The More They Get The More They Want

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Editorial Comment: His bank reports a loss of over $10 billion when we know there is at least contingent liability for 100 times more than that, and Moynihan at Bank of America is getting paid MORE. I suppose it makes sense from a bean-counter perspective — for having dodged the bullets in 2010 and not losing the bank altogether, maybe it WAS worth the extra money they are paying him. It is comparable to a mob chief getting paid extra money because he kept some of his fellow criminals out of jail.

It makes sense — until you realize that what they are doing every day is ruining our society. They have bent and broken so many laws, breached so much trust,  and betrayed so many American values, it is hard to believe that anyone would sit back and let the risk fall upon anyone but them and the reward moving further toward them and away from stockholders and other interested parties.

Pay for Bankers Creeping Back Up

By ANTONY CURRIE, MARGARET DOYLE and JAMES PETHOKOUKIS

Compensation for bank bosses is creeping back to the bad old days. Sure, nearly all of them now pocket a smaller amount each year than either they or their predecessors did before the financial crisis. But after a year or two of relative restraint, their boards are starting to favor them over shareholders again.

Brian Moynihan’s pay package stands out. The Bank of America chief executive was awarded $10 million for 2010 despite presiding over a $3.6 billion loss and a significantly negative total return for shareholders. Lloyd Blankfein of Goldman Sachs brought in 40 percent more than he did in 2009 even though earnings tumbled and the shareholders total return was a mere 2.5 percent. And while Barclays’ earnings from core operations increased by almost a third, the total compensation of £9 million ($14.7 million) for the newly anointed chief executive, Bob Diamond, far outpaced that rate, jumping ninefold from what he and his predecessor, John Varley, received a year earlier.

Not all are so out of whack. JPMorgan Chase has a better defense for Jamie Dimon’s 20 percent bonus increase. While its stock was essentially flat last year, the firm’s net income jumped by nearly half. Josef Ackermann, Deutsche Bank’s boss, took a pay cut, albeit of only 6 percent, despite earnings falling more, even after allowing for the accounting hit from buying Postbank. Morgan Stanley returned to profitability in 2010, but the chief executive James Gorman’s pay dipped by almost half from 2009 as the firm’s stock declined.

Both Mr. Gorman and Mr. Ackermann still took an outsize share of their respective companies’ profits, however. Mr. Gorman received 0.23 percent of income attributable to shareholders, and the Deutsche Bank boss’s figure was 0.27 percent, as much as a third more than rivals. Ken Chenault at American Express trumped them both: his unchanged $20.5 million compensation for 2010 represented 0.5 percent of earnings.

Only UBS and Citigroup, the biggest crisis losers, exhibited real modesty. Neither Oswald Grübel nor Vikram Pandit, the respective chief executives, got a bonus despite improved performance. For now, at least, they seem to recognize that shareholders should not play second fiddle to management. Investors elsewhere would do well to take note.

A Fiscal Cushion

When your credit card is nearly maxed out, dealing with emergencies can be tricky. A major rebuilding effort may stretch Japan to its limits. Politicians in Washington and other overspending capitals should take note of the warning.

Trying to calculate a country’s available “fiscal space” — the additional amount it can borrow before markets demand a sharply higher premium — is guesswork. The global financial crisis took the public debt of advanced economies to 75 percent of gross domestic product in 2009 from 60 percent in late 2007. And by 2015, the International Monetary Fund reckons, the average ratio may hit 85 percent. That is perilously close to the 90 percent level where debt seems to really hamper growth, according to economists Carmen Reinhart and Kenneth Rogoff. But nations have different debt levels and different track records in dealing with it. Based on those variables, new I.M.F. research suggests that some — including Japan with its 200 percent debt-to-G.D.P. ratio — have little room to add new debt before markets balk. The United States and Britain, by contrast, probably have a bit more capacity, the I.M.F. says. But that extra space could easily be gobbled up by unforeseen events, like the earthquake-related disasters, that may cost Japan 3 percent to 5 percent of its G.D.P. to address.

And the unexpected isn’t so unusual. Reconstruction after Hurricane Katrina in the United States in 2005 cost something on the order of 1 percent of G.D.P., while New Zealand’s recent earthquake could cost it more in relation to the country’s output than the current estimates for Japan. Then there is activity abroad. President Obama may be pondering the potential $300 million a week cost for enforcing a no-fly zone over Libya. If so, he won’t be alone among NATO members in wondering how to pay for it.

The United States and some other developed nations would appear to have little headroom to deal with the costs of another bank crisis — much less, say, a new war. It is something for those running cash-poor governments to remember. If they don’t create breathing room, they not only have to make hard budget choices, but also pray that Mother Nature will be kind.

ANTONY CURRIE, MARGARET DOYLE and JAMES PETHOKOUKIS

For more independent financial commentary and analysis, visit http://www.breakingviews.com.

6 Responses

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  2. You are right A Man.

    Bankster have ruined more lives than Hitler, bin Laden and Hussein.

    When does a THIEF think they have stolen enough?

  3. STOP FORECLOSURE FRAUD…. IT FUNDED TERRORISM.

  4. On 11/18/2010 Hovnanian subitted known fraudulent documents I allege into a California Court. Why does our Nation allow this? How can we stop them from stealing the lives of our future generations?Builder FORGERY and Fraud!

  5. We need to enforce a “No Bank Zone” The Banksters have ruined more lives than Kadafi Sadam Hussein and Osaba bin Laden Put together.

    The Banksters are at the level of Hitler and Stalin.

    They also use “Goebel’s” Propoganda. Goebel compared the jews to Rats The Banksters compare the American people to “Dead Beats”

    NEVER AGAIN

  6. […] Source: Livinglies’s Weblog […]

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