Bonuses 'Greatly Exceeded Profits' (4.00 / 4)

NY Atty. General Cuomo's study found that several financial giants that received federal bailout money in the last year paid out bonuses to employees in 2008 that greatly exceeded the amount of profit generated by the banks.

According to the report:

• Goldman Sachs, which earned $2.3 billion last year and received $10 billion in TARP funding, paid out $4.8 billion in bonuses in 2008 - more than double their net income.

• Morgan Stanley, which earned $1.7 billion last year and received $10 billion in bailout funds, handed out $4.475 billion in bonuses, nearly three times their net income.

• JPMorgan Chase, which earned $5.6 billion in 2008 and received $25 billion from the government, paid out $8.69 billion in bonus money.

• Citigroup and Merrill Lynch lost a combined $54 billion last year. They received a total of $55 billion in bailouts and paid out $9 billion in combined bonuses. ($5.33 billion for Citigroup; $3.6 billion for Merrill Lynch, which was subsequently acquired by Bank of America.)
  

Click here to read the full report

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by: counterspin @ Fri Jul 31, 2009 at 18:17:57 PM UTC

Do these numbers add up? (0.00 / 0)

If a company pays its employees more than it makes, which I think is what the linked and quoted article claims, then how does that company stay in business? How do they pay the share-holders?

I'm not saying that the information is incorrect. It just doesn't seem to add up.

"It sounds wrong...
     ...but its right."

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by: SpitBall @ Fri Jul 31, 2009 at 18:25:33 PM UTC

[ Parent ]

THEIR GOVERNMENT ROBBED US TO BAIL THEM OUT!!!!!! (4.00 / 1)

Z

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by: Z @ Fri Jul 31, 2009 at 18:42:57 PM UTC

[ Parent ]

2 things... (4.00 / 3)

The numbers 'earned' are actually supposed to be 'profits' not what they actually brought in before expenses.  So the bonuses would have been paid along with other expenses and then whatever was left was the profit. If those holding the majority of the shares weren't part of the bonus gravy train there would be outrage, but the majority of the shareholders who have stock in these companies don't matter for crap, so who cares if bonuses out run profits?

They will of course say that the 'bonus' isn't really a bonus, but is part of their pay package and rather than paying it out over the course of the year as a salary they dump it into one big paycheck based supposedly on the company's performance. If they wanted to get rid of the stink of the 'bonus' they should just pay their people a frickin' normal salary and that would go some way to making them look a little less like the greedy jerks they are. Its obvious that the 'bonus' check has nothing to do with performance, so why should they bother holding off paying it in one lump sum if the end-of-year results don't matter?  I guess it allows them in good years to pay out astronomically higher bonuses than in years when they need a government bailout.

What steams me is that even with our progressive tax system we can't make them pay their fair share.  Why the heck don't we have a 40 or 50% bracket for millionaires and a 50 or 60% bracket for those making over 2 million?  Why don't we have a progressive capital gains tax system as well?  

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by: Ricky @ Fri Jul 31, 2009 at 18:56:40 PM UTC

[ Parent ]

Wall Street Controls the Health Insurance Industry (4.00 / 1)

Former Cigna executive Wendell Potter spoke out recently against the tactics which health insurance companies used in order to satisfy Wall Street investors.

He appeared earlier this month on Bill Moyers Journal on PBS

BILL MOYERS: But you had, all these years, seen premiums rising. People purged from the rolls, people who couldn't afford the health care that Cigna and other companies were offering. This is the first time you came face to face with it?

WENDELL POTTER: Yeah, it was. You know, certainly, I knew people, and I talked to people who were uninsured. But when you're in the executive offices, when you're getting prepared for a call with an analyst, in the financial medium, what you think about are the numbers. You don't think about individual people. You think about the numbers, and whether or not you're going to meet Wall Street's expectations. That's what you think about, at that level. And it helps to think that way. That's why you-- that enables you to stay there, if you don't really think that you're talking about and dealing with real human beings.

<...>

BILL MOYERS: You told Congress that the industry has hijacked our health care system and turned it into a giant ATM for Wall Street. You said, "I saw how they confuse their customers and dump the sick, all so they can satisfy their Wall Street investors." How do they satisfy their Wall Street investors?

WENDELL POTTER: Well, there's a measure of profitability that investors look to, and it's called a medical loss ratio. And it's unique to the health insurance industry. And by medical loss ratio, I mean that it's a measure that tells investors or anyone else how much of a premium dollar is used by the insurance company to actually pay medical claims. And that has been shrinking, over the years, since the industry's been dominated by, or become dominated by for-profit insurance companies. Back in the early '90s, or back during the time that the Clinton plan was being debated, 95 cents out of every dollar was sent, you know, on average was used by the insurance companies to pay claims. Last year, it was down to just slightly above 80 percent.

So, investors want that to keep shrinking. And if they see that an insurance company has not done what they think meets their expectations with the medical loss ratio, they'll punish them. Investors will start leaving in droves.

I've seen a company stock price fall 20 percent in a single day, when it did not meet Wall Street's expectations with this medical loss ratio.

For example, if one company's medical loss ratio was 77.9 percent, for example, in one quarter, and the next quarter, it was 78.2 percent. It seems like a small movement. But investors will think that's ridiculous. And it's horrible.

<...>

BILL MOYERS: When a member of Congress asked the three executives who appeared before the committee-- if they would end the practice of canceling policies for sick enrollees, they refused. Why did they refuse?

WENDELL POTTER: Well, they were talking to Wall Street at that moment. They were saying that because-- I guess they might have to spend some additional dollars to be more vigilant, to make sure that they were not rescinding a policy inappropriately. It makes no sense. The only reason they would have said that is to cover themselves. And to send a signal to Wall Street that you know, we're going to continue business as usual here.

You know, I've been around a long time. And I have to say, I just don't get this. I just don't understand how the corporations can oppose a plan that gives the unhealthy people a chance to be covered. And they don't want to do it themselves.

Well, keep in mind, what they want to do is enhance their profits. Enhance shareholder value. That's number one. And the way that the business that they're in is health care, certainly. But their primary motivation is to reward their shareholders.

Most of the shareholders are large, institutional investors and hedge funds. Hedge fund managers are the ones who look at the stock. And investors for large organizations. It's not mom and pop investor.

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by: counterspin @ Fri Jul 31, 2009 at 19:38:48 PM UTC