Bailed-Out Banks Dole Out Bonuses
Despite monumental losses, several bailed-out banks give out season bonuses.
Dec. 19, 2008— -- When the nation's chief financial officers begged Congress for $700 billion of taxpayer money, they said it was about saving banks. They didn't say anything about saving bonuses.
Despite monumental losses, some Wall Street firms will still be giving out big bonuses this year -- even firms that were bailed out by the government.
Goldman Sachs, which accepted $10 billion in government money, and lost $2.1 billion last quarter, announced Tuesday that it handed out $10.93 billion in benefits, bonuses, and compensation for the year.
Goldman Sachs noted that the figure is down 46 percent from a year ago and that seven of its senior executives are forgoing bonuses this season.
"Bonuses across Goldman Sachs will be down significantly this year," a bank representative told ABC News. The spokesman refused to disclose the size of the bonus pool or how much of the compensation fund of $10.93 billion was planned for bonuses, but some employees are reportedly being given more than $200,000 in cash.
Morgan Stanley is in the same boat, having received $10 billion in government money. Their bonus pool this season is around $2 billion, according to a report in the New York Times. That figure is down 50 percent from last year.
Many people wonder why the banks' bonus pools would even be $1 this year.
"The banks are broke. They shouldn't be paying out bonuses this year," said Peter Morici, economist and business professor at the University of Maryland. "They're begging at the Treasury door. I don't understand why a waitress in Indiana should send her money to fund a million-dollar bonus on Wall Street."
"It looks like Goldman Sachs is treating this as business as usual," said compensation expert James Reda. "They are taking our taxpayer money. They should be able to account for that money."
Banking insiders argue that bonuses are part of their business model -- an accepted part of basic compensation and a key to the banks' viability.
"Why be pennywise and pound foolish. You want your good people, you want them motivated. And that is why they are paying bonuses," said Steve Kaplan, professor of finance at the University of Chicago.
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