Bailout Bonuses For Investment Bank Execs

CBS Evening News: Despite Taxpayer Bailout, Wall Street Firms Plan To Dole Out $14 Billion In Year-End Bonuses

http://www.cbsnews.com/stories/2008...in4612647.shtml

11/18/2008

(CBS) One of the recipients of the taxpayer bailout is still struggling. CitiGroup said Monday it plans to cut 53,000 jobs by early next year, one of the largest layoffs ever by an American corporation.

And what about the big bonuses Wall Street executives count on at this time of year?

Despite massive layoffs, dismal earnings reports, and a rescue check from the federal government, CBS News correspondent Priya David reports Wall Street investment firms still plan to hand out roughly $14 billion in year-end bonuses.

Now the industry leader, Goldman Sachs, has announced its top seven executives will forgo bonuses, stock and option awards this year, compensation packages totaling more than $300 million. Banking giant UBS followed suit.

"They've received billions of dollars from the public and to receive bonuses in the face of all that would have appeared to be piggish," said compensation consultant David Schmidt of James F. Reda & Associates.

Schmidt says Goldman Sachs was under tremendous pressure to cut bonuses, but it may just be a drop in the bucket compared to smaller bonuses thousands of rank-and-file employees get.

In light of today's job cuts, New York Attorney General Andrew Cuomo is calling on CitiGroup and AIG executives to drop their bonuses too.

"People are upset, and with good cause," Cuomo said. "You have people who have seen their life savings go out the window, and they did nothing wrong here.

"They were then called on for a trillion dollars to bailout the institutions that caused the problem in the first place."

More than excess, analysts say it's the compensation structure that's partly to blame for Wall Street's meltdown, a system that encouraged risky behavior to get bonuses.

"The more money you can bring in to the firm, the more you're gonna receive in terms of bonus," Schmidt said. "For those who are making those deals, if for some reason those deals don't work out, the personal repercussions are probably not what they should be."

Analysts say these executive bonus cuts are mostly a public relations maneuver, a rare case on Wall Street where taking less means more.