Bonus Bandits: Why Are Bank Execs Making a Killing in the Midst of Catastrophe?

By Sam Pizzigati, Too Much: A Commentary on Excess and Inequality. Posted October 20, 2009.

America’s biggest banks, amid the shakiest economic times since the 1930s, last week announced record profits — and deposited record billions into bonus pools for their top executives and traders. How did U.S. lawmakers and officialdom respond?

In Congress, a pivotal House committee gave the green light to a Wall Street regulatory reform bill that "does not do enough," disappointed consumer advocates quickly charged, "to protect taxpayers and our economy."

The nation's top executive pay regulator did some disappointing, too. "Pay czar" Ken Feinberg, the White House pick to oversee pay at the nation’s biggest bailed-outs, last week convinced soon-to-retire Bank of America CEO Ken Lewis to give up his $1.5 million 2009 salary. Why did Lewis agree? He gets to walk away, at year end, with a retirement package worth $69.3 million.

Welcome to post-meltdown America. One year and counting after last fall’s high-finance collapse, average Americans are reeling and Wall Street is rejoicing. The boom's back!

In fact, for Wall Street’s premiere financial giant, business is booming better than ever. Goldman Sachs last week announced $3.19 billion in third-quarter earnings, about quadruple the firm's quarterly profit a year ago. Goldman now has $16.7 billion sitting in its bonus pool.

That pool, by the end of December, will likely top off close to $23 billion, enough to pay each and every Goldman Sachs employee over $700,000 if the bonus dollars were divided equally.

The bonus dollars, past practice makes clear, won’t be equally divided. In 2007, Wall Street's previous record year, Goldman CEO Lloyd Blankfein took home $68 million. In 2008, 212 Goldman Sachs power suits stuffed their pockets with over $3 million each.

This year figures to be even more lucrative. Goldman, as one financial analyst points out, has so far in 2009 "earned three times as much as it did in all of 2008."

That's not, to be sure, all good news for Goldman. In a record recession, record earnings create a bit of a public relations problem. To forestall any serious political blowback, Goldman's movers and shakers have opened a "charm offensive." Message: We feel your pain. Reality: Goldman feels no pain — and doesn't intend to start any time soon.

The $200 million Goldman is now donating to charity, as the first thrust in its charm offensive, equals a mighty 6 percent of the firm’s third-quarter profit.

No other U.S. financial firm is matching Goldman’s stunning success. But you won't find other firms complaining. One new survey, released last week, estimates that 23 top U.S. banks and hedge funds will shell out $140 billion in 2009 compensation, $23 billion more than their previous all-time record high set in 2007.

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Sam Pizzigati is the editor of the online weekly Too Much, and an associate fellow at the Institute for Policy Studies.

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