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Last Updated: Jun 25, 2009 - 11:10:57 AM |
Executives at Goldman Sachs were told last week that they could expect
to receive their highest ever bonuses this year, according to an
article published Sunday in London's Observer newspaper. The first half
of this year has seen a spectacular rebound for Goldman, and the
company's London staff were told they would receive corresponding
end-of-year bonuses if, as expected, the bank sets a new profit record.
These bonuses will be paid for by the American people. Besides
receiving over $10 billion in cash from the US government last year,
Goldman Sachs was the largest beneficiary of the government bailout of
American International Group (AIG), receiving $12.9 billion to cover
funds owed to it by the failed insurance giant.
Goldman Sachs is by no means alone. The Financial Times reported Monday
that other banks, including Merrill Lynch, UBS and Citigroup, have
sharply increased compensation for top traders. The article noted that
the typical salary for managing directors has jumped from $250,000 to
$400,000 in just the past few months. This does not count bonuses.
The New York Times reported Wednesday that Citigroup, which has
received $45 billion in government cash and guarantees on over $300
billion of its assets, is increasing base salaries by up to 50 percent
and plans to award millions of new stock options. The Times said that
Bank of America, another beneficiary of multiple taxpayer handouts, and
Morgan Stanley were also raising salaries.
There is an element of provocation in the brazen manner in which the
Wall Street elite, whose manic pursuit of personal wealth played a
major role in precipitating the deepest economic crisis since the Great
Depression, uses taxpayer subsidies to further enrich itself. Like the
aristocracies of old, the American financial oligarchy insists on
flaunting its power and prerogatives. Mere mortals must “tighten their
belts” and accept layoffs and wage cuts, but the “free market” entitles
the bankers to use the crisis to make themselves richer than ever.
Nothing could more clearly expose the reality of class relations in
America, as well as the role of the Obama administration. Obama has
systematically worked to defend the wealth of the financial
aristocracy. He has opened up the Treasury to pay off the gambling
debts of Wall Street, dollar for dollar.
Last month, Goldman announced that it will pay half of its $1.2 billion
first-quarter profit to its staff, mostly in the form of bonuses. In
2008, amid the economic meltdown, the firm paid nearly a thousand top
bankers over $1 million each in compensation. Stockholders have also
done very well. Warren Buffet, who invested $5 billion in Goldman Sachs
six months ago, has already reaped $1 billion in profits.
Goldman repaid its $10 billion TARP (Troubled Asset Relief Program)
cash to the US government last week, along with several other large
banks. All of the banks, however, continue to benefit from trillions of
dollars in government aid in one form or another. Having paid back the
TARP loans, the banks are now exempt from the token restrictions on
compensation and speculative practices that came with the government
handouts.
Goldman and other mega-banks are getting a further boost from the
government’s policy of encouraging a further consolidation of the
banking industry. The disappearance of independent firms such as Bear
Stearns, Merrill Lynch, Lehman Brothers, Washington Mutual and other
banks has given Goldman, JPMorgan Chase, Morgan Stanley, Bank of
America and Citigroup a bigger share of the market than ever.
The strongest of these, such as Goldman and JPMorgan, are making a
fortune in the bond markets from the massive increase in government
borrowing, most of which is due to the government rescue of Wall
Street. The banks are charging lucrative fees on government handouts to
themselves.
David Williams, an investment banking analyst at Fox Pitt Kelton, told
the Observer, "This year is shaping up to be the best year ever for
investment banks, or at least those that have emerged relatively
unscathed from the credit crisis.... These banks are intermediaries in
the bond markets where governments and companies are raising billions
of pounds of new money. There is also a lack of competition that means
they can charge huge sums for doing business."
Record bank bonuses are the inevitable and desired outcome of Obama's
policy. The administration has repeatedly rejected caps on executive
pay and has done everything in its power to ensure that the major banks
are made “whole.” Coming one week after Obama unveiled his new bank
regulation plan, the promise of bigger-than-ever bonuses reveals the
reality behind the administration’s rhetoric: nothing will be done to
rein in the financial elite.
Of all the banking giants, Goldman Sachs is perhaps the most closely
tied to the White House and federal regulators. The list of former
Goldman Sachs employees holding top positions in the Obama
administration includes:
• Mark Patterson, a former Goldman Sachs lobbyist, who is the chief of
staff to Treasury Secretary Timothy Geithner (himself the former
president of the Federal Reserve Bank of New York).
• Reuben Jeffery III, former managing partner at Goldman Sachs, who
holds the post of undersecretary of state for economic, business, and
agricultural affairs.
• Neel Kashkari, former Goldman Sachs vice president, who is the
assistant secretary of the treasury for financial stability,
responsible for administering the TARP funds.
• Dianna Farrell, former financial analyst at Goldman Sachs, who serves
as deputy director of the National Economic Council.
Henry Paulson, the Bush administration’s treasury secretary, who
authored the TARP program and oversaw the AIG bailout, was the CEO of
Goldman before taking the Treasury post. Between Paulson and Robert
Rubin, who served under Clinton, the office of treasury secretary has
been occupied by a former Goldman Sachs executive more than half the
time since 1995.
The record bonuses come at a time when conditions of life for ordinary
people are worse than at any time since the Great Depression. The
official unemployment rate hit 9.4 percent last month, and the real
unemployment rate—including those involuntarily working part-time and
those who have given up looking for a job—is 16.4 percent. The number
of mass layoffs in May was the highest on record.
Those who remain employed have seen their wages fall precipitously. One
survey of company executives found that half planned to cut or freeze
workers’ pay. USA Today reported June 12 that pay cuts, reduced hours,
furloughs and involuntary part-time work have driven the working class
back to conditions not seen since the 1930s.
These two policies are linked: The money gained by impoverishing the
working class helps swell the fortunes of the Wall Street bankers.
There can be no solution to the social crisis confronting millions of
people in the US and internationally that does not begin with the
transformation of the banking giants into democratically-controlled
public utilities. The massive resources controlled by the financial
oligarchy for individual gain must be recovered and directed toward the
satisfaction of social needs.
Source:Ocnus.net 2009
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