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Wall Street Warnings, photo by Duncan Hull
Goldman Sachs released its income and expense data for the second quarter of 2012. Revenues are up 4% from the first quarter, but down 17% over the same period last year, and for the first six months of 2012, they are down 13% over the same period last year. Net earnings (profits) are down 55% over the first quarter. For the first half of 2012, net earnings are down 12% over the same period last year.
Compensation is a different story. For the first six months, compensation is 44% of revenues (p.4), compared with 42.4% for all of 2011. P.55 That includes a reduction of 9% over the first quarter. In contrast, dividends to common stock were $.46 for the quarter, amounting to approximately $230 million. Shareholders get 3.5% of the revenues and insiders get 44%? Really? Whose money is at risk, again?
That’s modern capitalism for you, lousy results don’t lead to lousy rewards for the insiders. Greedy bankers taking all the money, who could have imagined?
This story fits right in with Jennifer Ablan’s title in a Reuters piece: Banks Behave Badly redux: Is It Killing Confidence? She gives a quick rundown of the various crimes and frauds of the financial sector, and describes investor withdrawals from equity mutual funds and pretty much anything smacking of risk. She gives regulators a passing smack, not as hard as they deserve, but no doubt investors noticed that no one from Wall Street has gone to jail, or even been investigated, for the massive criminal corruption that led to the Great Crash.
She misses several components, though. We all know that big investors get an edge. Gretchen Morgenson confirms that the big investor funds get a heads up on changes in opinions of major analysts, the people whose views can have a big impact on the prices of the securities they follow. The major banks are repeatedly caught doing business with money-launderers, Ponzi Schemers, check-kiters and even terrorist organizations. The scandal today is HSBC, but there are plenty of others.
But the biggest problem is the arrogance of Wall Street and its corporate counterparts: they really believe that all those CEO Worship stories they get from an adoring media. Look at this picture of a preening Jamie Dimon, giving it his best gazing into the future of Randian Glory for the business paparazzi. And that isn’t all, we non-Wall-Streeters, otherwise known as “muppets”, need to revere them, praise them, and never, never hurt their feelings by using ugly descriptions like pirates, or thugs, or, even worse, by insisting on regulating them like the thieves and liars that they are.
13 Comments
Superb stuff, in clear terms of the truth, masaccio.
I hope that this diary might be front-paged.
DW
Muppets get a piece of the action. A very small piece.
Do muppets now understand that capitalism is not what they were told it was?
It is so frustrating, watching these people go about in the world with their many toys and their almost infinite wealth, when they all belong in prison. Or at least shunned by polite society.
Welcome to the real New Economy.
Gotta make sure all that talent doesn’t leave.
Even the Mafia resents being unfairly compared to the Den of Iniquity that’s today’s Wall Street.
What is the year-over-year % change for compensation, dividends?
For the first half, I meant to add.
lmgtfy.com
It is to laugh.
They don’t use that section of the parking lot.
Another year without customers’ yachts?
Back in the 80′s, I was an ace word processor at Goldman, and watched that segment go to hell over a period of years.
When I came aboard, I was put in 3 weeks of training (paid) by my agency, before setting foot at Goldman. Then I was put on the main floor, with my every move closely watched for 2 more weeks, before being allowed to work on live documents on my own.
At that point, they were seriously overstaffed. They had an extremely rigorous quality control team, and solid tech support. One of Goldman’s specialties was “raid defense,” in which heavy documentation had to be cranked out in sometimes a single day (or night), but through their qualify control, they could put a dozen operators on one large document, and it would be completely internally consistent. Operators were kept “on-call” at the agency and paid for it just for showing up.
Overall, they had a deep, but ruthless, commitment to excellence. Every year, 10% of their weakest analyst staff was fired, not for anything in particular, but merely for being in the bottom 10%.
Their Word Processing department was damn good.
But over the course of a few years, the paid training was fazed out, they made massive cutbacks in staff, and they launched a jihad against their operators, imposing excruciating background checks and drug testing. (One guy had to get an affidavit proving he had worked one summer years ago on a fishing boat in Alaska.)
They had to stop the jihad as they were losing too many of their top operators (including me), but an elite operation had self-destructed. Corporate culture permeates every level of a company, and what I saw probably operated at every level.