Lloyds chief tells staff: you'll still get bonuses
• Bank boss says bail-out imposes 'very, very few restrictions'
• Guardian/ICM poll shows no bounce for Brown from latest crisis
• Weakening economy pushes public debt to 60-year high

    * Jill Treanor
    * The Guardian,
    * Tuesday October 21 2008
    * Article history

The chief executive of Lloyds TSB, one of the banks participating in the £37bn bank bail-out, has promised staff they will receive bonuses this year despite Gordon Brown's promise of a crackdown on bankers' pay following the investment by taxpayers.

Eric Daniels has told employees that the historic government intervention will not change the behaviour of Lloyds, which is in the throes of the rescue takeover of HBOS brokered by the prime minister.

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Gus: Sure, getting a bonus at taxpayers expense is better than the bank folding up entirely or having to become lean... Isn't it? See toon at top.

If it had been any other industry, the comment from the government would have been "tough tities! We can get cheaper goods from China..."

CEO salaries jump 96pc

While most people are being forced to tighten their belts, figures out today show the pay of chief executives has skyrocketed in the six years to 2007.

The Australian Council of Superannuation Investors (ACSI) says that over a period from 2001 to 2007, CEOs' fixed median pay increased by 96.4 per cent.

The ACSI study looked at 69 companies in the top 100 ASX listed firms.

While in the the same period, pay for average adult weekly ordinary time earnings only saw an increase of 32.3 per cent.

The ACSI study also showed that the consumer price index increased by 17.7 per cent in the period.

The total pay for CEOs in 2007 ranged from $404,062 to $33.49 million.

The data indicates that 50 CEOs were paid less than $5.34 million, while 16 CEOs were paid above the average, but below $13.88 million.

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Did your wage moved for you too?...

On Wall Street, Bonuses, Not Profits, Were Real

“As a result of the extraordinary growth at Merrill during my tenure as C.E.O., the board saw fit to increase my compensation each year.”

— E. Stanley O’Neal, the former chief executive of Merrill Lynch, March 2008

For Dow Kim, 2006 was a very good year. While his salary at Merrill Lynch was $350,000, his total compensation was 100 times that — $35 million.

The difference between the two amounts was his bonus, a rich reward for the robust earnings made by the traders he oversaw in Merrill’s mortgage business.

Mr. Kim’s colleagues, not only at his level, but far down the ranks, also pocketed large paychecks. In all, Merrill handed out $5 billion to $6 billion in bonuses that year. A 20-something analyst with a base salary of $130,000 collected a bonus of $250,000. And a 30-something trader with a $180,000 salary got $5 million.

But Merrill’s record earnings in 2006 — $7.5 billion — turned out to be a mirage. The company has since lost three times that amount, largely because the mortgage investments that supposedly had powered some of those profits plunged in value.

Unlike the earnings, however, the bonuses have not been reversed.

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never mind, see toon at top....

Industry insiders are only half joking when they call it a hedge fund with a carmaker attached.

Porsche says its stock market trades are only for one reason: to take it towards its long term goal, the takeover of car making giant, Volkswagen.

In October 2008, Porsche's takeover moves triggered an unprecedented stock market squeeze when it suddenly revealed it owned or had positions on more than 74% of Volkswagen shares.

The value of Volkswagen stock rocketed to more than 1,000 euros, briefly making it the most valuable company in the world.

Hedge funds, who had gambled that the value of Volkswagen shares would fall are said to have lost between 10bn and 40bn euros.

Porsche denies any wrongdoing and says that it made no profit from the squeeze, but some hedge funds are crying foul.

Now the German financial regulator, BaFin, is conducting an investigation into what it calls "suspected market abuse."

The back story

The stories of Porsche and Volkswagen have long been intertwined.

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See a couple of blogs up... and the toon at top and that other blog too...

...

He said bonuses agreed to in 2008, before the firm's problems became known, could not legally be blocked.

"Quite frankly, AIG's hands are tied," Mr Liddy said in the letter.

"Under the current circumstances, I do not like these arrangements and find it distasteful and difficult to recommend to you that we must proceed with them."

AIG had promised to pay hundreds of million of dollars in bonuses to staff.

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When I was working in factories, bonuses were linked to productivity and sales... Should the performance of the whole outfit — or just my ability to drill 5,000 holes in steel struts during a half-shift — be going over a rough patch, bonuses were vamoosed quick smart. No bonus. Nothing. Just the minimum pay. End of story.

And in the financial world like AIG, things do not go bad overnight... There would have been major signs that things were going totally pear shape — way before bonuses would have be allocated — but not publicly admitted until the final accounts...  Thus the execs that have driven this leaky ship on the rocks will get their "bonuses" anyhow and — under the promises of ziltcho bonus next year — might go work somewhere else, where bonuses are still cream on top of milk...

Yes, in the world of high finances, the execs pay "themselves" agreed bonuses before the result, unlike shareholders whose dividends are geared to the final price of fish. Rotten. 

see toon at top...

Troubled US insurance giant AIG has sparked fury by paying its executives big performance bonuses at a time when it is relying on taxpayer money to stay afloat.

AIG is paying out more than $250 million in annual bonuses to 400 of its top executives.

Since nearly collapsing late last year, the insurer has received nearly $300 billion in government bailout money, and just weeks ago it posted the worst quarterly loss in US corporate history.

President Barack Obama's top economic adviser, Larry Summers, says the payment of the bonuses is outrageous.

"Every legal step possible to limit those bonuses is being taken."

AIG chief executive, Edward Liddy, says while he finds the large bonuses distasteful, he insists the insurer is legally obliged to pay them.

US lawmakers say it is unclear what, if anything, the government can do to recover the bonus money from the insurance giant or cut the bonuses since the contracts seem legally binding.

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There cannot be "set contracts" on bonuses. Set contracts on bonuses defeat the purpose of performance. Otherwise such contracts become part of payee salary except in name in order to make the extra outrageous payments appear to be performance related when they are simply disguised payola mayola.

And performance was dismal. Imagine US$170 billions bailout moneys!!! that's eight times the entire rescue package of the Aussie government to its people (A$42 billions). In other industries these execs would have been long sacked, with a boot up the fundamentals... In the olden days they'd be given a one-way ticket to smash rocks in Alcatraz...

And they won't have any ethical dilemma taking the bonus, will they?

The European Union has agreed a deal placing new limits on bankers' bonuses from next year.

Under a deal agreed with the European Parliament, bankers will receive no more than 30% of their bonus immediately and in cash, or 20% for larger bonuses.

The remaining bonus payments will be delayed and linked to long-term performance, with 50% paid in shares.

Hedge funds will also be covered by the new rules, the BBC has learned.

That will place the pay of hedge fund managers in the City of London under regulation for the first time, the BBC's business editor Robert Peston said.

"The new rules won't make a big difference to bankers based in London," he said.

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see toon at top...

By SEWELL CHAN

WASHINGTON — Ben S. Bernanke, who told Congress in 2007 that the subprime mortgage crisis was “likely to be contained,” said Thursday that he had failed to recognize flaws in the financial system that amplified the housing downturn and led to an economic disaster.

Under pointed but polite questioning from members of the Financial Crisis Inquiry Commission, Mr. Bernanke, the chairman of the Federal Reserve, signaled that the central bank was eager to embrace its expanded powers under the Dodd-Frank financial regulatory law that President Obama signed in July.

Mr. Bernanke spoke favorably of forcing huge banks to hold much more capital, particularly if they were systemically important — so much capital that being big would be costly. He declared that “for capitalism to work,” executive pay had to be linked to performance. And he said Americans were justifiably angry that bankers “who drove their companies into a ditch walked off with lots of money.”

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Gus: Geez!!! one could see the flaws in the banking system from space... Only people too close to the financial sector were not seeing the big holes in the boiler because they were too busy attending the furnace. See toon at top...

Anger is sweeping America. True, this white-hot rage is a minority phenomenon, not something that characterizes most of our fellow citizens. But the angry minority is angry indeed, consisting of people who feel that things to which they are entitled are being taken away. And they’re out for revenge.

No, I’m not talking about the Tea Partiers. I’m talking about the rich.

These are terrible times for many people in this country. Poverty, especially acute poverty, has soared in the economic slump; millions of people have lost their homes. Young people can’t find jobs; laid-off 50-somethings fear that they’ll never work again.

Yet if you want to find real political rage — the kind of rage that makes people compare President Obama to Hitler, or accuse him of treason — you won’t find it among these suffering Americans. You’ll find it instead among the very privileged, people who don’t have to worry about losing their jobs, their homes, or their health insurance, but who are outraged, outraged, at the thought of paying modestly higher taxes.

The rage of the rich has been building ever since Mr. Obama took office. At first, however, it was largely confined to Wall Street. Thus when New York magazine published an article titled “The Wail Of the 1%,” it was talking about financial wheeler-dealers whose firms had been bailed out with taxpayer funds, but were furious at suggestions that the price of these bailouts should include temporary limits on bonuses. When the billionaire Stephen Schwarzman compared an Obama proposal to the Nazi invasion of Poland, the proposal in question would have closed a tax loophole that specifically benefits fund managers like him.

Now, however, as decision time looms for the fate of the Bush tax cuts — will top tax rates go back to Clinton-era levels? — the rage of the rich has broadened, and also in some ways changed its character.

http://www.nytimes.com/2010/09/20/opinion/20krugman.html?ref=general&src=me&pagewanted=print

see toon at top...

Barclays' takeover of much of Lehman Brothers' US operations in 2008 was flawed but fair, a judge in New York has ruled.

Lehman had sued Barclays for $11bn (£6.8bn) in damages, claiming the bank was given special treatment.

However, while the judge said the sale process was "imperfect", it was still "adequate" under the circumstances.

Barclays bought Lehman's US operations in a hastily-arranged sale at the peak of the credit crisis in September 2008.

Averting 'calamity'

Lehman agreed to sell its US investment banking and broking arm for $1.85bn five days after it filed for Chapter 11 bankruptcy protection.

That, and the fact Lehman was the highest profile bank to be allowed to fail, was one of the most significant events of the global crisis.

Lehman's bankruptcy estate had hoped to extract an $11bn "windfall" payment from Barclays.

http://www.bbc.co.uk/news/business-12549242

see toon at top...

The legendary musician, Ry Cooder’s, tells Robert Scheer that his new album, including a song inspired by one of Scheer’s Truthdig columns, was written out of feeling frustrated, helpless and angry with current events.

Listen to the first track, “No Banker Left Behind,” previewed exclusively on Truthdig, and a discussion about the new album on Truthdig Radio below. Let us know here if you want to be alerted when tickets go on sale for a Ry Cooder concert in September benefiting Truthdig.

http://www.truthdig.com/arts_culture/item/exclusive_ry_cooders_no_banker_left_behind_20110526/

see toon at top...

The chief of the General Services Administration is resigning and two of her top deputies have been fired amid reports of excessive spending at a training conference at a luxury hotel that featured a mindreader, a clown and a comedian.

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Nothing new here... Most "business" conferences are strewn with fortune-tellers (stock market experts and real estate agents), many clowns (people hoping to learn how to make a buck while sitting in the audience) and plenty of comedians (PR personnel promoting the conference)... The only difference here, they make you pay for the privilege of being in the room, while on that GSA occasion you might have been paying without being invited...

Corporate jets, private-school fees and medical insurance are among the millions of dollars in executives perks paid out by the nation's biggest companies.
While a string of top executives have said they were prepared to forgo bonuses or take a cut to base salary in the face of the tough economic climate - many continue to enjoy rich non-cash benefits that come with the role.
At Coca-Cola Amatil, executives were treated to more than $1.3 million worth of perks last fianancial year including a corporate car, club membership and company products - presumably of the fizzy variety.

Read more: http://www.smh.com.au/business/torrent-of-perks-keep-execs-in-the-pink-20120906-25fnw.html#ixzz25erUMNkj

See toon at top...

HEINZ CEO William Johnson is entitled to a golden parachute worth $US56 million ($55.27 million) if he's fired by the company's new owners.

Warren Buffet's Berkshire Hathaway and 3G Capital announced last month they are buying the tomato sauce maker for $US23.3 billion. 

US banking giant JP Morgan is set for a record $13bn (£8bn) fine to settle investigations into its mortgage-backed securities, US media reports say.

A tentative deal is believed to have been reached in talks with senior US justice department officials.

The sale of overvalued mortgage-backed securities was blamed for the near-collapse of the banking system in 2007.

Last month, JP Morgan was fined almost $1bn in a separate case over the "London Whale" trading debacle.

The scandal arose from disastrous trades by former bank employee Bruno Iksil, who made big bets on the financial markets.

Risky assets

The tentative deal to pay the $13bn fine to the justice department was reached during the talks on Friday, between JP Morgan lawyers with US Attorney General Eric Holder and his deputy Tony West, the Wall Street Journal said, citing officials familiar with the decision.

http://www.bbc.co.uk/news/business-24599345

Should a boiler maker steal a couple of washers from his employer, he'd be put in jail for it. But so far NOT A SINGLE BANK EXECUTIVE has been sent to prison for having started — or participated in — the bush fire that destroyed the world economy... Sure their defense could be that "they were following" orders, instructions, recommendations or laisser-faire inspired by Greenspan, but this should not wash the dirty linen... Their criminal behaviour was launched by greed — and greed only. Contrarily, the boiler-maker need to fix a leaking vessel at home, a vessel he cannot replace with his daily pittance from the shipyard...

See toon at top...