Don’t feel sorry for Goldman management
Since everything I know about Goldman Sachs was learned either by reading articles from Matt Taibbi at Rolling Stone or by listening to him talk about the company on Comedy Central or YouTube, I’m probably missing something here, because, surely, this can’t be right.
Surely, the investment bank’s latest image-rebuilding effort can’t be this transparent.
Something has probably escaped my grasp here because, to me, it doesn’t appear as though issuing stock that can’t be sold for five years to their management committee instead of paying cash bonuses will have a material effect on the executives’ finances (that was the point, right?) since they already own millions of shares that can, presumably, be sold in a pinch if they need to buy something really nice this holiday season.
As a point of reference, though he declined a bonus last year, Blankfein received an all-time record $53.4 million bonus in 2007.
The company’s decision was intended to quiet some of the popular dissent about Wall Street prospering while Main Street is still struggling and, like some of the other image-repair work they’ve done this year, it may not have the desired effect, though you can easily understand how the phrase “not paying cash bonuses” must have sounded irresistible when the idea was first floated amongst the executive staff.
Of course, since the shares vest over a five year period and the expense won’t be recorded until that time, this move will have the added impact of making Goldman’s reported 2009 profits look even more outlandish than before.
What is it they say? Goldman always wins?
ooo
Tim Iacono is a retired software engineer and writes the financial blog “The Mess That Greenspan Made” which chronicles the many and varied after-effects of the Greenspan term at the Federal Reserve. Tim is also the founder of the investment website “Iacono Research” that provides weekly updates to subscribers on the economy, natural resources, and financial markets.
December 15th, 2009 at 6:12 pm
the only answer to goldman sachs is; glass steagall-glass steadall-glass steagall.
glass steagall should be part of the constitution as repeal has fostered all these bank miscreants.
when goldman sachs has banks that accept deposits, have checking accounts and savings accounts amd count change, then they might be able to be called a bank. until that time they are just another greedy group.
even gustav levy (for those of you who are old enough to remember) couldn’t get away with all of this cheating and lack of bank control.
at least it is being addressed with some heavy hitters such as paul volcker.
December 15th, 2009 at 6:16 pm
a little rushed on previous comment but two typos “steadall” and “amd”
December 15th, 2009 at 7:03 pm
well-
it’s sad- because they should be in jail for fraud and malfeasance and stripped of all ill gotten gains
December 15th, 2009 at 7:14 pm
“The company’s decision was intended to quiet some of the popular dissent about Wall Street prospering while Main Street is still struggling”
Apparently the USG is prospering as well. I saw a graphic today on TV where the number of Federal employees making $100K a year or more has doubled to 66K since the recession began in Dec ‘07. And then they wonder why the average American has so little respect for either Wall Street or the U.S. government. Nice…
December 15th, 2009 at 7:32 pm
I don’t bemoan Goldman’s “success”. I bemoan the fact that it comes only because of the US taxpayer and his assumption of the risks they undertake–through the Federal Reserve’s policy of free and unlimited money, and the Federal Government’s policy of throwing life-lines to any financial industry player that it deems TBTF.
All these TBTF institutions should have the pay of their executives capped at about the level of a GS-13. No pun intended.
December 15th, 2009 at 8:15 pm
I guess I was a little remiss on my numbers re: the 7:14 post. USG employees making more that $150K jumped to over 66K for a gain of 119% since 12-07. Those making more than $100K jumped by 46% to 383K and those making more than $170 jumped by 93% to 22K. So, we now have 471K USG employees making $100K or more. Here’s the full article.
http://www.usatoday.com/news/washington/2009-12-10-federal-pay-salaries_N.htm
And again, referencing my earlier post re: the average American, not only will there be no public option in the healthcare proposal, there will be no Medicare extension. Why should we get an opportunity to take part in any of the fruits of this country’s labor? After all, we have unemployment benefits and Food Stamps…
http://online.wsj.com/article/SB126083637029991305.html
December 15th, 2009 at 8:21 pm
Hey, Bush and the GOP had the KBR thorn in their side. The Dems must’ve wanted a scandal of their own for the next few years.
December 15th, 2009 at 9:29 pm
Per chance is that the same Stephen Friedman who was a director for the New York Fed and who made $5 million trading Goldman Sachs stock on inside information about the AIG deal?
What a complete fuck over of the public.
December 15th, 2009 at 9:38 pm
Does anybody in the MSM have the cajones to go after Friedman or is he just too powerful?
Why isn’t the Attorney General investigating the abuse of power and misuse of his position as Chairman of the NY Federal Reserve? Why would any ethical firm retain someone who has displayed such a callous disregard for ethical behavior while in public office?
This is really, really bad.
December 15th, 2009 at 9:51 pm
Please, cut them a break already. They’re doing “God’s work”.
December 15th, 2009 at 10:05 pm
At worst, they break even.
However, if you include the tax implications, the recipients may end up paying lower taxes by converting income to capital gains and thus, take home more money. It depends on how the stock awards are written, if they end up donating any of the stock to charity (gain tax writeoff), etc.
All they while, claiming to have “sacrificed liquidity” to improve their image and the public opinion of GS.
December 15th, 2009 at 10:14 pm
They only win because they’re smarter than everyone else and because they deserve it.
Whatever happened to that “Russian programmer” thing? I looked up his PHD thesis. High speed routing in ‘telecommunications’ networks – heh. Make sure my packets get there before yours. (can you say “FIX” boys and girls?).
Wasn’t Cuomo looking into that? And if I’m correct (about Cuomo) how come this fell off the radar screen or whatever?
December 15th, 2009 at 10:36 pm
On this one, I’ll take the cup as half-full.
This is not a PR move. It amounts to giving a reach-around to the past and the partner-owned model.
I’m with Volker, this mess is about corporate governance as much as anything else. (For every mention of “moral hazard” read “corporate governance” and it’ll make a lot more sense. He does comment in plain English about the relationship between board members at financial institutions and the activities of these institutions.)
GSEman is ahead of the curve and that’s cool. But they’re still taxpayer-financed terrorists in possession of WMDs so I guess things could be better.
“Wake up, gentlemen.”
http://online.wsj.com/article/SB10001424052748704825504574586330960597134.html
December 15th, 2009 at 11:22 pm
Safe to say Goldman is TBTF…not so for many others. FDIC doubling budget for next year…
http://www.bloomberg.com/apps/news?pid=20601087&sid=arQEV.zQ0wMY&pos=5
December 16th, 2009 at 12:48 am
Recently I’ve been the frog swimming around in the water knowing I have no control over the eventual temp. Just being thankful for another day before the heat gets turned up.
But this shit just plain old curdles my cream.
And to read tonight about the huge tax break the BS Obama admin just gave Citi just drives me completely and totally bug-fucking nuts.
The elites are rubbing the Sheeples’ noses in their shit and laughing about it all the way to the bank.
And Drama Queen BS Obama is staying above the fray. Well he’s still tasting something bad, and it’s still that useless taxpaying voter that’s not important.
December 16th, 2009 at 2:08 am
>> the huge tax break the BS Obama admin just gave Citi just drives me completely and totally bug-fucking nuts.
Me, too. “Oh, ‘bama…” just lost my vote.
December 16th, 2009 at 2:10 am
I accept all told-ya-so’s.
December 16th, 2009 at 3:53 am
[...] table, from Yahoo via the Big Picture, should do it. These are just stock holding, not total wealth. One should probably assume that the [...]
December 16th, 2009 at 5:32 am
But wait it gets better.. Don’t they get to sell their stock tax free once they accept the jobs at the Treasury that they always get? Since the CEO of JPM is lobbing for that Treasury secretary post (for instance) doesn’t he get to sell all his shares tax free? Isn’t that a way for the fat cats to cash out for free?
December 16th, 2009 at 5:32 am
A year ago it was argued that the bailouts were needed to avoid a systemic collapse. So what is the reasoning for continuing to bail out banks at taxpayers expense? This is sickening beyond belief.
December 16th, 2009 at 8:23 am
yes, Tim, but as you know the point is to make it so that if GS turns out to be another Lehman/Bear in two years, at least these LATEST bonus payments won’t further enrich the executives if the stock becomes worthless or nearly so.
i don’t think the goal was to have a “material effect on executive’s finances” at all -it’s to align the compensation with the risk that’s still on the books.
December 16th, 2009 at 10:34 am
I guess moving to the Tech Bubble compensation model is an improvement… no matter how modest it is. Stock options for everyone, including the receptionist.