First Socialist National Bank

I could care less about executive compensation, and quite frankly most CEOs should be taken out back and shot by the shareholders for selling their companies out to the government by accepting TARP money, especially when not every bank needed it – but every big bank was required to take it by Paulson and Bernanke on that fateful weekend when capitalism got its first fatal stab in the back.

Here’s the thing that absolutely nobody in Washington or Main Street understands: virtually all of those bonuses were paid to the employees who earned them because of their performance. The CEOs did not take a dime (nor should they have done anything but write a suicide note). While it’s great to rouse the peons with claims that banks paid employees millions “just for showing up” and “pushing paper around” that has never been the case. It’s true that an employee who consistently produced for many years, but then had an off year, would still be paid a [much smaller] bonus – because the bank understood correctly that it’s likely that this employee will generate revenue again, and did not want him to quit. There are virtually no cases, however, where an employee who routinely lost money for the bank was retained, let alone paid a bonus (case in point – almost everyone on mortgage desks was let go way before anyone started talking about a bank bailout). Those who make the big bucks have quotas, if you fail to meet them for 2 or 3 years you’re out on your ass. This is how this business works.

Furthermore, and most importantly, a bonus is a percentage of revenue that you brought the bank. That is – these people are getting a fraction of what they directly contributed to the bank’s bottom line. The best traders and their teams can leave and make money elsewhere, and in fact there has been a massive outpouring of all the best talent from sell-side shops in 2008. This will, by grade school logic, result in far greater losses for the banks in the future. On the other hand, retaining an employee who on average brings in $10mm/year revenue for $2mm/year bonus isn’t a difficult choice in a rational world. Arbitrarily limiting that person’s comp just because some secretary in Nebraska who can't pay her mortgage and has 8 kids doesn’t make that much in her lifetime is a tenet of socialism.People in a capitalist society get paid based on what they earn, not based on what they need, or what the government thinks they should earn.

clipped from www.bloomberg.com President Barack Obama called bonus payouts at banks getting rescue funds “shameful” as he and Treasury Secretary Timothy Geithner announced the government will require financial companies getting aid in the future to cap compensation of top officials at $500,000 a year. A New York state comptroller report that $18.4 billion in bonuses were paid out to Wall Street executives and employees as the U.S. sank into a recession further inflamed Americans. “For top executives to award themselves these kinds of compensation packages in the midst of this economic crisis is not only in bad taste, it’s a bad strategy, and I will not tolerate it as president,” Obama said. On Wall Street, there is concern that compensation curbs would hinder a company’s ability to attract top-notch employees, and that would lead to a talent drain, Meredith Whitney, an analyst at Oppenheimer & Co., said on Bloomberg Television. “If you cap compensation, the best and the brightest are still going to figure out a way to make money and it may not be on Wall Street, when those minds are needed most,” Whitney said. William Cohan, a former investment banker at Lazard Ltd. and JPMorgan and author of “The Last Tycoons” about Lazard, disputed that notion.“What do they do? They push paper around,” Cohan said, “Where else can you get paid $500,000 to do that?” Senator Claire McCaskill, said small-business owners are calling the bonuses “obscene” and other lawmakers say they are getting angry calls and mail from constituents on the subject. McCaskill said today the Obama plan is in line with what lawmakers are seeking in an effort to change “the arrogant, greedy culture that created this mess in the first place.”