Wall Street awards itself billions in Christmas bonuses

Link: Wall Street awards itself billions in Christmas bonuses.

Wall Street is awarding itself tens of billions in bonuses this winter. The fantastic amounts of money being handed out to investment bankers, securities traders and the like is symptomatic of the vast social divide that blights every aspect of American life.

Investment bank Goldman Sachs is leading the pack. The firm reported an increase in quarterly earnings of 93 percent and will distribute some $16.5 billion in bonuses to dozens of its bankers and traders. The top “rainmakers,” as they are called, will each take home as much as $20 to $25 million just in bonuses, “while traders who booked big profits will take home a chunk of those profits, up to $50 million apiece,” according to a December 13 article in the New York Times. The report cited the comment of one New York-based investment firm, “Anyone at the bonus line at Goldman Sachs died and went to bonus heaven. It doesn’t get any better than this.”

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The staggering figure of $100 billion in total bonuses is more than twice the annual budget of the US Department of Housing and Urban Development and nearly twice the US Department of Education budget. Washington spends $20 billion annually on foreign aid to the entire world. The yearly budget of the City of New York, which employs 250,000 people, amounts to $50 billion.

The $16.5 billion in bonuses at Goldman Sachs alone is more than New York City pays to educate 1.1 million children in its schools, the largest local school budget in the US. Goldman Sachs is giving out more in year-end financial rewards than the federal government spends on the nation’s largest low-income housing program, the Housing Choice Voucher Program ($15.9 billion), which covers some 2 million households.

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In 2004, in the “richest city in the world,” an estimated 1.2 million people, including 400,000 children, lived in hunger or in households where having sufficient food was always in question.

In 2005, the top fifth of Manhattan’s earners reported making $330,244—about 41 times more than the $8,019 reported by the bottom fifth. The Bronx remains the poorest urban county in the country, with more than half of its households headed by a woman and including young children who live below the poverty level.

As is the case with every other social phenomenon, there are two holiday seasons in the US, one for the wealthy elite and another for the overwhelming majority of the population. The gap is registered by every significant social barometer.

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A report from the Center on Budget and Policy Priorities points out that the disparities in consumer expenditure among households at different income levels were greater in 2005 than in any year on record. The top fifth of households made 39 percent of all consumer expenditures in 2005, the highest share on record. The bottom 20 percent of the population made only eight percent of the expenditures, tied with 2004 for the lowest share ever.

Comments

[Scott Hughes]

It's the poor and hunger, namely the working poor, who I'd like to see get the money. Unfortunately, the hunger and poverty epidemics cannot be ended simply by throwing money and other resources at them. We also need to utilize wisdom, (non-governmental) organization, voluntary cooperation, and persistence.

Thanks,
Scott Hughes
http://forums.millionsofmouths.com

[john buell]

If one is going to address the massive inequalities in wealth to which Jodi's provocative post refers, there are at least two tasks. 1)Mainstream media portray these vast bonuses as rewards for extraordinary contributions to the productivity of our business enterpirses and thus as beneficial to the rest of us. If one taxes away or otherwise limits these bonuses, then these cleaver financial types will not have the incentive to work their magic. I think there are two answers to this line. There is no evidence that at least modest increases in the progressivity of the tax structure has a negative bearing on work effort. But secondly, many of these bonuses go for orchestrating mergers and acquisitions that not only often do not enhance but often detract from the productivity of the overall economy. The same can be said for many of the IPOs that are the carling of Wall Street. Readers of this blog might be interested in Doug Henwood's book, Wall Street and in his regular monthly newsletter, Left Business Observer. I think Henwood is the most subtle and wideranging left economic journalist going today.

Secondly, the larger dilemma here is that large numbers of Americans think they are going to become rich, even very rich. This aspirational politics stands in the way of conventional liberal or social democratic impulses and I am not sure what to do about this. I do think that arguments about fair taxation as a way of expanding equality of economic opportunity may have some purchase. I also think that many Americans still care about fairness and about meeting promises. One of the adverse effects of some of the financial manipulations is that pension obligations are scrapped, and the loss of these pensions in turn leads to the quest for individual riches. So for lots of reasons left and liberal types need to focus on what is happening to pensions. They also need to address the very flawed right wing argument that Social Security is going under.

[rwilson]

John,

Bonuses are taxed at 48% and Social Security is more screwed up than Iraq.

[Julio Urgel]

2006 Wall Street Bonus Survey

www.wsren.org/career