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Goldman paves the way for return of mega bonuses
Hugo Duncan and Nick Goodway14.04.09
BANKS are poised to start handing out multi-million-pound bonuses despite claims that excessive pay helped to fuel the global financial crisis.
Government bail-outs of failing institutions and a backlash against bankers saw bonus payments slashed last year as the world economy dived into recession.
But the curb on earnings looks to be short-lived after Goldman Sachs today paved the way for bumper payouts to staff in London and New York following better-than-expected results.
Liberal Democrat Treasury spokesman Vince Cable told the Standard: "I'm deeply concerned that they seem to have learned nothing from experience.
"It was the bonus culture that led these institutions into taking high risks which led to their collapse or near-collapse.
"They are ultimately dependent on guarantees from the taxpayer. They may claim to have paid off whatever taxpayer help they received but they ultimately depend on being bailed out by the Government if their position becomes untenable." Goldman Sachs indicated it would repay money borrowed from the US government, freeing it from restrictions on executive pay.
A large proportion of the payouts are likely to be in shares rather than cash to promote long-term success.
It could lead to unprecedented windfalls for bankers when shares rally from their current lowly levels. Goldman reported profits of $1.81billion in the first quarter of the year compared with $1.51billion in the same period of last year.
Other banks around the world are likely to argue they need to follow suit in order to attract and retain the best people.
Goldman chief executive Lloyd Blankfein is one of the strongest advocates of banks being allowed to resume paying bonuses. He is reported to have told him that a cap on pay "was going to limit our ability to compete, both here and aboard".
It comes after Gordon Brown and other world leaders used the G20 summit to argue that the days of large bonus payments were over. British banks which have been bailed out by the Government, including Royal Bank of Scotland and HBOS rescuer Lloyds Banking Group, were forced to cut bonuses or scrap them.
Barclays turned down all offers of government help and will next week outline its new pay structure at its annual meeting.
It will still allow it to reward top investment bankers with huge pay-outs but more of it is likely to be in shares than cash.
US Federal Reserve chairman Ben Bernanke tonight said the latest figures on housing and consumer spending suggested the rapid contraction in the economy could be easing. "Recently we have seen tentative signs that the sharp decline ... may be slowing, for example, in data on home sales, homebuilding and consumer spending, including sales of new motor vehicles," he said.However, disappointing figures from the US high street showed retail sales fell 1.1% in March.
Reader views (25)
Martin_Clerkenwell, london. Your correct they didnt want the bail out money but took it anyway,why? It wasnt to send fear around the markets driving shares down so they could buy all the shares at a nice cheap price? POW! as if by magic they are making loads of profit again!Even a blind man can see this is manipulation of the markets on a grandiose scale.The taxpayers should not stop the pressure on the bankers until gordon brown starts jailing them.Blankfien being public enemy #1!At worst people, we have the comfort of knowing that if these dogs wriggle out of doing some jail time they are certain to burn in hell.
- Chris, London
funny isn't it, even in response those claiming to see perfectly can only respond in empty generalities and platitudes.
when plain speaking is dimissed as obfuscation, either the point is missed or a thesaurus has been recently purchased!
- Scott, london
Come on people these bankers are not Criminals. How can they be?They wear expensive suits, drive nice cars and live in luxury.We all should work a great deal harder to make sure these bankers can get what they want, maybe the nurses, teachers etc should take a pay cut.It is proposterous that they cannot afford to install gold taps in their third bathrooms.We must rally behind our moral superiors maybe even start a charity for the poor blighters.
- Chris, London
Goldman's did not want the bail out and are now paying it back.....GS continues to impress
- Martin_Clerkenwell, london
Actually, those numbers are a complete fraud (surprise surprise!) Goldmans just shifted from a November year end to a December year end in time for this result. Consequently those results do not cover December at all (it just dropped off the radar!) - with it in place they were well DOWN on last year - despite the US government shoveling money at them under the counter!!!!!
- Disagree, Bangkok
The rich and upper middle class need to be taught a lesson. Even now they continue to believe they have a right to the wealth of the country.Its time the working class fight for justice and equality.A political party for the majority is needed,were bonuses are taxed at 95%,expenses for doing ones job are abolished,and a maximum wage is introduced being no more than 15 times that of minimum wage.Viva the people,Viva the working class.
- David, london
Labour just wants to reinflate the bubble and get house prices booming again in time for next year's general election. Gordon Brown's talk of new regulations and responsibility in the banks and financial sector was exactly that - talk. No new laws have been passed and no new regulations imposed! The state owned banks are already starting to offer 120% mortgages all over again. Labour's approach is to print money, borrow money and let the bankers do as they please - anything to get the economy roaring again, even if it is all based on borrowed money and recycled loans. They don't care about the long term problems this will pile up for the economy, they just want to stay in power.
- Mike, London UK
Re. the "Debt Crisis", or should it be called "The Greatest Wealth Grab in History"?
You may already have heard of this website http://www.goldmansachs666.com/
Note that they are also looking for contributions for a book called "How Goldman Sachs Destroyed the World".
I have heard lots of things about GS, but I don't know what's true because no agency has ever had the guts to investigate them properly.
- Kate, London
Scott says "Part of the recovery will involve paying bonuses to the people responsible. wishing otherwise is cutting off your nose to spite your face".
How about all those still on the gravy-train who were "responsible" for the mess we're in? "Part of the recovery" might well be doing after the property, wealth, and fat pensions funds built up by these criminals who ruined lives gambling with other peoples' money, then shrugged when it all went pear-shaped.
Sounds like "heads, we lose; tails they win", to me.
And James: if you see "nothing wrong" with this money-grubbing "culture", then you have a serious problem, because you've learnt nothing.
- Croyboy, Croydon
"the uneducated masses"
Presumably Scott, London, it is therefore our responsibility as such a gifted minority, to educate them ?
Maybe the more people who can tell the difference between revenues generated against fantasy assets, courtesy of 'mark to myth' valuation procedures(c.MR) and revenues generated against good old fashion banking practices, the better for all of us
- John Bloomfield, Twickenham
Proof - as if any more were ever needed - that arrogance and ignorance go hand-in-hand
- Jason, London, England
Scott in London is trying to do a great job for the status quo suits, but it doesn't wash old boy. We see through it. A solid reward for a job well done is fine, but millions in bonuses for falling asleep on the job and driving a business into the ground just ain't on. Ignorance, Scott? Your attempts at obfuscation are transparent.
- Ben Adamson, New York, NY
Another thing -allegedly they were forced to take the TARP and want to pay it back. Well how come they don't mention all the TARP money they appropriated from AIG???
- Ralph Jolly, chicago usa
What a hoot -record profits at GS and Wells Fargo!
Seriously, apart from the stock market pimps everyone in the financial community thinks this is hilarious.
How miraculous that a business that wasn't viable and indeed bankrupt only a few months ago is now reporting massive profits!!!
I've got a radical idea -how about we pay bonuses to successful people and not the architects of economic depression and those that have decimated the financial landscape?
- Ralph Jolly, chicago usa
the uneducated masses who would rather the banks didn't make money, as every bit as culpable for this recession as the guys in the city. a lack of capital to fund economic expansion has brought the UK to its knees, and it will only be greater activity in the financial sector that will drag it back - which is what is meant when the government talks of a systemic need to bail out the banks. Part of the recovery will involve paying bonuses to the people responsible. wishing otherwise is cutting off your nose to spite your face.
in fact, it could be argued very strongly that if where we are now is the natural and correct equilibrium (as many have done) then it is due to the actions of the banks that we ever had anything to lose.
and that's without reminding the white van masses that in each case when the government has nationalised banks over the last century or so they have made substantial profits.
hell its ignorance like this, that leads me to sympathise with the credit derivative mob.
- Scott, london
Same old story,same old capitalist nonsense.If the Bankers are worth bonuses im dam sure the Teachers who educate my kids are,and im dam sure the Doctors and Nurses are that saved my old mothers life last year are,come to that I'm dam sure the postman is who delivers my mail,and the guy who keeps my street clean,and,and and and,pull the other one.COME ON THE WORKING CLASS.
- Kev, London-UK
Goldman has been profitable throughout this mess and they are repaying all TARP money which they did not want in the first instance. Bonus's are paid out of profits so nothing wrong here at all.
- James Macleod Ritchie, Oyster Bay Cove
Why is there something strangely comforting about hearing this news?
- George, London
This news makes the 10% demand by School Teachers small pickings,COME ON the Teachers.
- Colin, Bristol
Here we go again, and how long before we have to bail them out again... Pigs the lot of them, the sob story of all those hours you have to work doesnt wash with people who earn an honest and decent living....
- Dc, Ealing, London
It would be nice if Dave and George instead of behaving like startled Maiden Aunts aat a Pop Concert told us what they intend to do about Banking Salaries and Bonuses and who is going to be punished with cuts in services and Tax increases to pay for the Banker's appalling performance . I'm sure that the Tories won't touch the Bankers, just normal earners and pensioners.
- T Taylor, Acton England
As Talleyrand said of the Bourbons, the bankers have "learned nothing and forgotten nothing", and we know what happened to the Bourbons!
- Roy, England
These people are not only greedy but mad. In order for a Banker to get out of bed he needs not only a huge salary, a massive bonus even when he fails, but also low taxes to prove that the rest of us really respect him. Don't these people realise how much the majority of Tax-payers detest Bankers and hope that there is a God so that they end up suffering eternal punishment in the fires of Hell.
- T Taylor, Acton England
Surely this will come as no surprise to anyone “will it” after all banks pay bonuses even when they make loses.
- Mike Melbourne, Bedford England
Again Vince Cable is right, 'I'm deeply concerned that they seem to have learned nothing from experience.'
So much for clampdown talked at the G20 talks, its sending out the wrong vibes. GREED GREED GREED
- Carlo Cusano, Bedford
