to “Making sense of the banking industry…”

  1. Tea Party Slayer says :

    Great information on salaries here. I’ll say it till I’m blue in the face, I believe rolling back the Bush tax cuts for the wealthy will reallocate the flow of money away from Wall Street and back to main street. As a result, these excessive salaries and bubbles will die down some. I’ve said Wall Street has a purpose in our economy, but that purpose has mutated into excessively lazy, greedy, wasteful behavior that’s destructive. Restoring balance to the tax code would be a huge first step in controlling Wall Street misbehavior.

    • thejumbledmind says :

      I completely agree that we need to roll back the Bush tax cuts. We also need to reinstate the estate tax as well as increase tax on capital gains. Closing tax loopholes will help considerably as well.

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