US financial crisis … but not for banking fat cats

This video from Reuters is called 2007: The subprime meltdown.

By Andre Damon:

Amid record losses, Wall Street awarded itself $39 billion

21 January 2008

The five largest Wall Street banks doled out a record $39 billion in bonuses last year, according to data collected by the Bloomberg news service. After driving hundreds of thousands of families into foreclosure, causing a financial crisis affecting hundreds of millions, and pushing the US and world economies closer to recession, it appears Wall Street is rewarding itself for a job well done.

The banks announced record losses in the fourth quarter, wrapping up the financial industry’s worst year since 2002. All in all, Wall Street wrote off more than $90 billion in bad debt for the year, and the five largest banks saw their profits drop more than 60 percent. Three of the five firms posted losses in the fourth quarter.

For all that, the bankers made out like bandits. Despite the firms’ abysmal performance, Wall Street buffered its traders from any shocks to their incomes by increasing the ratio of compensation relative to revenues. Typically, banks try to keep compensation below 50 percent of revenues; in 2006, when the five firms paid out some $36 billion in year-end bonuses, the figure was approximately 45 percent. In 2007, it jumped to more than 60 percent, according to figures released by the New York State Comptroller’s office.

While the $39 billion was divided among 186,000 workers at the five firms—averaging $211,849—the lion’s share was reserved for a few thousand high-level managers, traders, and senior executives, who took in multimillion-dollar bonuses in addition to their salaries. Rank-and-file clerical workers took home a few hundred dollars.

See also here.

4 thoughts on “US financial crisis … but not for banking fat cats

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