Readers of The Guardian were greeted with this leading story — front-page, up top — on Saturday morning:

Wall Street banks in $70bn staff payout
Pay and bonus deals equivalent to 10% of US government bail-out package

Having laid out the thrust of the story very plainly in the headline and sub-head, the paper then detailed the way that the Bush-Obama bailout (the most apt moniker for a scheme devised by the top echelons of the bipartisan elite) is yet another inside job by the Beltway bandits who move in and out of the revolving door between “public service” and vast feeding troughs of Cronytopia.

So while Americans looking at the nations’s “leading newspaper,” the New York Times, found a vast belching of psychobabble and personal gossip about Cindy McCain taking up the front page, the rest of the world was learning this:

Financial workers at Wall Street’s top banks are to receive pay deals worth more than $70bn (£40bn), a substantial proportion of which is expected to be paid in discretionary bonuses, for their work so far this year – despite plunging the global financial system into its worst crisis since the 1929 stock market crash, the Guardian has learned.

Staff at six banks including Goldman Sachs and Citigroup are in line to pick up the payouts despite being the beneficiaries of a $700bn bail-out from the US government that has already prompted criticism. The government’s cash has been poured in on the condition that excessive executive pay would be curbed.

The Guardian errs a bit in that last sentence, of coure. Almost all of the “conditions” mentioned in connection with the bailout have no teeth whatsoever, no enforcement mechanism, no real penalities. They are more properly termed “suggestions,” or rather, “PR exercises that we hope our Wall Street lords will deign to at least pretend to follow for a short time, until the heat is off.”

But still, the meat of the story is solid indeed. And how did the British newspaper find out what America’s “paper of record” — and the countless media outlets that follow its lead — seems not to know? By looking at publicly available documents and connecting the dots: journalism, in other words.

Pay plans for bankers have been disclosed in recent corporate statements. Pressure on the US firms to review preparations for annual bonuses increased yesterday when Germany’s Deutsche Bank said many of its leading traders would join Josef Ackermann, its chief executive, in waiving millions of euros in annual payouts.

The Guardian’s perusal of the Big Banks’ public paperwork reveal what has long been obvious to anyone with eyes: the massive bonuses to top execs and reckless traders have no connection whatsoever to the company’s performance. Quite the opposite, in fact. As the paper notes in a particularly egregious example, the bonuses offered to Morgan Stanley’s top dogs were greater than the entire stock market value of the entire company, after the firm’s worth had been destroyed by, er, Morgan Stanley’s top dogs.

The sums that continue to be spent by Wall Street firms on payroll, payoffs and, most controversially, bonuses appear to bear no relation to the losses incurred by investors in the banks. Shares in Citigroup and Goldman Sachs have declined by more than 45% since the start of the year. Merrill Lynch and Morgan Stanley have fallen by more than 60%. JP MorganChase fell 6.4% and Lehman Brothers has collapsed….

In the first nine months of the year Citigroup…accrued $25.9bn for salaries and bonuses, an increase on the previous year of 4%. Earlier this week the bank accepted a $25bn investment by the US government as part of its bail-out plan.

At Goldman Sachs the figure was $11.4bn, Morgan Stanley $10.73bn, JP Morgan $6.53bn and Merrill Lynch $11.7bn. At Merrill, which was on the point of going bust last month before being taken over by Bank of America, the total accrued in the last quarter grew 76% to $3.49bn. At Morgan Stanley, the amount put aside for staff compensation also grew in the last quarter to the end of August by 3% to $3.7bn.

Days before it collapsed into bankruptcy protection a month ago Lehman Brothers revealed $6.12bn of staff pay plans in its corporate filings. These payouts, the bank insisted, were justified despite net revenue collapsing from $14.9bn to a net outgoing of $64m.

Think of that: burning your company’s $15 billion pile of cash down to a handful of ashes still gets you more than $6 billion in easy money.

The UK bailout plan is somewhat more rigorous: the government has actually forced a few top bank brass to resign, and has taken a controlling or substantial role in actually running several banks — as opposed to the American plan, which consists largely of buying watered stock in a few big beasts while giving them the keys to the treasury to pay for their continuing bonus binges.

But this is not to say that the UK plan is not also a mug’s game rigged for incestuous insiders. All the Nobel-wreathed claptrap about Gordon Brown as the “saviour” of the global economic system is the usual hero-worship from afar that so often afflicts Americans when it comes to the UK. (Look how Tony Blair swans around in the States, gathering honors, teaching at Yale, etc., when he hardly dares show his face in his own country.) The government’s Financial Services Authority, the supposed watchdog over the British bailout, is stuffed with haughtily-titled insiders who come straight from the institutions they are supposed to be regulating — and were themselves responsible in many cases for bringing on the crisis back when they were grazing in Cronytopia.

But, as always, the Brits are small fry when compared to the other half of the “special relationship.” As the indispensible Pam Martens details in CounterPunch, the Bush-Obama bailout is an intensely incestuous insider’s club made up of the very authors of the massive economic collapse. This includes — most emphatically and no doubt deliberately — the people appointed by Goldman Sachs gamester turned Treasury Secretary Henry Paulson to “represent taxpayer interests” in the gargantuan give-away:

…we learn from the U.S. Treasury web site that it has hired the law firm of Simpson, Thacher & Bartlett to represent our taxpayer interests going forward at a cost to us of $300,000 for six months work. But we’re not allowed to know their hourly wages; that information has been blacked out on the Treasury’s contract. Curiously, the Treasury has named in its contract the specific lawyers it wants to work for us. Two of those are Lee A. Meyerson and David Eisenberg. Mr. Meyerson has been a central player in facilitating the bank consolidations that have led to the present train wreck, including building JPMorgan Chase from the body parts of Chemical Bank, Chase Manhattan and Bank One.

Mr. Eisenberg has played a central role in the proliferation of the credit derivatives blowing up on the books of the Frankenbanks created by Mr. Meyerson. Here’s what the Simpson, Thacher & Bartlett web site says about its relationships and Mr. Eisenberg’s work:

“The Firm’s practice benefits from established relationships with all of the major investment banks…Mr. Eisenberg is responsible for creating the asset-backed practice at the firm and has represented clients involved in the structuring of the first asset-backed commercial paper program, the first public offering of credit card-backed securities by a bank and the first offering of asset-backed securities supported by dealer floor plan loans…Mr. Eisenberg represents JPMorgan Chase Bank, as issuer, in its ongoing program of public offerings of its credit card receivables backed notes. In addition Mr. Eisenberg represented JPMorgan Chase Bank in connection with the issuance of notes backed by commercial loans and in connection with its offerings of Leveraged Notes for Credit Exposure, a credit derivative product. Mr. Eisenberg has also represented underwriters, issuers and sponsors of modeled index catastrophe bonds. Mr. Eisenberg has represented sellers and buyers of credit protection in connection with synthetic securitizations of consumer loans, commercial loans and high yield bonds.”

This is an unconscionable conflict of interest given that JPMorgan Chase is receiving $25 billion of taxpayer funds under this bailout and that the program is very likely to be buying the very toxic waste for which Mr. Eisenberg wrote legal opinions and assisted in proliferating.

It is an unconscionable conflict, but as we know, “conscience” is not an operative concept on the commanding heights of Cronytopia.

Leave a Reply

Your email address will not be published. Required fields are marked *