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| 5/19 |
| 2009/1/28-2/4 [Finance/Banking, Finance/Investment] UID:52483 Activity:very high |
1/28 Pork bill passes the House, no R's vote for it.
\_ which pork bill?
\_ Yay, fair and balanced NPR:
http://www.npr.org/templates/story/story.php?storyId=99919378
Also, GOP apparently unclear on definition of pork.
\_ Even Chris Matthews called it one big earmark.
\_ The fact that you think he represents informed liberal
opinion says a lot about you.
\_ Pell Grants are pork?
\_ Apparently the R's haven't heard that old adage about
holes, shovels, and digging.
\_ Apparently, you're an idiot.
\_ Thanks for playing anyway.
\_ I think Democrats should of tied the "Pork" bill along with
should've or "should have" -- ...
TARP and Auto bail out. I failed to understand why money to
investment bank / commercial bank (e.g. TARP) is not considered
"pork" by Republicans while putting money into infrastructure is.
\_ Bankers donate money to the Republican party, but construction
workers do not.
\_ I wasn't particularly pro-bailout, but there are a few important
differences. The bailout money was often used in ways that
might come back. (Loans, stock, etc.) The bailout was also a
targetted attempt to have an immediate effect on a vital piece of
the economy. No capital and capitalism doesn't work.
Infrastructure may take years to even begin construction, that's
not a quick action. The stimulus bill also also is not
particularly targeted. It seems to chuck a billion or two to
anyone the dems like.
\_ As opposed to $18.4 billion for bonuses for the investment
bankers who got us into this mess. -tom
\_ tom prefers life in the mud.
\_ Yawn. Justify your side's naked corruption by pointing out
the other side's flaws. How exciting.
\_ what in the stimulus bill is naked corruption? -tom
\_ I already told you. Pell Grants. -!op
\_ I see: funding golden parachutes for
millionaires is OK; funding higher education
for the poor is naked corruption. Great.
Enjoy losing in 2012. -tom
\_ This number is bandied about, but what does it mean? I
read it is about 50% less than last year. What is the
average size of the bonus awarded and what is the base
pay? For instance, if total payroll is $1T (say) then
$18.4B in bonuses seems small. Or even if total
payroll is $18B then $18B in bonuses can still be
small if it is spread over 1M employees. I don't
sympathize with the banks, but this number is thrown
out there without much explanation. Were these bonuses
all cash or was there stock or options also awarded?
It costs the bank no cash to award someone $1M in options,
for instance.
all cash or were stock/options also awarded? It costs the
bank no cash to award someone $1M in options, for instance.
\_ http://www.nytimes.com/2009/01/29/business/29bonus.html
The number is based largely on personal income tax
collections. It excludes stock options. -tom
\_ It almost doesn't matter what it means, other than
this: the guys who ruined our economy, destroyed their
companies and lost trillions of dollars are being
rewarded with bonuses.
\_ I think the word "bonus" is what trips people
up. It's just salary. It's more in good years
and less in bad years, like you might expect.
It will never really be zero any more than
you can expect those people to work for free no
matter how poorly they are performing. Certain
professions earn a significant amount of salary each
year in a lump sum "bonus" and it's not quite the
same thing as if you or I get a bonus at work.
For example, my sister's ex-husband worked for a
law firm and every year they got a "Christmas
bonus" of 1 week's salary. It's common in law
just as in banking. Eliminating the bonus is
equivalent to cutting salary. Would it make you
feel better if they said they were reducing their
"base salary" 50%? That's essentially what is
happening. Their salary is tied to performance,
but that doesn't mean their poor performance = zero
salary any more than yours should be. If they
perform poorly enough they will be fired and
many have been. BTW, the average bonus was $112K,
which was down 36.7%. Sounds like a big pay cut
to me. Did you get a 37% pay cut because your
company's revenues went down in the poor market?
many have been.
\_ What was the average base pay? The bonus could
go to zero and these losers would still get paid
more than enough. Using taxpayer dollars to
give incentive-based pay to people who drove
their companies into bankruptcy and the entire
economy into crisis is absolutely, completely
indefensible. And then to attack Pell Grants!
I suppose the conservative strategy of asserting
things too ridiculous to argue against is still
in force. -tom
\_ 1. I didn't attack Pell Grants.
2. I like how you say their pay would be
"more than enough", comrade. I think you
could survive on half your current salary
and in a studio apartment instead of a
house, but the market values your services
more than that. I read that the average Wall
Street salary is around $300K with a base
salary of $100-250K. So it's reasonable
to think a typical package might be $150K
base salary and a $150K bonus. If you
eliminate the $150K bonus entirely then
base pay is still more than enough to live
on, but likely far less than what it would
take to retain top talent. Heck, you can
barely get a sysadmin for City of SF for
$150K. Lots of these guys are Harvard
Business grad with years of experience
who fell prey to the whims of their
CEOs who decided to use a lot of leverage.
The CEOs should suffer. The rank-and-file
traders and bankers are suffering
enough if you pay attention to how many
are out of work now.
\_ No, they haven't suffered enough. The
banking sector is still bloated and
overpaid. There is no particular reason
that a Harvard MBA should make $300k,
unless he is contributing that much to
society. For the last 10 years, the
bankers have disastrously misallocated
capital. If they don't like mere $150k
salaries, good luck finding an industry
that will support them in the lifestyle
they think they deserve.
\_ http://tinyurl.com/ajf25h (WSJ)
\_ People aren't paid according to
"what they contribute to society".
Most of those guys are very smart
and will find something else to
do, which would leave the banks
run by people less capable. You think
it's bad *now*?
\_ I don't think there's any evidence
that the people running the banks
are very capable. If they're so
fucking capable, why are they all
going bankrupt? The argument about
"that's what it costs to retain
top talent" is 100% bullshit.
The system is rigged. CEOs, VPs
and hotshots get to decide who to
pay what--and, surprise surprise,
they decide that it's vital to
the interest of the company to
pay CEOs, VPs and hotshots more
and more as a function of total
revenue and earnings. Until the
whole thing comes crashing down
and they ask the government to
bail them out. The absolute first
thing that should happen before
any bankrupt institution is bailed
out is that all performance-based
pay should be immediately suspended
until the company is solvent. If
that means that executives leave
for other companies that managed
their assets better and therefore
aren't going bankrupt, that's fine;
isn't survival of the fittest one
of the tenets of the market
economists? -tom
\_ Lots of free-market cheerleaders
seem to forget the basic econ 101
stuff that says what is needed
for markets to function. Namely
competition and low barriers to
entry.
What is it about these banks that
makes them able to keep fat
profits year after year?
\_ Somehow society was able to function
with a banking sector that was half
the current size - as a proportion
of the economy - for many decades.
All those Ivy geniuses can go find
another way to game the system (and
ultimately rip off the taxpayer, no
doubt). Almost every "invention" of
the financial sector in the last 10
years was crap. Is it seriously
your contention that these guys
deserve lifetime employment on the
public dime at $300k/yr, even though
what they produce has no value to
society whatsover?
\_ Somehow society was able to
function with a banking sector that
was half the current size - as a
proportion of the economy - for
many decades. All those Ivy
geniuses can go find another way to
game the system (and ultimately rip
off the taxpayer, no doubt). Almost
every "invention" of the financial
sector in the last 10 years was
crap. Is it seriously your
contention that these guys deserve
lifetime employment on the public
dime at $300k/yr, even though what
they produce has no value to
society whatsoever?
\_ I don't think they deserve
lifetime employment on the
public dime forever. I never
said that. However, letting
the big banks BK would be a
disaster. This whole thing
about bonuses is a PR stunt
as is Obama's outrage. Banks
are going to need $1T and we're
worrying about $20B in bonuses
that were earned? Do you really
contend that banks have no value
to society?!
A bank that does a good job of allocating _/
capital to productive uses has a value.
Do you think that the primary inventions
of the financial sector of the last decade
or so (CDS, CDOs, SIVs, etc) have had a
net positive value? If so, why are all
the banks collapsing? If anything, the
total contribution to society by the
financial sector over the last decade
has been strongly negative. This is
reflected in the change in their
equity value, and in the collapse in
value of all the stupid things they
allocated capital to (most exurban
McMansions, but also the mostly
speculative paper instraments used
speculative paper instruments used
to gamble on them).
\_ http://tinyurl.com/ajf25h (WJ)
Check out the comments. Even the WSJ readers
are getting restless.
\_ Just the media stirring up shit and now the
rabble is roused. What about bailing out
auto workers who made shit cars? I know a
lot of people are against that, too, but
at some point you have to place blame
where it is due, which is management. The
auto workers were just building the cars
they were told to build. Likewise, the bank
employees were just selling the products they
were told to sell while the government
cheered from the sidelines about how many
more people could now afford home ownership
while keeping rates insanely low and wasting
$$$ in Iraq. Blame Bush for this mess.
\_ It is funny that you think that the
readership of the WSJ is "the rabble."
You can imagine what the actual rabble
think of the bank bailouts.
\_ Doesn't matter what they think. They
don't realize what will happen without
lending or credit. For instance, most
hospitals use large lines of credit to
cover bills during the period between
when services are rendered and the
insurance companies finally pay. The
average consumer relies on banks for
a lot more than they realize.
\_ In a democracy, what the people think
matters. Especially when you coming to
the taxpayer, hat in hand, asking for
a bailout. The current overleveraged
banks could all fail and all that
would happen is that new bunch would
crop up to take their place. No doubt
the economy needs credit. Why do we
need Citibank, JPM and all the other
crooks?
\_ That's why we have a republic.
We don't need uninformed citizens
making these decisions.
\_ I am mostly unimpressed with
what our elected representatives
have done so far, but you are
probably right, a directly
democratic response would
probably be even worse.
\_ automaker bailout is what, 1/100th of the
bank bailout?
\_ In other industries, you are awarded a bonus for doing well
or if the company has done well in that year. There is no sane
person who can claim the banking industry did well in 2008.
So why did they get bonuses? That's what bugs me.
\_ This is not "other industries" and Wall Street and law firms
work differently.
\_ They work differently because they've stacked the deck in
favor of lining their own pockets. The role of government
is to protect taxpayer assets, not performance-based
compensation for executives of bankrupt companies. Let
them try to convince the bankruptcy court that the first
priority is to pay them their bonuses. -tom
\_ Bankruptcy courts are genrally in favor of companies
making payroll.
\_ Bonuses != payroll.
\_ Except that in the case of certain firms (like banks)
they really are almost the same thing. Bonuses
are not some optional incentives based on merit
or something, although they can be tied to it.
Think of bonuses more like tips for a waitress.
Sure, you make more if you're good but they aren't
really optional. Even bad service results in a
tip (or should anyway) because the payscale and
taxes are based on that.
\_ Bankers don't make $2.80/hr.
\_ This is back to the "They make more than *I*
think they are worth" argument. We can say
that about software engineers or any job,
really. However, that's not how salaries
are determined in this country. Go back to
Soviet Russia. It's much more equitable there.
\_ Except software engineers are not asking
for handouts from the Federal government.
You keep "forgetting" that part.
\_ Tangential. You can argue that companies
shouldn't be receiving aid, but that's
not your argument. Your argument is
that the government should dictate
salaries in turn for aid. That will
leave those companies without any
employees, because paying them 50%
of market rate for salaries will
have them leaving in droves. How
will that help anything? The banks
may as well BK then.
\_ OK. -tom
\_ So let's be clear that your issue
isn't "bonuses". It's that the
banks are receiving any money
at all. Why beat around the
bush for 6 paragraphs?
\_ So let's be clear that you
love to beat up straw men
rather than paying attention.
Fine. I'm not particularly
pleased that the banks are
receiving money, and I'm
outraged that the money
they're receiving is going
incentive-based pay for the
assholes who caused the
problem. And it's totally
typical for the Republican
typical of the Republican
disdain for the American
public. -tom
\_ I seriously doubt that the employees
will be leaving in droves, even if they
were paid the starvation wages of
will be leaving in droves, even if
they were paid the starvation wages of
$300k/yr. Especially since 100s of
thousands of others in their field
will be out of work. But it is a risk
I am willing to take.
\_ Exactly... this is ridiculous.
where exactly are they all gonna
go? The best they might do is
start a new company, or perhaps
use their genius to go to one of
those other lucrative $500k
careers out there, which would be
such a terrible loss for America
I know, our capital would be so
misallocated.
\_ One obvious place is to the
hedge funds and regional
banks, growing them into
megabanks of the type they
work for now. Of course, only
the best will leave. The bad
ones will remain to handle
the delevering, valuation
of assets, and spending of
TARP funds. My fear is that
the best ones are leaving
*anyway*. Wouldn't you?
\_ And if they go to a regional
bank (probably not making
$300k/yr) and grow it into
a well-run company that
efficiently makes loans, has
a well-run risk management
department and is not sucking
off the taxpayers teat, this
is a bad thing how, exactly?
\_ The Bad Thing is what
happens to the banks
they left.
Most hedge funds are closing,
not hiring, btw.
\_ Many are folding b/c
investors are withdrawing,
but this is a blip on
the radar. Mutual
funds, pensions, and
even hedgies still
manage a lot of money.
\_ Hedge funds are closing
because the returns on
their strategy have
dropped to 20% of
the original, rather
small percentage.
In fact, according to
DeLong it was a large
hedge fund getting
out of the business,
which hosed a number
of other highly
leveraged hedge funds,
which acted as the
trigger for the
whole liquidity
crisis. -tom
http://online.wsj.com/article/SB123353536455237761.html
"It's just a tough, tough time, and there are a lot of
good people out there looking for work."
\_ Right, but they aren't going to work for $6.50/hour.
Let's not confuse "looking for work" with "looking
for any work at any price".
\_ I have a friend who does ibanking for UBS, 1st out of biz school,
didn't get fired in the 4 rounds of layoffs, I was adding up
her base salary (120k) to the bonus she got 140k and wondered
what the hell she did that was worth 260k a year.
\_ Is she hot? picsP |
| 5/19 |
|
| www.npr.org/templates/story/story.php?storyId=99919378 All Things Considered, January 27, 2009 The debate over the economic stimulus package backed by President Obama has focused on the bill's huge tax cuts and spending meant to pump new life into the economy. money set aside for the National Endowment for the Arts and to plant grass on the National Mall. But if you listen to Republicans, you might ask: What's in a name? That which we call pork, by any other name would smell as porcine. Jeff Flake of Arizona, perhaps the most pork-conscious member of the Republican Party. "There aren't congressional earmarks, and that's a good thing. But when you get down to the city level, it's chock-full of pork." No earmarks in the bill means no members of Congress managed to get a specific amount of money doled out to special projects in their districts. That is what is often called pork in big congressional spending bills. But even without earmarks, Flake says the bill is made of bacon -- and not because of the Obama administration, he adds. "It's gone through the congressional Democrats," he says. "It's basically a grab bag for every program that they've wanted to see funded for years." The bill pushes tens of billions of dollars into education, and not just for building and renovation projects, but for everything from Head Start to college loans and Pell Grants. Some Republicans ask: How does that stimulate the economy? "For example, $50 million for the National Endowment for the Arts," Flake says. The bill includes $200 million to reseed the National Mall in Washington. Democrats See Jobs So, according to Republicans, the bill is full of pork. David Obey of Wisconsin, the chairman of the House Appropriations Committee. Every cent of government spending goes through Obey's office. "We are trying to find every possible constructive way to put people back to work," he says. "And if one of those ways is to repair the Mall, I see no harm in doing that, if it accomplishes a good public purpose." Obey and other Democrats also say this bill will have some of the toughest oversight of any government spending in years -- and not just by Congress. For example, it specifically bars local governments from using the infrastructure money to build zoos, casinos, swimming pools and golf courses. Arizona's Flake asks: If there's no pork in the bill, why ban these things? No Pork Even so, Flake will introduce an amendment on the House floor Wednesday that would ban spending stimulus money on duck ponds, ice rinks, ski hills and dog parks. "Pork is a very subjective definition," says Robert Bixby of the nonpartisan budget watchdog The Concord Coalition. "One man's idea of pork is another man's vital federal program." When you have two parties with strong ideological differences -- especially when it comes to spending taxpayer money -- a big ham on the dining room table can look like two different things. E-mail this Page Recipient's e-mail address: Up to twelve addresses, separated by commas. Your e-mail address: Your name: Personal message (optional, 600 characters max): Your NPR member station: * Are you a member of your local NPR station? Yes No Would you like to receive information from your local NPR member station? |
| www.nytimes.com/2009/01/29/business/29bonus.html Article Tools Sponsored By By BEN WHITE Published: January 28, 2009 By almost any measure, 2008 was a complete disaster for Wall Street -- except, that is, when the bonuses arrived. That was the sixth-largest haul on record, according to a report released Wednesday by the New York State comptroller. While the payouts paled next to the riches of recent years, Wall Street workers still took home about as much as they did in 2004, when the Dow Jones industrial average was flying above 10,000, on its way to a record high. Some bankers took home millions last year even as their employers lost billions. The comptroller's estimate, a closely watched guidepost of the annual December-January bonus season, is based largely on personal income tax collections. It excludes stock option awards that could push the figures even higher. Thomas P DiNapoli, said it was unclear if banks had used taxpayer money for the bonuses, a possibility that strikes corporate governance experts, and indeed many ordinary Americans, as outrageous. He urged the Obama administration to examine the issue closely. "The issue of transparency is a significant one, and there needs to be an accounting about whether there was any taxpayer money used to pay bonuses or to pay for corporate jets or dividends or anything else," Mr DiNapoli said in an interview. Granted, New York's bankers and brokers are far poorer than they were in 2006, when record deals, and the record profits they generated, ushered in an era of Wall Street hyperwealth. But the size of that downturn partly reflected the lofty heights to which bonuses had soared during the bull market. At many banks, those payouts were based on profits that turned out to be ephemeral. According to Mr DiNapoli, the brokerage units of New York financial companies lost more than $35 billion in 2008, triple their losses in 2007. The pain is unlikely to end there, and Wall Street is betting that the Obama administration will move swiftly to buy some of banks' troubled assets to encourage reluctant banks to make loans. Many corporate governance experts, investors and lawmakers question why financial companies that have accepted taxpayer money paid any bonuses at all. Financial industry executives argue that they need to pay their best workers well in order to keep them, but with many banks cutting jobs, job options are dwindling, even for stars. executive compensation, called the 2008 bonus figure "disconcerting." Bonuses, he said, are meant to reward good performance and retain employees. But Wall Street disbursed billions despite staggering losses and a shrinking job market. "This was neither the sixth-best year in terms of aggregate profits, nor was it the sixth-most-difficult year in terms of retaining employees," Professor Bebchuk said. Echoing Mr DiNapoli, Professor Bebchuk said he was concerned that banks might be using taxpayer money to subsidize bonuses or dividends to stockholders. "What the government has been trying to do is shore up capital, and any diversion of capital out of banks, whether in the form of dividends or large payments to employees, really undermines what we are trying to do," he said. Troubled Asset Relief Program, or TARP, should be made more transparent. "Companies can simply say they are trying to do their best to comply with compensation limits without providing any of the details that the public is entitled to." Bank of America, which recently acquired Merrill, asking for information about Merrill's decision to pay $4 billion to $5 billion in bonuses despite new, gaping losses that forced Bank of America to seek a second financial lifeline from Washington. A Treasury department official said that in the coming weeks, the department would take action to further ensure taxpayer money is not used to pay bonuses. Even though Wall Street spent billions on bonuses, New York firms squeezed rank-and-file executives harder than many companies in other fields. Outside the financial industry, many corporate executives received fatter bonuses in 2008, even as the economy lost 26 million jobs. According to data from Equilar, a compensation research firm, the average performance-based bonuses for top executives, other than the chief executive, at 132 companies with revenues of more than $1 billion increased by 14 percent, to $265,594, in the 2008 fiscal year. For New York State and New York City, however, the leaner times on Wall Street will hurt, Mr DiNapoli said. That is smaller than the overall 44 percent decline because the money was spread among a smaller pool following thousands of job losses. The comptroller said the reduction in bonuses would cost New York State nearly $1 billion in income tax revenue and cost New York City $275 million. |
| tinyurl.com/ajf25h -> blogs.wsj.com/deals/2009/01/30/afternoon-reading-how-did-the-government-miss-all-those-bonuses/ This service is temporary unavailable due to system maintenance. The username entered is already associated with another account. Please enter a different username The email address you have entered is already in use. James Ledbetter at The Big Money writes that it is refreshing to have "a president capable of telling economic truths." He writes: "Obama is dead right, not only on moral grounds but on business grounds, too. In fact, he didn't go far enough: Wall Street should give the bonuses back to American taxpayers, at least until investment banks begin to show a profit and have paid back every cent of welfare they've taken from the government." asks a simple question: How did the government miss all those bonuses. Clearly, those charged with handing out the TARP money knew Wall Street's compensation model. Douglas A McIntyre writes: "The government walked away from the entire matter because it was complex and time consuming. This is the same reason that the Treasury Department wrote checks to the banks instead of buying their toxic assets even though Congress had been told that the TARP funds would only be used to buy toxic assets. It was quicker and easier to just give the banks money because of the worsening crisis." com It's tough to make the case that you're going to discourage the next Chuck Prince, when you can't lay your hands on this Chuck Prince. Obama needs to identify and seek clawback from high level executives who have caused this problem, including his own advisor, Bob Rubin. Governemnt needs to go after these people and citizens need to go after the govt to do so. everyone should write their senators to tell them to vote any measures down until this is rectified. An organization such as a bank receives billions of dollars government aid, distributes millions in bonuses to executives, then announces thousands of employee layoffs. There should be a real upscale investigation of organizations and their executives. There should also be an investigation of those in government responsible for making such handouts with such lackadaisical, if any, regulations. Meanwhile, the really smart guys from WSt are cutting their cash payments, while increasing their tax-deferred stock grants "to retain talent." At the same time they are busy convincing the the politicians that the shareholders (ie themselves) need to be protected. Once the Geithner banker-relief act is approved they will make out like bandits again. Step 1: Set up the "Bad Bank Buyout Bank" Step 2: Let the country & world know the "Bad Bank Buyout Bank" will step in AFTER a Bank files chapter 7 or 11 and gaurantee any bad debt that would cause systematic failures. The instituitions themselves will have to try and survive like every other industry in the US Step 3: Once Banks file chapter 7 or 11 then it's quite easy to use the bankruptcy's CLAWBACK rules to demand payback of bonuses and other Golden parachutes, (even if the people have already spent the money) and put the fear of JAIL and BANKRUPTCY JUDGES in every bankers heart! Politicians waste hundreds of billions every year because they are spending our money, not theirs. Let the people who earn the money keep the money - we know how to spend our money better than anyone else. Unfortunately about 50+% of our annual earnings go to various governments in the form of income taxes, capital gains taxes, property taxes, sales taxes, telephone surcharges, highways tolls, etc. When Bob Rubin and our legislators repealed the Glass-Steagel act they were acting against public interest when everyone knows that the act was to prevent what we now have again. John Bonior is quoted as saying "We have some very smart people in wall street that created this mess and they now have us at their mercy. And last why is Moodys not in jail for grading all of the cds AAA when everyone now knows is JUNK ? big bonuses, big business, big corruption, overlooked/ignored by the past administration? Pretty much boils down to just that - lack of oversight by the Bush administration - go figure. Look at the philosophy of the Republican Party - "the elitist party". Get the bonuses back from these bandits and return the money to the shareholders who were the victims of their deceit. So I'm not sure the brain cells are properly allocated to solve this problem effectively and efficiently. so it could be the case that this is helping but it's not helping enough to turn things around at this point. The issues with Fannie and Freddie were certainly cultivated and exacerbated during the 1990s under the "watchful eyes" of Clinton, Frank, Dodd & Co. Our government can't even catch Madoff when he's handed to them on a silver platter. Our government doesn't even make mutual fund companies clearly disclose their fees on the first page of a prospectus. At least one of these scumbags-gimme one, any one-should don the orange jumpsuit (instead of being allowed to remain in his ill-gotten million-dollar apartment on bail), then taken out and hung by the neck in public till the eyeballs pop out so the whole world can witness. Then concentrate and work on the next guy in line down the list-they're all there, trust us! TARP was intended to create confidence on the market that these 2B2F institutions would make good on their obligations. The so called franchise is kaput, that is why the bulge bracket banks (those that are left) are now virtual penny stocks. Fred and Barney deserve as much credit as the Wall Street kleptocrats that did what is in their nature. GIMME THREE STEP'S WALL STREET SLICKSTER (GIMME THREE STEPS, Lynard Skynard) WilliamBanzai7 I was cutting the rug Down at a place called the Bull and Bear jug With a mound of bailout bonus loot When in walked a man With a gun in his hand And he was looking for a banker or two. He said, hey there fellow, With the Hermes tie colored yellow, Watcha tryin to prove? cause that's my money there And I'm a man who cares And this might be all for you. cause he was lean, mean, Big and bad, lord, Pointin that gun at me. I said, wait a minute, mister, I ain't no PONZI scheming slickster. And I know you dont owe me But I wish youd let me Ask one favor from you. Gimme three steps Gimme three steps mister, And youll never see me no more. Well the crowd cleared away And I began to pray As my blackberry fell on the floor. And Im telling you son, Well, it aint no fun Staring straight down a bailout busting forty-four. Well he turned and screamed at Cramer on the TV screen And thats the break I was looking for. And you could hear me screaming a mile away As I was headed out towards the door. Part 1: What Happened Journal reporters explain how the housing bubble inflated and burst, and why easy money led to the collapse of Wall Street's biggest financial institutions. View the whole series advertisement ABOUT THIS BLOG Heidi Moore Deal Journal is an up-to-the-minute take on the deals and deal makers that shape the landscape of Wall Street, including mergers and acquisitions, capital-raising, private equity and bankruptcy. The Wall Street Journal's Heidi N Moore is the lead writer, with contributions from other Journal reporters. |
| online.wsj.com/article/SB123353536455237761.html This service is temporary unavailable due to system maintenance. The username entered is already associated with another account. Please enter a different username The email address you have entered is already in use. Alvarez & Marsal Now: CEO: Bryan Marsal, (above) Employees: 500 Cash on balance sheet: $7 billion So for now, Lehman is seen as a relatively secure home for throngs of finance professionals thrown out of work in recent months. It's even become a place for former Lehman CEO Richard Fuld to informally hang his hat. "We're getting swamped with rsums," says Bryan Marsal, a turnaround expert who is now Lehman's chief executive officer. "It's just a tough, tough time, and there are a lot of good people out there looking for work." Such a timeline promises the kind of job security that's a rarity on Wall Street today. Charged with untangling the mess is Alvarez & Marsal, the New York-based restructuring firm where Mr Marsal is a co-founder. With 150 full-time employees working on the case, its chief task is to sell off Lehman's remaining assets and maximize recovery for creditors, which are owed more than $150 billion. Mr Marsal says the goal is to dissolve the firm in 18 to 24 months from now, though several restructuring experts say that's an aggressive timetable. Alvarez & Marsal got the gig in September after Lehman's board appointed it to administer the bankrupt company's estate. To carry out the mission, Alvarez & Marsal kept 130 Lehman employees on the firm's payroll. It has also recruited back more than 200 former Lehman employees, and is still hiring staff to handle targeted areas such derivatives and real-estate holdings. Behind the scenes is Mr Fuld, the firm's former chairman and chief executive, who was widely vilified when Lehman collapsed in mid-September. He's just around the corner from Mr Marsal, who says he picks Mr Fuld's brain about Lehman's business several times a week. "We asked him to stay if he has nowhere better to go," says Mr Marsal. "He's been very good about making himself available for questions about Lehman assets." Associated costs run about $30 million a month, excluding fees to lawyers and advisers on the case. Employees are paid a salary -- with modest retention bonus added as "a kiss" says Mr Marsal -- to entice workers to stay at a place with a limited lifespan. The assignment is a lucrative one for Alvarez & Marsal, which is charging Lehman hourly fees of $550 to $850 for its top executives working on the case, with rich incentive fees for the firm depending on its recovery for creditors. Despite Lehman's assured dissolution, executive recruiters say it isn't surprising that the collapsed investment bank has become a desirable place to work. "This is a well-paying job in one of the worst employment markets in history," says Skiddy von Stade, founder of New York-based executive placement firm FS von Stade & Associates. "Through the disposition of Lehman's assets, the employees will have a chance to demonstrate their strengths and skills for opportunities down the road -- possibly with the very buyers of these securities and investments." Mr Marsal says compensation is in line with similar jobs on Wall Street, yet far below what it was at Lehman. He and his team are "very, very careful" about the expenses of the firm, which he says are generally lean. "The excess of Lehman was the size of the salaries and the expectations of people with the bonus plan," he says. View Full Image Now Hiring: Lehman Reuters Staff members stand in a meeting room at the Lehman Brothers offices in the financial district of Canary Wharf in London Sept. Now Hiring: Lehman Now Hiring: Lehman Gone are the pay and perks that came with being a top executive at pre-bankruptcy Lehman. Mr Fuld and his management team sat on the 31st floor of Lehman's former headquarters, a state-of-the-art steel-and-granite building in Times Square. Barclays bought that site and took it over, so now Lehman's command center is a run-of-the-mill office on the 45th floor of the Time-Life building, which long served as Lehman overflow space. Mr Marsal and his team are making due without weekly deliveries of fresh flowers and warm chocolate-chip muffins on Fridays -- perks enjoyed by the firm's former brass. Gone too is the executive dining suite where a private chef prepared lunch for Lehman's top executives. Henry Klein is part of Lehman's new topsy-turvy reality. A nine-year Lehman veteran, he oversaw a portfolio of investments in India from the firm's New York office. When Lehman failed, Mr Klein was transferred to Barclays, but says he had little to do there. Mr Klein left Barclays in mid-November, and then approached Alvarez & Marsal. Today, he's back overseeing the very assets he says he managed at Lehman. The 46-year-old Mr Klein is currently focused on a small $36 million real-estate investment in Hyderabad, a large city in south central India. Lehman may continue to back the deal, but also may have to pull its funding. Luc Faucheux, 39, heads up the desk at the bankrupt entity that trades interest-rate swaps and other fixed-income derivatives. "I always wanted this job," laughs the former Lehman staffer who says he had a related, but less senior role. "Be careful what you wish for, because you might just get it." "Given the state of the world we're in, the things I'm learning working on the largest bankruptcy in history are a set of skills that could be marketable for the foreseeable future." Rather than immediately sell assets into a depressed market, Alvarez & Marsal has opted to retain and manage a chunk of Lehman's holdings. Last month, Alvarez & Marsal decided to keep a 49% interest in Lehman's money-management business, Neuberger Investment Management, selling the balance to Neuberger's management. It made a similar move with Lehman Brothers Merchant Banking, the firm's flagship private-equity business. The estate also has held on to more than 100 direct stakes in private companies. These include direct investments made alongside Lehman's private-equity clients in large boom-era buyouts such as First Data Corp. It is also raising money by selling off the firm's sizable art collection, whose value Lehman has pegged at roughly $30 million. Some of the photographs and paintings still grace the halls of Barclays and Lehman's Neuberger unit. Finally, there is a cavalry of corporate jets valued at $164 million. Lehman has already sold six jets, as well as interests in fractional shares service NetJets Inc. Still on the block: Six more planes, including a Boeing 767, and a Sikorsky chopper. Some of those jets Lehman owned as investments and only four were used for corporate purposes at any one time, according to a Lehman spokeswoman. "The fleet's been grounded," Mr Marsal reassured the bankruptcy judge overseeing the case at a hearing last month. "Nobody is flying around these planes and no one is using the helicopter." com Printed in The Wall Street Journal, page A1 Copyright 2008 Dow Jones & Company, Inc. All Rights Reserved This copy is for your personal, non-commercial use only. Q: Does anyone have experience with being required to invest in a private equity backed company as a condition of employment? Other than the lossof investment if the company fails, what are the risks? The language you used does not comply with community standards. 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