No Rhyme or Reason

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That's the title of Andrew Cuomo's report on the compensation practices of financial companies. It's quite a disturbing report. What it concludes from data supplied by the major TARP recipients is that there is no logic behind compensation practices other than to pay top dollar no matter what the firm's results are.

For example, Citicorp lost more than $27 billion in 2008 yet paid bonuses of $5.33 billion. Or take Merrill Lynch, which was saved from extinction. It also lost more than $27 billion. It was more conservative with bonuses; it only paid $3.6 billion. The pattern was the same with all the companies that took our money. To cite just one, Bank of America's 2008 net fell from $14 to $4 billion, yet its compensation remained at $18 billion.

The report contains several interesting charts. The one that really interests me is in Appendix A. It compares the earnings per employee to the bonus per employee. So that with Citigroup, for example, it lost $85,812 per employee but was able to pay out bonuses of $16,512 per employee.

Other charts of interest are found in Apppendix C. Here you'll compare compensation to revenue and net income. In 2007 our friends at Citicorp paid out in compensation 952.03% of net income; the company made $3,617,000 and paid out $34,435,000 in compensation.

What is Geithner and company doing about changing the financial structure of this country? I may not live to see it, but I can guarantee that we'll see a recurrence of the current disaster fairly soon unless there are fundamental changes made.