Boo Hoo

TW: To me these columns are risible. Colvin "educates" us with the profound notion that Wall Street bonuses are forward looking and since Wall Street will recover before the general economy that bonuses will become appropriate for Wall Street bankers shepherding those forward looking markets. I agree markets are in fact forward looking.

But one question if Wall Street bonuses are so damn forward looking why were they being paid out hand over fist in 2005, 2006, 2007 and even early 2008 into the face of the worst Wall Street performance in 60 years.

This is the tails I win, heads you lose proposition that continues to perplex and infuriate folks outside Wall Street. Now that some semblance (although certainly tenuous) of normalcy is returning to the financial markets. The usual suspects are berating TARP, "guvmint" and any sort of regulatory reform. In other words thanks for bailing our asses out of the fire, don't let the door hit you in the ass.

From Geoff Colvin at Fortune:
"...before we institute public floggings for bankers, let's take a closer look at who or what is really to blame.

At the root of the public's anger is a timing issue: In recessions the stock market tends to anticipate the recovery by six to nine months. That means that business at Wall Street firms, including those that accepted TARP money, will pick up while most of the country is still suffering. So Wall Street employees who are paid in part through bonuses will see those bonuses rise from last year's deeply depressed levels.

At the same time, overall unemployment generally does not improve until the end of a recession or even later. So for many months to come, maybe a year or more, Americans will be jobless in growing numbers while Wall Street firms will be hiring and paying more - with taxpayers' dollars - and Washington will be caught in the middle.

That means we'll see many days when headlines carry bad news for workers and good news for bankers...

Why shouldn't Wall Street be punished? Because it would be bad for the country. Now that all of us taxpayers own a piece of the banks, thanks to the Bush and Obama administrations' bailouts, we need our investments to pay off. It's in the immediate interests of taxpayers, and in the longer-term interests of the economy, for Bank of America (BAC, Fortune 500), Citigroup, Goldman Sachs (GS, Fortune 500), and the rest to do well financially. The more money they make, the sooner they can pay back the Treasury and focus fully on their necessary roles in the economy.

Restoring profitability to the banks will require paying bonuses. The only way these firms succeed is with superior human capital, and the way they get it is by paying for it. Plenty of global financial firms did not take TARP funds, and they can pay what they like. Analyze the first-quarter results of Credit Suisse (CS), Deutsche Bank (DB), CIBC, and others that compete with TARP recipients, and you'll find that they, too, are paying their people more.

The results are just what you'd expect. "Citi is hemorrhaging people, and the government restrictions are making it worse," says Alan Johnson, a compensation consultant whose clients include many Wall Street firms. "I have clients who are not TARP recipients and who are giddy that they can now steal people like they never could before..."
http://money.cnn.com/2009/05/12/news/economy/colvin_wallstreet.fortune/index.htm