The $700+ billion government sweetheart deal[1] for the Street of Broken Dreams is already paying dividends for the insiders. The Guardian reports that financial firm employees can expect discretionary Christmas bonuses and pay worth $70 billion at the time of the worst global financial crisis since 1929. Staff at six of the banks in line for government handouts are waiting to cash in on your tax money. The sums seem unrelated to their firms' performances too. Shares in Citigroup and Goldman Sachs have declined by more than 45% over the year. Merrill Lynch and Morgan Stanley shares have fallen by more than 60%. JP MorganChase fell 6.4% and Lehman Brothers is no more. Bonus pots at these institutions are enormous by Main Street standards (in billions): Goldman Sachs $10.73, Morgan Stanley $10.7, JP MorganChase $6.53, Merrill Lynch $11.7 and days before it collapsed into bankruptcy Lehman Brothers had planned payouts of $6.12. The pregnant question is of course why this hoard of money is not being put up to cover capital requirements in the "liquidity crisis" situation[2].And if fat pay packets at your expense are not enough to send you to the polls check out what is happening at AIG, the insurance company the US government just rescued for $123 billion in loans. Last month AIG drew criticism when news emerged it had picked up the tab for a $440,000 week long retreat at a luxurious California resort for top-performing insurance agents. Nevertheless, AIG execs had the nerve to go on a partridge shoot in the north of England for a cool $86,000 each. One of the happy hunters told an undercover reporter from London's News of the World that, “The recession will go on until about 2011, but the shooting was great today and we are relaxing fine.” Adding insult to injury, AP is reporting that Freddie Mac paid a lobbying firm in DC $2 million to defeat a regulatory bill sponsored by Republicans when that party controlled the Senate in 2005. DCI targeted 17 Republican senators in 13 states during its campaign to kill the bill. According to Freddie Mac employees the DCI campaign was a stealth job that only a few dozen people knew about. DCI's chief executive is Doug Goodyear who the McCain campaign hired to manage the convention in St. Paul. McCain's campaign manager, Rick Davis, or his lobbying firm has taken more than $2 million from Fannie Mae and Freddie Mac dating back to 2000. One way or another its always Christmas for the "masters of the universe". Ditto MoDo--il faut que les tetes roulent.
[1]Here’s how much of the $125billion in additional capital the Fed’s Primary Dealers (government authorized open market participants) will collect: Citigroup, $25billion; JPMorgan Chase & Co., $25 billion; Bank of America and its soon to be acquired brokerage, Merrill Lynch, $25 billion; Goldman Sachs, $10 billion; Morgan Stanley, $10 billion. In other words, of the first $125 billion outlay from the emergency stock purchase fund of $250 billion, 76% is going to shore up the government's bond brokers and $300,000 is going to retain one of Wall Street’s favorite law firms to oversee the program.
[2] The crisis is one of confidence not liquidity. There is so much bad debt in the market that potential lenders with money prefer to hold it or invest in risk-free securities. Twenty of the nation's largest financial institutions owned a combined total of $2.3 trillion in mortgages as of June 30. They owned another $1.2 trillion of mortgage-backed securities. And they reported selling another $1.2 trillion in mortgage-related investments on which they retained hundreds of billions of dollars in potential liability, according to filings the firms made with regulatory agencies. The numbers do not include investments derived from mortgages in more complicated ways, such as collateralized debt obligations. These three categories of mortgage-related financial instruments add up to a $4.7 trillion obligation for the twenty largest financial institutions.