Goldman Sachs earnings far exceed expectations
Washington Post
By Tomoeh Murakami Tse
January 21, 2010Goldman Sachs on Thursday reported earnings of $13.4 billion and a compensation pool of $16.2 billion for 2009. The results represent a remarkable recovery for Goldman Sachs, which emerged from the financial crisis ahead of rivals as it booked handsome profits from trading activities as markets recovered. The compensation pool – which includes salary and benefits but is largely for year-end bonuses – translates to an average payout of $498,000 per employee, although rainmaker traders and bankers will earn millions. The average pay amount is up 37 percent from 2008, although lower than the pre-crisis level in 2007.
Compensation at large banks has been under intense public scrutiny as the country struggles with double-digit unemployment rate in the wake of an economic crisis that many lawmakers contend was fanned by excessive risk-taking on Wall Street. That the average Goldman employee will pocket half a million dollars is sure to draw additional fire, and the firm sought to play down the figure. Goldman noted that its compensation pool represented 36 percent of its revenue, the lowest ratio since it became a public company in 1999. Last year, Goldman set aside 49 percent of its revenue for compensation and benefits, which is typical for the industry…
Obama Moves to Limit ‘Reckless Risks’ of Big Banks
The New York Times
By SEWELL CHAN and ERIC DASH
January 21, 2010Declaring that huge banks had nearly brought down the economy by taking “huge, reckless risks in pursuit of quick profits and massive bonuses,” President Obama on Thursday proposed legislation to limit the scope and size of large financial institutions.
The changes would prohibit bank holding companies from owning, investing, or sponsoring hedge fund or private equity funds and from engaging in proprietary trading — what Mr. Obama called the Volcker Rule, in recognition of the former Federal Reserve chairman, Paul A. Volcker, who has championed the restriction. In addition, Mr. Obama will seek to limit consolidation in the financial sector, by placing curbs on the growth of the market share of liabilities at the biggest firms. An existing cap, put in place in 1994, put a limit of 10 percent on the share of insured deposits that can be held by any one bank. That cap would be expanded, officials said, to include liabilities other than deposits.
Both changes require legislation by Congress, and Republican leaders, as well as the banking industry, signaled on Thursday that they would resist the proposals. Mr. Obama, speaking in the Diplomatic Reception Room at the White House, said he anticipated such opposition, saying an “army of industry lobbyists” had already descended on the capital to oppose regulatory reform. “If these folks want a fight, it’s a fight I’m ready to have,” he said…
It makes perfect sense. If investors want to put their money in the hands of "rainmakers" who are paid these huge bonuses, that’s fine. But to give such people access to all the money in Banks is asking for trouble [the kind of trouble we currently have]. The Act further limited the size of Banks. The story of its demise is an American Tragedy:
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