CEO of Goldman says bankers are overpaid & there also should be clawback of salaries

Discussion in 'Wall St. News' started by ByLoSellHi, Sep 9, 2009.

  1. Well, what can one say?

    Goldman’s Blankfein Calls for Pay Rules to Stem Risk (Update2)
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    By Aaron Kirchfeld and Jann Bettinga

    Sept. 9 (Bloomberg) --
    Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein said multiyear guaranteed contracts for bankers should be banned and the “clawback” of pay should be permitted to discourage excessive risk-taking.

    Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein

    The portion of pay in stock should rise “significantly” as compensation increases, senior bankers should get most of their pay in deferred equity and top executives should be required to retain the bulk of the equity until they retire, Blankfein also said at a banking conference in Frankfurt today.

    “Compensation continues to generate controversy and anger,” Blankfein said. “And, in many respects, much of it is understandable and appropriate. There is little justification for the payment of outsized discretionary compensation when a financial institution lost money for the year.”

    New York-based Goldman Sachs fueled criticism of pay practices on Wall Street when it set aside a record $11.4 billion for compensation and benefits in the first half of 2009. G-20 finance ministers and central bankers agreed in London last weekend to a blueprint for changes to financial-services regulation, including global standards on compensation that call for clawbacks and pay based on longer-term performance.

    Governments in the U.S. and Europe are facing popular pressure to curb bankers’ pay after financial institutions, including American International Group Inc. and Royal Bank of Scotland Group Plc, were bailed out by taxpayers following the U.S. subprime mortgage crisis in 2007. Since then, financial companies have announced more than $1.6 trillion in writedowns and losses, according to data compiled by Bloomberg.

    Banks Are ‘Healing’

    Blankfein previously laid out the firm’s compensation principles at the May 8 annual shareholders meeting in New York.

    The 54-year-old CEO agreed not to take a bonus last year after being awarded a record $68.5 million in salary and bonus for 2007. The firm, which took $10 billion in U.S. rescue funds last year, has repaid the government’s bailout money along with $426 million in dividends to taxpayers.

    Goldman reported record second-quarter earnings as revenue from trading and stock underwriting reached all-time highs.

    Financial markets are “in recovery,” banks are “healing” and the worst of the crisis is “off the table,” Blankfein said. Goldman is operating with lower leverage, fewer risky assets, and “consequently much lower risk,” he said.

    Lehman Rescue?

    Lehman Brothers Holdings Inc.’s bankruptcy almost a year ago, the biggest in U.S. history, led to panic in credit markets. Blankfein said a state rescue of Lehman might have led to another, even bigger company being allowed to fail instead. A day after Lehman’s collapse the Federal Reserve stepped in to rescue AIG, enabling companies including Goldman Sachs to receive money they were owed by the insurer.

    A bailout of Lehman Brothers might have provoked a public backlash, causing the government “to let the next institution fail” instead, Blankfein said during a question-and-answer session after the speech. “It might have been a much bigger one with much more dire consequences.”

    Goldman supports the move to central clearinghouses and exchange trading of standardized derivatives as a way to reduce “bilateral credit risk, increase liquidity and enhance the level of transparency,” the Goldman CEO said.

    While all liquid over-the-counter derivatives should be centrally cleared, it’s more difficult to define what should be traded off an exchange, Blankfein said. In less liquid markets, prompt reporting of aggregated pricing and clearing are need to boost transparency, he said.

    Shouldn’t Outlaw Risk

    “The industry let the growth and complexity in new instruments outstrip their economic and social utility as well the operational capacity to manage them,” Blankfein said.

    The Obama administration is working on a plan to help gain oversight and control of the market for derivatives traded over the counter. The so-called OTC market consists of privately negotiated contracts that enable companies or investors to hedge against or bet on swings in the value of bonds, interest rates, currencies, commodities or stocks. Unlike exchanges, the business is unregulated and prices aren’t public.

    The Obama plan would require that the most common, or standardized, OTC derivatives be processed through clearinghouses, whose members would make good on trades in the event any of them default.

    Better Regulation

    Blankfein said calls for a wholesale reform of the regulatory regime are appropriate after the financial crisis, though he warned against completely outlawing risk because it would hurt innovation and economic growth.

    We should resist a response “that is solely designed around protecting us from the 100-year storm,” Blankfein said. “Taking risk completely out of the system will be at the cost of economic growth.”

    Abandoning instead of regulating market instruments such as derivatives would also limit access to capital and the protection against and distribution of risk, he said.

    “The public policy goal is to retain the economically valuable attributes of these markets, while mitigating the systemic risk they pose through the right infrastructure and incentives to manage it,” Blankfein said. He recommended more “rigorous” capital requirements for customized derivatives.

    The most effective ways to avoid risks in the future include requiring financial companies to reflect all their investments in their profit and loss accounts, and the implementation of fair-value accounting, Blankfein said.

    Coordination of regulatory authorities within and between countries and the sharing of information, helped by organizations such as the Financial Stability Board, are also needed to help recognize systemic risks and take concerted action against them, he said.

    To contact the reporter on this story: Aaron Kirchfeld in Frankfurt at
    Last Updated: September 9, 2009 09:07 EDT
  2. lrm21



    (I got my money)

    Don't shoot me... I am on your side.

    The greedy bankers went that way. They are hiding in the big CITI building.

    This bullshit from

    Dec. 19 (Bloomberg) -- Goldman Sachs Group Inc. Chairman and Chief Executive Officer Lloyd Blankfein is eligible for an $87 million bonus this year after his firm shattered Wall Street's profit record.