- Big Pay Packages Return to Wall Street
Compensation on Track to Soar as Earnings Recover From Crisis; 'Like It's 2007 Again'
(http://online.wsj.com/article/SB124649352055183157.html#mod%3Dtodays_us_money_and_investing%26project%3DBONUSES0907%26articleTabs%3Dinteractive)
- ADP Estimates U.S. Companies Cut Payrolls by 473,000
http://www.bloomberg.com/apps/news?pid=20601087&sid=a5utvno88qDM)
OK, so the investment banks are now officially bank holding companies and are supposed to be levered considerably less than the dangerous 30:1 leverage ratios before the big crash. But just today a Barclay's analyst comes out and says that Goldman Sachs sees no limits on leverage and no reason to pull back on any of its business lines. That's a convenient line of thinking for a firm that now has access to the Fed's discount window and can effectively print money for themselves on the spread between short and long-term yields driven primarily by the administration's stimulus policies. Let's not forget the short-term rates have been artificially suppressed by government actions and long-term rates are reflecting concerns about inflation as a result of the same actions. The circularity of this is astounding.
Back in September when the conversion by the two remaining investment banks to bank holding companies was announced and there was financial blood all over the Street, the New York Times ran an article with the following:
"It also is a turning point for the high-rolling culture of Wall Street, with its seven-figure bonuses and lavish perks for even midlevel executives. It effectively returns Wall Street to the way it was structured before Congress passed a law during the Great Depression separating investment banking from commercial banking, known as the Glass-Steagall Act."
(http://www.nytimes.com/2008/09/22/business/22bank.html)
Hmmmm....sounds like we've got a disconnect between what was supposed to happen and what is actually happening. Goldman's basically saying it's business as usual against a backdrop of worsening labor, housing and general economic conditions that's raising the spectre of a second stimulus package. When I think hard about this my mind hurts. The general population is getting kicked in the proverbial nuts over and over again while the Lords of Wall Street jump on the back of the government and stroll merrily unencumbered by the concerns of the common man. And as the year progresses and awareness of this grows, I sense we're in for a pretty significant populist uprising. All I really know though is this just ain't right.
