Merrill Lynch swings bonus ax

Browsing this blog while reading up on bonuses for WS firms in light of the Bear Stearns mess, I was reminded of the outcry about the $600 Christmas bonuses given to autoworkers. Of course, these are taxable, so the average worker gets less than $350.
Compare that to the hundreds of thousands, even millions of dollars in bonuses awarded on Wall Street in good years and bad. Someone wrote, “Have a heart, it’s Christmas time”. Well, Daddy’s going to have to say no to Junior’s brand-new Corvette or BMW, but I don’t think it’s going to mean discount chicken on the dinner table.

I can’t believe anyone thinks these people deserve any bonus, they lost money in my world you get zip, not a reduction.

Personally I think many managers at the banks and brokerages should be going to jail. I really don’t see how people making all of this money can plead ignorance. I was saying this would have to end and I don’t know anything about finance.

I think this may have much greater repercussions than Adelphia Cable did and John Rigas was given a life sentence.

I agree with Varsity.

On the current ‘crisis’, while I-Banks packaged and sold the loans, the blame lies with 1) the borrowers who won’t/can’t make their payments 2) the investors on the other side who bought the loans either in CDOs or otherwisel and 3) the ratings agencies who clearly are too stupid to properly highlight the risk of the securities. The banks did what banks do - functioned as an intermediary between those who needed $ and those who had it to invest. Pretty simple.

As to the bonus issue, the banks are well within their rights to not pay bonuses to their workers. But the banks should also be prepared for an exodus of talent, which will prevent them form being profitably when things turn around. And maybe most of you don’t care that talent gets paid - but I guarantee that if you own stock in these companies, or have an indexed mutual fund (S&P, etc) in your 401k plan, you should care, because the stocks are widely held and this impacts you directly.

My advice - don’t let your antagonism and/or jealousy towards people who are highly compensated for doing a demanding job impair your ability to reason and see how these larger issues filter through the economy and impact you as well.

I can’t blame the lenders for making those loans. They were paid via comission, and it wasn’t as though they were given structured commissions that were contingent upon the success of the loan…no, their commission was guranteed & the loan was sold to Freddie Mac or Fannie Mae. I have a buddy who used to sell these mortgages and it was great money. From 2002-2006, it wasn’t uncommon for a college student to get out of school, become a mortgage broker, and immediately have a six figure income. It was a great job because, unlike being a financial planner, after you made money from the client, you never had to deal with them ever again. The broker could take the comission check and go on his merry way.
I DO blame the people who bought all of the loans though. THOSE entities were behaving completely irresponsible. If they shut down the practice of buying these horrible debt obligations earlier, we probably wouldnt be in this debacle.

As much as we all would like to see strict capitalism principles and darwinistic rule punish those who over-extended themselves in the mortgage market, the Fed WILL bail out homeowners…but it isn’t because they want lil’Jonny to have a nice home over the holidays.
Most municipal and state governments have tied up pension & asset/retirement plans in Structured Investment Vehicles (SIVs) I live in CT and I know for a fact that our state Treasurer has put a large amount of state assets into Collateral Debt Obligations in order to get a 7-8% return rate vs the measley 2% the banks pay out.

Now that these SIVs and CDOs are in trouble, the Fed will no doubt do everything in its power to help them. The last thing the Federal Government wants to see is for State & Local pension funds to go bust and have no way for local governments to function without jacking up taxes significantly.

I interviewed for a job at Ameriprise Financial, and I can say that these investment houses have well over 5000 different investment tools to snag possible clients, so Personal Financial Advisors complaining that they were “just doing what their bosses told them” and that “we aren’t the decision makers” is a rather pie-in-the-sky argument.

Inflation will rise, interest rates will remain low, and america’s youth will keep wondering how to ever achieve affluence in today’s society. I spent just as much time out in the field this year and billed just as many consultant hours for my time on projects, but that hardly gurantees that I will get any Christmas bonus. In fact, I am already convinced that I will NOT be getting one.

So there you have it. The Fed has let the free money spicket run for far too long, and the over-evaluation of Real Eastate was in reality a physical representation of our depreciating dollar….doubtful salaries will go up though because “there is no inflation” when calculating “Core Inflation” which leaves out Food & Energy prices.

Don’t give those bigwhigs Christmas bonuses. Make them learn to live on a budget like the rest of us.(”us” is a relative loose term since only a small portion of society budgets and most are in debt up to their eyeballs.)

Happy Holidays Everyone.

Wow, what a lot of resentment and ignorance going around in some of these comments. I am not a banker, but I can tell you that most of these folks are some of the hardest working and smartest people you can meet. While it is true that compensation for a 29 year-old can be $300-$500K, most of it comes in the form of variable compensation (i.e., Bonus) that in most cases is a multiple of their salaries (i.e., Starting salary for a newly minted MBA would range between $115-$150K). Therefore a slash in the bonus of 50% means that your income was severely reduced.

Here is a piece of advice for all of those that will reply that $200K is a lot, and that nobody making this type of money should complain: Get a great undergrad degree, work for 4-5 years, complete a top-tier MBA (i.e., Harvard, Stanford, et al), and then work 70-80 hour weeks.

Let me say that everybody gets some blame for the credit mess we are in:

The bankers, who created obscure financial instruments that they could only price correctly in their computer models.

The mortgage lenders, who only cared about their commission and gave money to people who could not afford the mortgage.

The borrower who got a loan that he/she knew could not be repaid even of they did not lose their jobs, got divorced, etc (I am getting ahead of the apologist that will bring these as plausible scenarios of hard working people who are losing their homes)—how can somebody making $40K think they could afford a $300K home? He/she was just as greedy as the bankers, and was speculating in real estate. They thought that home values would increase ad infinitum, and that they would be able to flip the house, or refi after a couple of years under the assumption that their home would appreciate in value by 20% in just a few years. If you are that greedy and lets face it, stupid as well, then you have a recipe for disaster.

The regulators, central bank, and government. They fell asleep at the wheel and where happy to prop up a fake economic boom.

I am a mortgage banker. I can tell you back in 2004, 2005 and 2006, we were allowed to write loans for people who had absolutely no business getting loans for a mortgage. And most of the time, no down payment was required, even for people who had previously filed bankruptcy or had shown a horrible history of repaying debt. You would not believe how easy it was to get a loan, and how much we were allowed to lend to people that you knew could not afford to repay it. Without a down payment, they had no vested interest in keeping up with the house payment as they had nothing to lose if it foreclosed. Now, part of the mortgage crisis was due to outside forces (economy, media influence), but the lenders were at great fault for lending their investor’s money to people they had no business lending to.

As a loan officer, I am paid on 100% commission, and while I may advise a client on how much they probably can afford, if they wanted to buy a house, and I could get them approved, that’s what I did. And I knew, if I didn’t, someone else would, and then I wouldn’t get paid. The culture we were in, you had to do what the client wanted, and most people with bad credit look short term not long term (that’s how they ended up with bad credit), and I offered someone a long term fixed loan, and someone else offered an adjustable rate mortgage with an interest rate 1% less, they went with that person.

You go further down the line, and these people are behind on their mortgages, or foreclosing because the bought a house they couldn’t afford, or couldn’t afford the payment when the adjustable rate increased. Well, now you have a market where home values are decreasing rapidly. Now, people who do pay on time are having problems because they cannot sell their home because they owe more than it’s worth, or if they had an adjustable rate, they can’t refinance because the house isn’t worth enough. Now you have a situation where irresponsible lenders allowed irresponsible borrowers to spend their investors’ money, and now you are taking out the responsible borrowers with them.

I see massive arrests and invstigations and bank runs and the fed can not stop it.

Those who ranted about greed and bonus’s for underperformance do not understand that the one’s hurt the most are NOT the executives who made the terrible decisions on CDO’s. The 50,000+ other workers who happen to work at Merrill and the rest of the struggling firms will now have to slog through 2008 being paid far less, and probably asked to do more. Anyone who’s ever worked on the Street will tell you that bonus compensation is the lifeblood that drives performance. Yet the comments posted here would seem to suggest that everyone who works on Wall Street are greedy and overpaid. Some of these people are the hardest working on the planet - 80 hour weeks are not that uncommon. The posters who are out for blood should target their ire at executives who made the call on these decisions, and the fools who bought subprime mortgages in the first place.

Does anyone on this bulletin board actually understand what happened in the “sub-prime mortgage crisis”? It doesn’t seem like many people have a grasp for the true underlying issues that caused this problem to begin with…..and that is, people borrowing more money than they can afford to pay back. Wall Streeters simply sold off and distributed that risk across a broad base of investors. They did not however, in many cases, make the actual mortgage loans to would-be homeowners. Since when is it ok to borrow money, and when the borrower can’t pay - they throw up their hands and blame the person that lent them the money? Americans that overborrowed need to take responsibility for their actions.

I am not surprised to see they will still get bonuses even though they lost money. Look, they are from Wall Street. They have one hand in the pocket of the investors and the other hand in the US treasury (public money). The idea is to keep their own pocket full by taking either from the investors or from the US treasury. This year, they lost investor’s money so now they will make it up by getting the public money. So, why not give bonuses anyway, they know they will make up the loss soon. How, because they always have rich uncles like Ben now and was Allan G in the past. They always come to their rescues. Wall Street always look ahead, we all know that.

Why do they get any at all? As employees of this so called brokerage that founded the creative marketing of “crap” they should feel the pinch also.

A bonus for LOSING 8 Billion Dollars?

wow, the social mood is changing. I have a feeling this down turn is just the begining. The days of easy credit and cheap money are coming to an end. How prepared are you? Credit card bills? Home equity? Kids? Out sourcing? high gasoline prices, high milk prices, jobs, layoffs???

These are the same guys that got extra large bonuses last year before the whole sham was unconvered. They got much more last year than they should have. Hence, they should be the ones who don’t get as much this year … not to mention, these guys get a VERY LARGE (by the average american standard) base salary. Nobody should be crying for them.

So, Stanley O’Neal leaves with $161.5 million after presiding over this current disaster, but the workers who don’t have much say over such things get to have a lean year. Yeah, makes perfect sense.

Goldman Sachs is getting insider information. This company needs to be investigated. They can’t be the only smart boys, they are the insider boys.

If you do not perform, you should not be getting a bonus… Wow I wish all companies were as nice as this. What a bunch of babies

Exactly! Management and senior persons get greedy, screw up and lose billions and it will come at the expense of the average joe working at the company. Bid deal, you should have received 1 million and now you will receive 600K. Hurts a lot less than the guy that gets 10K but is now getting 6K.

In all fairness, i’m sure these people got spikes in bonuses when the bankers were raking in billions before the crash.

What i find most amusing are the departing CEOs that have completely failed (O’Neal, Prince, ect) and yet will receive record pay packages as they leave….thank you for failing, here is hundreds of millions of dollars

You are all over paid, pompous clowns that get paid way too much to start with. I wish you could join the rest of the world and sweat it out just trying to get your cost of living increase every year.

MadDawg-”amature”, as you call yourself, might say it best.It is frustrating to see people make such absurd comments,and still claim to know more than the professionals. A word of advice, don’t believe everything you hear yourself say.

One of the many things you apparently do not understand is that these individuals’ bonuses are a (variable) factor in calculating their total compensation. Because of this, their base pay (salary) is fixed at a much lower amount than you assume. A cut in bonus equates to a significant cut in pay. These are people who had limited control/say in the actions that led to the losses. Don’t forget that these are people that, like you and me, may have families they still need to support. Have a heart…at least during the holidays.

And before you know it, these firms will be asking the government for help, tax breaks or a bailout using taxpayer money to fix their mistakes, and pay bonuses. If these made stupid investments, let them carry the burden without any bonuses…!

These people should be indicted too for defrauding the CDO purchaser. They are thieves in 3 piece suits.

It certainly amazing that when you write down that much money,made so many poor choices and created much of the current mortgage crisis why anyone would entiitle to any Bonus. Wall Street created this mortgage crisis with the programs they put out. Now we are going to have to suffer for a year before it comes back. You should get nothing.

Can I get a “reduced” bonus for swindling 700,000+ people out of their homes and ruining their American dream? Rather than any bonus, they should be tossed in the slammer and made to sell their homes to those they stole from. Worthless theives!

No bonuses should be given to those greedy little punks. What other job can you screw up and still get a bonus.

Americans - WAKE UP!
how about the nurse, the trucker, mecanic, teacher, retiree whose hard earned retirement funds are ouright pilfered away - WHEN do American’s wake up to this institutionalized scams and fraud on Wall Street?

Slash bonuses? How about a bag of coal?

Boo hoo. These guys are going from a 10 zillion dollar bonus to a 6 zillion dollar bonus. Wall Street is some sort of opposite world where failing big will still reward you very handsomely.

Hah!

I’d like to see some of these fatcat CEO’s take NO BONUS, and maybe NO SALARY!

Yeah, we have to tighten our belts but let’s start with your budget for paperclips instead of my $100 million salary. After we’ve saved everywhere else in this company, then maybe my buddies on the board will award me a bonus for being so smart!

Wall Streeters aren’t feeling nearly enough pain IMO.

There’s a special place in hell reserved for traders of all issues, commodities, etc. etc. You reap millions, create nothing, drive a sick market (see heating oil prices and the people who’ll freeze to death this winter),and still manage to take home a paycheck which could handsomely support ten families.

Mad-Dawg: you are JV. You have no idea what finance is about. If you are going to voice your opinion, you should at least know something about the subject. Learn how to spell.

Why would you get ANY bonus if you lose money? And yes…mgmt scum bears a lot of responsibility as well… but since when do you get a bonus when you lose money? The only place else you see that level of stupidity and wastefulness is in our government.

When record profits were being generated the avg working guy did not see much of an increase AT ALL, CEO’s did. Now the working class hero gets their little bouns slashed while the top guys still get paid. Hope everyone is enjoying 3.00 gasoline for the holidays. We brought this on ourselves. The little guy makes up 75% of this economy. The fed thought of a way for us to spend beyond our means, how you say, by lowering the overnight rate to 1% for over a yr and making everyones house appear to be worth much more then it really was. The little guy FELT rich and spent spent spent. Now the retracement happens and this will be painful. Recession is unavoidable for 2008, and yeah Happy New Year.

Unfortunatly, I feel bad for the back office folks, who bust their buts all year long to be considered “Fully Performing” in order to get a bonus. A small bonus is a nicer gesture then no bonus, in which workers will go elsewhere for the greeneer pasture, by the way it dosent exist theses days..

“While it seems to make sense to cut bonuses, this it typical of Corporate America - Management screws up, overspends, etc, and then tells “the working stiff” it has been a tough year and everybody needs to sacrifice, da da da da.”

The working stiff? Are you kidding me? Sorry, but a 29-year old earning $500k a year is hardly a working stiff. Not to mention, that is one of the primary reasons bankers make so much in the good years, because they either make $100k or are fired in the bad years. We have more good years than bad, but they take the risk with their earnings by taking jobs that are tied to deal flow. Don’t feel bad for them in the least. These guys were paid record bonuses in the last two years and can leave for a number of great corporate jobs. This is the perpetual cycle of i-banking, and each one of these guys understood this coming in.

My Merrill Lynch PFA has steered me away from risky paper instruments and equities, and guided me into achieving the best investing year in 2007 that I’ve ever had. With his help, I’ll be ready when the market corrects, and we’ll beat the market then, too. He deserves a big fat bonus and a loud corporate “atta boy”.

On Wall Street bonuses can be 50% of your salary. That’s built in to how they compensate. So getting 0 bonus would be like them taking money away from you if you had a bad year. Also remember that the vast majority of the people who’s bonuses were getting cut are not decision makers. It’s not like the guy on the trading desk can tell the PM “thanks for all this cash to buy mortgages but I think I’m going to buy you some treasuries instead. You’ll thank me in a year”

While it seems to make sense to cut bonuses, this it typical of Corporate America - Management screws up, overspends, etc, and then tells “the working stiff” it has been a tough year and everybody needs to sacrifice, da da da da.

Why the hell does someone need to be compensated with bonus when clearly they have failed to perform.

Who cares?

why would you give any bonus at all, if you lost money?

LMAO!

“The bonus cuts will be steepest for traders in mortgage bonds and collateralized debt obligations, the risky debt whose collapse led to an $8 billion writedown at Merrill last quarter….”

you know, if i do a bad job, such as the horrible job of the handling of the mortgages & mortgage backed securities, as all these traders, brokers, bankers, etc. have done, i would get ZERO BONUS!

this is what these people should get..ZERO…

now, just to be safe let me make sure i understand what i’m reading here….

in more or less terms, ‘the banks, traders/brokers, financiers of mortgages and mortgage backed securities people WILL BE GETTING A BONUS but just not as big from merrill this year??

where in the funk did this idea go wrong..? can anybody else see this?

award those retarded imbiciles that were only looking out for their bottom line, because their predatory means of doing business was lining their pockets with the cash of those that mostly cannot pay and now that the ‘pyrimad’ more or less has crashed, now they get bonuses but just not as big??

merrill, no wonder you wrote down 8 BILLION DOLLARS….you’re made of nothing but greedy losers that take, take, take and cry like little bitches when your gravy train runs out…as well, you pass the losses not onto yourselves but all others who do business with you, while still taking your bonuses…just not as big…

you scum make me laugh and that is why you’ll never get a single penny of mine…lol…i’ve made more money staying away from you financial twats that know so little about money, that i can see my returns will be higher than your best and i’m an amature investor that doesn’t get a bonus for losing BILLIONS.

wallow in your losses losers….the worst is yet to come. perhaps you’ll throw yourselves out of your highrise, corner offices and brokers desks when the big losses finally come down the pipe. well, we can only hope; i’ll keep my fingers crossed