When Free Market Means Whatever You Can Get Away With

Wouldn't it be nice to have access to zero cost loans? Wouldn't it be nice to receive $14 trillion in guarantees and direct money? Wouldn't it be nice to have the freedom to raise credit card rates as high as you want with no explanation, and charge exorbitant fees to people for breathing the wrong way?

Barry Ritholtz at The Big Picture asks a very good question in his post Record Bank Bonuses Based On Record Bank Fraud:

Ask yourself how hard it is for any finance firm to make money — risk free! — when they can borrow from the Federal Reserve at a rate of zero, and then turnaround and “lend” that same cash to the Treasury (buying bonds) at 3% ?

Banks Set for Record Pay

Major U.S. banks and securities firms are on pace to pay their people about $145 billion for 2009, a record sum that indicates how compensation is climbing despite fury over Wall Street's pay culture.

An analysis by The Wall Street Journal shows that executives, traders, investment bankers, money managers and others at 38 top financial companies can expect to earn nearly 18% more than they did in 2008—and slightly more than in the record year of 2007. The conclusions are based on an examination of securities filings for the first nine months of 2009 and revenue estimates through year-end.

I think we forgot that banks are supposed to support we, the people, not the other way around.

Interesting link:

Lawsuit filed against Presidents Bush, Obama, Treasury Secretaries, and all 50 governors, accusing them of aiding and abetting in mortgage fraud against the people of the U.S.

PAUL L. MUCKLE, Plaintiff Vs. THE UNITED STATES OF AMERICA, Former President George W. Bush; President Barack H. Obama; Treasury Secretaries John W. Snow, Henry Merritt Paulson, Jr., Tim Geithner; SEC Chiefs William H. Donaldson, Christopher Cox; The governors of the following states or their current successors

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Goldman Sachs Responds to Outcry

Goldman Sachs Employees
In Government..Past and Present :
Goldman Sachs'- The Great American Bubble Machine - expertise in reaping the benefits of generating inflated speculations paid off with a spectacular year, while the rest of us struggled to either keep the jobs we have or replace the jobs we lost.

Despite, our plight, and despite our sacrifice to bail Goldman Sachs out, the firm planned to distribute the biggest bonus payout in its 140-year history. This, of course, outraged Americans everywhere. After all, Goldman, at the mercy of we, the taxpayers, received $10 billion in TARP funds and an additional $12.9 billion in bailout money (as a counterparty to AIG's worthless credit default swaps) not to mention access to as much free credit as they need, amongst other windfalls, that the average American can only imagine in their wildest dreams. Yes, they paid back the $10 billion, but that's a drop in the bucket, considering the ocean of advantages they received. Not to mention, by paying the money back, they escaped the executive compensation limits, and the constraints that existed until the bailout money was paid back.

Well, it appears Goldman has responded to their largest shareholders who would like to see Goldman's profits lining their pockets, rather than the pockets of Goldman employees, and to the public outcry against the the biggest bonus payout in the firm's history. Goldman's 30 most-senior executives will be paid in the form of stock, rather than in cash.

“– The firm’s entire 30-person management committee, which comprises all global divisional and regional leadership, will receive 100 percent of their discretionary compensation in the form of Shares at Risk, which are subject to restrictions for five years. Discretionary compensation represents the vast majority of senior management’s compensation and is directly tied to the firm’s overall performance.”

“– Shares at Risk cannot be sold for five years, in addition to other restrictions.”

“– The five-year holding period on Shares at Risk includes an enhanced recapture provision that will permit the firm to recapture the shares in cases where the employee engaged in materially improper risk analysis or failed sufficiently to raise concerns about risks. Enhancing our recapture provision is intended to ensure that our employees are accountable for the future impact of their decisions, to reinforce the importance of risk controls to the firm and to make clear that our compensation practices do not reward taking excessive risk.”

“– The enhanced recapture rights build off an existing clawback mechanism which goes well beyond employee acts of fraud or malfeasance and includes any conduct that is detrimental to the firm, including conduct resulting in a material restatement of the financial statements or material financial harm to the firm or one of its business units.”

“– Shareholders will have an advisory vote on the firm’s compensation principles and the compensation of its named executive officers at the firm’s Annual Meeting of Shareholders in 2010.”

Links:

Goldman Sachs Announces Changes to 2009 Compensation Program

Goldman Sachs Alters Its Bonus Policy to Quell Uproar

$994,795 is what Goldman's employees contributed to President Obama's campaign, making them #1 amongst Obama's contributors.

Top 5 AIG executives may quit over pay: - Five top executives at troubled insurer American International Group (AIG) said last week they will quit if their compensation is cut significantly by the US pay czar, says a media report.

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