Debt Wish

The most perplexing question that arises out of the S&P downgrade of the U.S. debt is why we’re still worrying about what they think, after all the credit rating agencies’ previous political shenanigans.

The credit rating agencies claim they are entitled to their opinions under the First Amendment, even if they are bought and paid for by Wall Street.

But anything that the S&P offers should be taken with a huge grain of salt. As James Kwak pointed out on Baseline Scenario, the S&P’s latest insights into our financial/economic/political mess weren’t exactly earth-shattering. Apparently S&P wanted us to know that they recognized we’re suffering from political gridlock in Washington.

Thank you, S&P.

If the rating agency really wanted to offer a public service, it might have pointed out that the big banks’ bundled mortgages were nothing but trash before the economy collapsed.

But of course, as we know should all know by now, S&P and the other credit rating agencies are no more interested in peddling public service any more than they are interested in offering accurate information or thorough analysis.

S&P and the others are interested in serving the interests of Wall Street, and right now Wall Street is interested in forcing its austerity agenda on the rest of us. S&P is just trying to do its small part to batter any resistance we might offer.

Like the too big to fail banks, S&P has perfected the kind of lack of shame which allows it to dispense its financial opinions with a straight face, demanding to be taken seriously even though it missed the fraud, sloppiness and greed that led up the financial collapse.

Come to think of it, there is a more perplexing question about S&P: how come a swarm of federal investigators hasn’t taken the agency down, following up on the earlier Senate investigation?

Jane Hamsher has an interesting take on that question at firedoglake, posing the theory that S&P’s thrashing of the U.S. credit rating is an effort to pay back Republicans for keeping the authorities off S&P’s back. In the bigger picture, S&P is just trying to play its part in efforts by leaders of both parties to slash Social Security and other programs that benefit the middle class under the guise of balancing the budget.

But the S&P tipped its political hand by favoring cuts to social programs over tax loophole-closing, revenue-raising, or real defense cuts. When Wall Street and its cronies need help, the credit rating agencies will always do their part.

 

 

 

Cuomo report on bonuses: No rhyme or reason

http://www.oag.state.ny.us/media_center/2009/july/pdfs/Bonus%20Report%20Final%207.30.09.pdf

NO RHYME OR REASON:

The Heads I Win, Tails You Lose I Bank Bonus Culture
Andrew M. Cuomo

Attorney General

State of New York

NO RHYME OR REASON:
The Heads I Win, Tails You Lose I Bank Bonus Culture
Through various inquiries, the New York State Attorney General's Office has been examining the causes of last year's economic downturn. We have reviewed the failures of the credit rating agencies, the role of government regulators, the flaws of the credit default swap market, and the effects of over-leverage and fraud in the housing and mortgage markets, among others.

As part of this review we have also been examining the compensation structures employed by various banks and firms. Accordingly, over the past nine months this Office has been conducting an investigation into compensation practices in the American banking system. We have reviewed historic and current data on numerous banks' compensation and bonus plans. We have taken testimony from participants in all aspects of,the process, including bank executives who set and administer the compensation process, members of boards of directors who review company salary and bonus structures, compensation consultants who advise the companies, and the recipients of bonuses.
As one would expect, in describing their compensation programs, most banks emphasize the importance of tying pay to performance. Indeed, one senior bank executive noted recently that individual compensation should hot be set without taking into strong consideration the performance of the business unit and the overall firm. As this executive put it, "employees should share in the upside when overall performance is strong and they should all share in the downside when overall performance is weak."
But despite such claims, one thing is clear from this investigation to date: there is no clear rhyme or reason to the way banks compensate and reward their employ~es. In many ways, the past three years have provided a virtual laboratory in which to test the hypothesis that compensation in the financial industry was performance-based. But even a cursory examination of the data suggests that in these challenging economic times, compensation for bank employees has become unmoored from the banks' financial performance.
Thus, when the banks did well, their employees were paid well. When the banks did poorly,
their employees were paid well. And when the banks did very poorly, they were bailed out by taxpayers and their employees were still paid well. Bonuses and overall compensation did not vary significantly as profits diminished.
An analysis of the 2008 bonuses and earnings at the original nine TARP recipients illustrates the point. Two firms, Citigroup and Merrill Lynch suffered massive losses of more than $27 billion at each firm. Nevertheless, Citigroup paid out $5.33 billion in bonuses and Merrill paid $3.6 billion in bonuses. Together, they lost $54 billion, paid out nearly $9 billion in bonuses and then received TA~ bailouts totaling $55 billion.
For three other firms - Goldman 8achs, Morgan Stanley, and JP. Morgan Chase - 2008 bonus payments were substantially greater than the banks' net income. Goldman earned $2.3 biHion, paid out $4.8 billion in bonuses, and received $10 billion in TARP funding. Morgan Stanley earned $1.7 billion, paid $4.475 billion in bonuses, and received $10 billion in TARP funding. JP. Morgan Chase earned $5.6 billion, paid $8.69 bil1ion in bonuses, and received $25 billion in TARP funding. Combined, these three firms earned $9.6 billion, paid bonuses of nearly $18 billion, and received TARP taxpayer funds worth $45 bil1ion. Appendices A and B, attached hereto, provide further information on the 2008 earnings, bonus pools, and TARP funding for the nine original TARP recipients. We note that some ofthe nine recipients maintain that they did not request or desire TARP funding. Other banks, like State Street and Bank of New York Menon, paid bonuses that were more in
line with their net income, which is certainly what one would expect in a difficult year like 2008;
For example, State Street earned $1.8 billion, paid bonuses totaling approximately $470 million, and received $2 billion in TARP funding. Thus, the relationship between performance of the firms and bonuses varied immensely and the bonus incentive system does not appear to have been tethered to any consistent principles tying compensation to performance or risk metrics.
Historical financial filings support the same conclusions. At many banks, for example,
compensation and benefits steadily increased during the bull market years between 2003 and 2006. However, when the sub-prime crisis emerged in 2007, followed by the current recession, compensation and benefits stayed at bull-market levels even though bank performance plummeted. For instance, at Bank of America, compensation and benefit payments increased from more than $10 billion to more than $18 billion in between 2003 and 2006. Yet, in 2008, when Bank of America's net income fell from $14 billion to $4 billion, Bank of America's compensation payments remained at the $18 billion level. Bank of America paid $18 billion in compensation and benefit payments again in 2008, even though 2008 performance was dismal when compared to the 2003-2006 bull market. Similar patterns are clear at Citigroup, where bull-market compensation payments increased from $20 billion to $30 billion. When the recession hit in 2007, Citigroup's compensation payouts remained at bull-market levels - well­ over $30 billion, even though the firm faced a significant financial crisis. Appendix C, attached hereto, provides further historical data.
In some senses, large payouts became a cultural expectation at banks and a source of competition among the firms. For example, as Merrill Lynch's performance plummeted, Merrill severed the tie between paying based on performance and set its bonus pool based on what it expected its competitors would do. Accordingly, Merrill paid out close to $16 billion in 2007 while losing more than $7 billion and paid close to $15 billion in 2008 while facing near collapse. Moreover, Merrill's losses in 2007 and 2008 more than erased Merrill's earnings between 2003 and 2006.
Clearly, the compensation structures in the boom years did not account for long-term risk, andhuge paydays continued while the firm faced extinction.
Thus, rather than abiding by steady principles to guide compensation decisions year in and year out, bank executives did just the opposite by delivering high compensation every year. For example, testimony from the head of Merrill Lynch's compensation committee revealed that in 2007, Merrill changed its compensation rationale resulting in huge bonuses in it difficult year:
Q: In 2008 was Merrill Lynch looking at the bonuses as a percent of revenue?
A: No. In 2007 we diverted from that for reasons. We set out in a proxy that Merrill had
suffered substantial losses largely related to one unit of the corporation. Overall financial
performance is usually a key ingredient. We had to balance that with the need to pay our
employees in units that performed....
Q: Did there come a time in 2008 when you revisited that approach that you need to consider
having bonuses in some way reflect the economic performance of Merrill year to date?
A: I think we always looked at financial performance, but [beginning in 2007] I think we
thought it would jeopardize the long-term health of the firm - and certainly later jeopardize the franchise value of Bank of America - if we didn't pay people who performed and contributed for their performance in the face oflarge losses on legacy assets in some units....] . The information contained in the three appendices attached hereto set out, in stark terms, the failure of the compensation structures at many of our nation's largest financial institutions to follow any objective and consistent principles. To the contrary, what these statistics portray is an ad hoc system that does not come dose to meeting the goal of having employees share in the upside and the downside of their firm's performance. We emphasize that the problems we have found relate to problems with banking compensation system-wide and should not be taken as criticism of any particular individual's conduct.
We recognize, of course, that there can be situations where the distribution of profits to
employees who created real profits would be appropriate even though the overall firm may have lost money. This might be the case, for example, where one division of a firm earned large profits but another division lost profits. A principled and consistent approach would, however, balance the need to reward and retain those who created profits with the need for bonuses to reflect the overall performance of the firm. In any event, our investigations have shown numerous instances where large bonuses were paid to individuals in money-losing divisions at firms who saw either substantially reduced profits or losses in 2008.
In sum, as we seek to learn lessons from this economic crisis and repair the damage it has
wrought, it will be vital to develop and implement sound principles and rationales for executive compensation and bonuses that promote sustainable and rational economic growth. The repeated explanation from bank executives that bonuses are tied to performance in a manner designed to promote such growth does not appear to be accurate. Indeed, our investigation suggests a disconnect between compensation and bank performance that resulted in a "heads I win, tails you lose" bonus system. In other words, bank compensation structures lacked consistent principles and tended to result in a compensation system that was all "upside."

The private market place is, and should be responsible for setting compensation structures.

However, compensation packages should be designed to promote long-term, sustainable growth and actual increases in value. This would drive firms towards decision-making that promotes long-term actual growth and performance rather than the dangerous combination of short-term booked profits and blow-up deferral caused by the current bonus culture. Moreover, if market participants begin following sounder and more principled bonus systems, firms would be less susceptible to the "poaching" of their employees by other firms offering unreasonably large compensation packages. Such poaching has too often resulted in irrational bonus bidding wars that harm the entire industry by forcing firms to continually increase bonus levels and leading to a compensation system that is simply a one-way ratchet up.

This rationalization of the compensation and bonus system must be accomplished now. Hopefully, the private sector sees the problem and addresses it quickly. The private sector is the appropriate forum for such reform, and some firms have already taken steps in the right direction.

If the private sector does not act, such reform should be discussed as part of the federal regulatory reform effort, and, where appropriate, taken into account by the Obama Administration's pay czar.

APPENDIX A
-,
TARP RECIPIENTS' 2008 BONUS CHART
Below is a chart of the original nine TARP recipients for 2008 highlighting each banks earnings/losses, bonus pool, number of
employees, earnings per employee, bonus per employee, amount ofTARP funds received and the amount of bonus payments in excess
of $3 million, $2 million and $1 million.
:::$2
M__:::~lM·
Bank of America $4,000,000,000 $3,300,000,000 243)000 $16,461 $13,580 $45 B 28 65 172

.. Bank of New York Mellon $1,400,000,000 $945,000,000 42,900 $32,634 $22,028 $3 B 12 22 74

Citigroup, Inc. ($27,700,000,000) $5,330,000,000 322,800 ($85,812) $16,512 $45 B 124 176 738

Goldman Sachs Group $2,322,000,000 $4,823,358,763 30,067 $77,228 $160,420 $10 B 212 391 953

,J.P. Morgan Chase & Co.. $5,600,000,000 $8,693,000,000 224,961 $24,893 $38,642 $25 B >200 1,626

-
I,Merrill Lynch ($27,600,000,000) $3,600,000,000 59,000 ($467,797) $61,017 $10 B 1~9 696
Morgan Stanley $1,707,000,000 $4,475,000,000 46,964 $36,347 $95,286 $10 B 101 189 428
-
'State Street Corp. $1,811,000,900 $469,970,000 2~.475 $63,600 $16,505 $2 B 3 8 44
~Well§Fargo & Co:. _ $42,933,000,000) $977,500,000 281,000 ($152,786) $3,479 $25 B 7 22 62
* Wells Fargo & Company's 2008 losses include Wachovia's 2008 losses.
5
APPENDIX B
TARP RECIPIENTS' 2008 COMPENSATION SUMMARY
WITH BONUS BREAKDOWN
Below is a summary of the original nine TARP recipients highlighting the total amount of
TARP funds received by each bank, the total 2008 earnings, the total 2008 bonuses, the number of
employees receiving a bonus over a $1 mil1ion, the total number of employees and a breakdown of
the bonus' payments.
. 1. Bank of America
TARP: $45 billion ($15 billion on 10/28/08 under the Capital Purchasing
Program; $10 billion on 1/9/09 under the Capital Purchasing
Program [for Merrill Lynch]); $20 billion on 1/16/09 under the
Targeted Investment Program (1/16/09 Treasury and other
government organizations agrees to backstop $118 billion in
assets)
2008 Earnings: $4.0 billion, or $0.55 per diluted common share.
2008 Total Bonuses: $3.33 billion in cash and equity ($2.9 billion of the mixed cash and
equity bonuses were discretionary and $337 million of the mixed
cash and equity bonuses were guaranteed)
172 employees: at least $1 million
Total Workforcel: 243,000
BODUS Breakdown
.The top four recipients received a combined $64.01 million.
The next four bonus recipients received a combined $36.85 million.
The next six bonus recipients received a combined $31.39 million.
Four individuals received bonuses of $1 0 million or more and combined they received
$64.01 million.
8 individuals received bonuses of $8 million or more.
1 All Workforce numbers were taken from the companies' l(}K's for the year 2008.
6

10 individuals received bonuses of $5 million or more.
28 individuals received bonuses of $3 million or more.
65 individuals received bonuses of $2 million or more.
Overall, the top 28 bonus recipients received a combined $183.16 million.
2. Bank of New York Mellon
TARP: $3 billion
2008 Earnings: $1.4 billion, or $1.20 per diluted share.
2008 Total Bonuses: $945 million
74 employees: at least $1 million
Total Workforce: 42,900
Bonus Breakdown
The top five executives received no cash bonuses.
The remaining 12 members of the 17 member "Executive Committee" received a
combined $16 million, which is an average bonus of $1 ,333,750 a person.
Other employees, totaling 30,521 individuals, received a combined $928.57 million,
which is an average bonus of $30,424 a person.
12 individuals received bonuses of $3 million or more.
22 individuals received bonuses of $2 million or more.
3. Citigroup, Inc.
TARP:     $45 billion ($25 billion on 10/28/08 underthe Capital Purchasing
Program; $20 billion on 12/30/08 under the Targeted Investment
Program) (11/23/08 Treasury and other goverrunent organizations
agrees to backstop $306 billion in assets)
7

2008 Net Losses: $27.7 billion, or $5.59 per share.
2008 Total Bonuses:     $5.33 billion in cash and equity ($4.6 billion of the mixed cash and
equity bonuses were discretionary and $704 million of the mixed
cash and equity bonuses were formulaic)
738 employees: at least $1 million
Total Workforce: 322,800
Bonus Breakdown
11 executives received a combined $77.25 million in cash, def~rred cash, performance
vesting stock, and performance priced options.
The Senior Leadership Committee (excluding members who are also executives)
received a combined $126.26 million in cash, deferred cash, and equity.
The top four recipients received a combined $43.66 million.

The next four bonus recipients received a combined $37.47 million.

The next six bonus recipients received a combined $49.81 million.

Three individuals received bonuses of $1 0 million or more and combined they received
$33.88 million.
13 individuals received bonuses of $8 million or more.
44 individuals received bonuses of $5 million or more.
69 individuals received bonuses of $4 million or more.
124 individuals received bonuses of$3 million or more.
176 individuals received bonuses of $2 million or more.
Overall, the top 124 bonus recipients received a combined $609.10 million.
4. Goldman Sachs Group, Inc.
TARP:     $10 billion
8

2008 Earnings: $2.322 billion, or $4.47 in diluted earnings per common share
2008 Total Bonuses: $4.82 billion ($2.24 billion in cash)
oemployees received more than $884,193 in cash, but combined
cash and equity:
953 employees: at least $1 million
Total Workforce: 30,067
Bonus Breakdown
The top four recipients received a combined $45.90 million.

The next four bonus recipients received a combined $40.81 million.

The next six bonus recipients received a combined $56.40 million.

6 individuals received bonuses of $1 0 million or more and combined they received
$67.70 million.
21 individuals received bonuses of $8 million or more.
78 individuals received bonuses of $5 million or more.
95 individuals received bonuses of $4 million or more.
212 individuals received bonuses of $3 million or more.
391 individuals received bonuses of $2 million or more.
Overall, the top 200 bonus recipients received a combined $994.68 million.
5. J.P. Morgan Chase & Co.
TARP: $25 billion
2008 Earnings: $5.6 billion, or $1.37 per share
2008 Total Bonuses: $8.693 billion ($5.908 billion in cash)
9

1,626 employees: at least $1 million
Total Workforce: 224,961
Bonus Breakdown
The top four recipients received a combined $74.80 million.
The next four bonus recipients received a combined $49.18 million.
The next six bonus recipients received a combined $60.96 million.
Ten individuals received bonuses in cash and equity of $1 0 million or more and
combined they received $145.50 million.
29 individuals received bonuses of $8 million or more.
84 individuals received bonuses of $5 million or more.
130 individuals received bonuses of $4 million or more.
Over 200 individuals received bonuses of $3 million or more.
Overall, the top 200 bonus recipients received a combined $1.119 billion.
6. Merrill Lynch
TARP: $10 billion (was never drawn down by Merrill Lynch; instead, it
was given to Bank of America on 1/09/09)
2008 Net Losses: $27.6 billion, or $24.82 per diluted share
2008 Total Bonuses: $3.6 billion
696 employees: at least $1 million
Total Workforce: 59,000
Bonus Breakdown
The top four recipients received a combined $121 million.

The next four bonus recipients received a combined $62 million.

10

The next six bonus recipients received a combined $66 million.

Fourteen individuals received bonuses of $1 0 million or more and combined they

received $250 million.

20 individuals received bonuses of $8 million or more.

53 individuals received bonuses of $5 million or more.

149 individuals received bonuses of $3 million or more.

Overall, the top 149 bonus recipients received a combined $858 million..
7. Morgan Stanley
TARP: $10 billion
2008 Earnings: $1.707 billion, or $1.45 in diluted earnings per share
Total Bonuses: $4.475 billion
428 employees: at least $1 million
Total Workforce: 46,964
Bonus Breakdown
The top four recipients received a combined $73.04 million.

The next four bonus recipients received a combined $51.08 million.

The next six bonus recipients received a combined $59.62 million.

Ten individuals received bonuses of $1 0 million or more and combined they received

$146.80 million.

15 individuals received bonuses of $8 million or more.

40 individuals received bonuses of $5 million or more.

59 individuals received bonuses of $4 million or more.

11

10 1 individuals received bonuses of $3 million or more.
189 individuals received bonuses of $2 million or more.
Overall, the top 101 bonus recipients received a combined $577 million.
8. State Street Corp.
TARP: $2 billion
2008 Earnings: $1.811 billion, or $4.35 per diluted share
Total Bonuses: $469.97 million ($376.70 million in cash)
44 employees: at least $1 million
Total Workforce: 28,475
Bonus Breakdown
The top four recipients received a combined $17.88 million.

The next four bonus recipients received a combined $8.52 million.

The next six bonus recipients received a combined $10.30 million.

oindividuals received bonuses of $1 0 million or more.

oindividuals received bonuses of $8 million or more.

1 individual received bonuses of $5 million or more.

2 individuals received bonuses of $4 million or more.

3 individuals received bonuses of $3 million or more.

8 individuals received bonuses of $2 million or more.

Overall, the top 3 bonus recipients received a combined $15.15 million.
12

9. Wells Fargo & Co.
TARP: $25 billion
2008 Net Losses: $42.933 billion (includes losses from Wachovia)
Total Bonuses: $977.5 million
62 employees: at least $1 million
Total Workforce: 281,000
Bonus Breakdown
The Senior Executive Officers of Wells Fargo did not receive any bonuses

The top four recipients received a combined $17.29 million.

The next four bonus recipients received a combined $12.63 million.

The next six bonus recipients received a combined $16.14 million.

1 individual received a bonus of $5 million or more..

7 individuals received bonuses of $3 million or more.

22 individuals received bonuses of $2 million or more.

Overall, the top 7 bonus recipients received a combined $27.12 million.

Overall, the top 209 bonus recipients received a combined $197.75 million

13

APPENDIXC

TARP RECIPIENTS' HISTORICAL COMPENSATION & BENEFITS

AS A PERCENTAGE OF NET REVENUE & NET INCOME

Below are charts for the original nine TARP recipients from 2003 to the second quarter
2009 highlighting each bank's historical net revenue, compensation and benefits, compensation
as a percentage of revenue, net income, and compensation as a percentage of net income.
BANK OF AMERICA COMPENSATION & BENEFITS STATISTICS
Compensation as % orNet Revenue & Net Income
(mil.) Net
Revenue
Compo &
Benefits
Compo %
of Revenue
Net Income Compo % of
Net Income
2003 $37,886.00 $10,446.00 27.57% $10,762.00 97.06%
2004 $49682.00 $13435.00 27.04% $13947.00 96.33%
2005 $56,923.00 $15,054.00 26.45% $16,465.00 91.43%
2006 $73 804.00 $18211.00 24.67% $21 133.00 86.17%
2007 $68,068.00 $18,753.00 27.55% $14,982.00 125.17%
2008 $73976.00 $18371.00 24.83% $4008.00 458.36%
200910 $35758.00 $8768.00 24.52% $4247.00 206.45%
200920* $32774.00 $7790.00 23.77% $3224.00 241.63%
* As reported by BAC. 10-Q not yet filed with SEC.
14

BANK OF NEW YORK COMPENSATION & BENEFITS STATISTICS
Compensation as % orNet Revenue & Net Income
(mil.) Net
Revenue
Compo &
Benefits
Compo %of
Revenue
Net Income Compo %of
Net Income
2003 $4,880.00 $2,002.00 41% $1,157.00 173.03%
2004 $5 551.00 $2324.00 42% $1 440.00 161.39%
2005 $6,055.00 $2,310 or $2,549 38% or 42% $1,571.00 147.04% or
162.52%
2006 $6.838.00 $2640.00 39% $2.847.00 92.73%
2007 $11,331.00 $4,120.00 36% $2,039.00 202.06%
2008 $13 365.00 $5 115.00 38% . $1.386.00 369.05%
200910 $32060.00 $1 169.00 36% $370.00 315.95%
200920* $32 130.00 $1 153.00 36% $410.00 281.22%
Effective July 1,2007, The Bank of New York Company, Inc. and Mellon Financial Corporation
merged into The Bank of New York Mellon Corporation. Data for prior periods reflects only the
Bank of New York.
* As reported by BNY. 10-Q not yet filed with SEC.
2 2007 10-K versus 2005 10-K
15

CITIGROUP COMPENSATION & BENEFITS STATISTICS
Compensation as % orNet Revenue & Net Income
Net
Revenue
(mil.)
Compo &
Benefits (mil.)
Compo %
of Revenue
Net Income Compo %of
Net Income
2003 $71,594.00 $20,719.00 28.94%* $17,853.00 116.05%
2004 $79635.00 $22934.00 28.80%* $17046.00 134.54%
2005 $83,642.00 $25,772.00 30.81% $24,589.00 104.81 %
2006 $89615.00 $30277.00 33.79% $21 538.00 140.57%
2007 $81,698.00 I $34,435.00 42.15% $3,617.00 952.03%
2008 $53,692.00 $32,440.00 60.42% $(27,684.00) N/A
20091Q $24,521.00 $6,419.00** 26.18% $1,593.00 403.95%
20092Q*** $29,969.00 $6,359.00 21.22% $4,279.00 149.61%
* Before adjustment to align with other numbers of income statements the percentages were
26.15%,26.75%, and 26.61%, respectively.
** $6,419 reported in 10-Q. $6,235 reported in Second Quarter financial release.
***As reported by Citi. 10-Q not yet filed with SEC.
.'
16

GOLDMAN SACHS COMPENSATION & BENEFITS STATISTICS
Compensation as % orNet Revenue & Net Income
Net
Revenue
(mil.)
Camp. &
Benefits (mil.)
Camp. %
of Revenue
Net Income Camp. %of
Net Income
2002 $13,986.00 $7,037.00 50.31% $2,114.00 332.88%
2003 $16,012.00 $7,515.00 46.93% $3,005.00 250.08%
2004 $20550.00 $9652.00 I 46.97% $4553.00 211.99%
2005 $25,238.00 $11,758.00 46.59% $5,626.00 208.99%
2006 $37,665.00 $16,457.00 43.69% I $9,537.00 172.56%
2007 $45,987.00 $20,190.00 43.90% $11,599.00 174.07%
2008 $22222.00 $10934.00 49.00% $2322.00 470.89%
20091Q $9,425.00 $4,712.00 49.99% $1,814.00 259.76%
20092Q* $13,760.00 $6,650.00 48.32% $3,440.00 193.31%
* As reported by OS. 10-Q not yet filed with SEC.
17

JP MORGAN COMPENSATION & BENEFITS STATISTICS
Compensation as % o(Net Revenue & Net Income
Net
Revenue
(mil.)
Compo &
Benefits (mil.)
Compo %
of Revenue
Net Income Compo % of
Net Income
2002 $29,614.00 $10,693.00 36.11 % $2,114.00 505.82%
2003 $33,191.00 $11,387.00 34.31% $6,719.00* 169.47%
2004 $42736.00 $14506.00 33.94%. $4466.00 324.81%
2005 $54,248.00 $18,065.00 33.30% $8,483.00 212.96%
2006 $61,999.00 $21,191.00 34.18% $14,444.00 146.71%
2007 $71,372.00 $22,689.00 31.79% $15,365.00 147.67% .
2008 $67,252 22,746.00 33.82% $5,605.00 405.81%
20091Q $25,025.00 $7,588.00 30.32% $2,141.00 354.41%
20092Q** $25,623.00 $6,917.00 27.00% $2,721.00 254.21%
* Heritage JP Morgan Chase Only

** As reported by JPM. 10-Q not yet filed with SEC.

18

MERRILL LYNCH COMPENSATION & BENEFITS STATISTICS
Compensation as % orNet Revenue & Net Income
Net Revenue
(mil.)
Compo &
Benefits
(mil.)
Compo % of
Revenue
Net Income Compo % of
Net Income
2003 . $19,548.00 $9,814.00 50.20% $3,836.00 255.84%
2004 $21 500.00 $10599.00 49.30% $4436.00 238.93%
2005 $25,277.00 $12,314.00 48.72% $5,116.00 240.70%
2006 $33,781.00 $16,867.00 49.93% $7,499.00 224.92%
2007 $11,250.00 $15,903.00 141.36% ($7,777.00) N/A
2008 ($12,593.00) $14,763.00 N/A ($27,612.00) N/A
MORGAN STANLEY COMPENSATION & BENEFITS STATISTICS
Compensation as % orNet Revenue & Net Income
Net
Revenue
(mil.)
Compo &
Benefits
(mil.)
Compo % of
Revenue
Net Income Compo % of
Net Income
2002 $19,127.00 $7,933.00 41.48% $2,988.00 265.50%
2003 $17,621.00 $7,892.00 44.79% $3,787.00 208.40%
2004 $20,319.00 $9,320.00 45.87% $4,486.00 207.76%
2005 $23,525.00 $10,749.00 45.69% $4,939.00 217.64%
2006 $29,839.00 $13,986.00 46.87% $7,472.00 187.18%
2007 $28,026.00 $16,552.00 59.06% $3,209.00 515.80%
2008 $24,739.00 $12,306.00 49.74% $1,707.00 720.91%
20091Q $3,042.00 $2,082.00 68.44% ($190.00) N/A
20092Q* $5,400.00 $3,900.00 72.22% $149.00 2,617.45%
* As reported by MS. 10-Q not yet filed with SEC.
19
STATE STREET COMPENSATION & BENEFITS STATISTICS
Compensation as % orNet Revenue & Net Income
(mil.) Net
Revenue
Compo &
Benefits
Compo % of
Revenue
Net Income Compo % of
Net Income
2003 $4,734.00 $1,731.00 36.57% $722.00 239.75%
2004 $4951.00 $1 957.00 39.53% $798.00 245.24%
2005 $5,473.00 $2,231.00 40.76% $838.00 266.23%
2006 $6311.00 $2652.00 42.02% $1 106.00 239.78%
2007 $8,336.00 $3,256.00 39.06% $1,261.00 258.21%
2008 $10693.0 $3 842.00 35.93% $1811.00 212.15%
200910 $2002.00 $731.00 36.5% $476.00 15-3.57%
200920* $2 122.00 $696.00 32.8% ($3 182.00)** N/A
* As reported by STT. 10-Q not yet filed with SEC.

** Extraordinary loss as a result of the previously reported consolidation of the ABCP conduits.

20

WELLS FARGO COMPENSATION & BENEFITS STATISTICS
Compensation as % orNet Revenue & Net Income
Net
Revenue
(mil.)
Compo &
Benefits
(mil.)
Compo %
of Revenue
Net Income Compo % of
Net Income
2003 $28,389.00 $8,924.00 31.43% $6,202.00 143.89%
2004 $30059.00 $8446.00 28.10% $7014.00 120.42%
2005 $32,949.00 $10,455.00 31.73% $7,671.00 136.29%
2006 $35,691.00 $12,027.00 33.70% $8,420.00 142.84%
2007 $39,390.00 $13,368.00 33.94% $8,057.00 165.92%
2008 $41,897.00 $12,940.00 30.88% $2,655.00* 487.38%
20091Q $21,000.00 $6,494.00** 30.92% $3,050.00 212.92%
20092Q*** $22,500.00 $6,725.00** 29.89% $3,170.00 212.15%
* Does not include 2008 losses from Wachovia.

** Includes "salaries, commission and incentive compensation, and employee benefits," as

reported by the company.

*** As reported by Wells Fargo. 10-Q not yet filed with SEC.

21

Around the Web: Landmark or Pit Stop?

I understand why people feel the need to tout the historical significance of the financial reform package that passed the conference committee. The president needs it politically and those who support him want to give him credit for getting anything at all in the face of the onslaught of bank lobbyists. Lots of folks worked very hard against tremendous odds to get something passed.

But I think a more sober analysis shows that what’s been achieved is pretty modest. It hands over many crucial details to the same regulators who oversaw our financial debacle.

Summing up, Bloomberg reports: “Legislation to overhaul financial regulation will help curb risk-taking and boost capital buffers. What it won’t do is fundamentally reshape Wall Street’s biggest banks or prevent another crisis, analysts said.”

Zach Carter characterizes it as a good first step. The Roosevelt Institute’s Robert Johnson writes: “This first round was not the whole fight. It was the wake-up call and the beginning of the fight. Rest up and get ready. There is so much more to do.”

The question is when we’ll get the chance to take the additional steps that are needed. The public is skeptical that the new rules will prevent another crisis, according to this AP poll. The Big Picture’s Barry Ritholtz grades the various aspects of the reform effort. Overall grade? C-. Top marks go to the new minimum mortgage underwriting standards. But legislators get failing grades for leaving four critical issues on the table: “to big to fail banks,” bank leverage, credit rating agencies and corporate pay.

Ritholtz saves some of his harshest evaluation for the proposal to house the new consumer protection agency inside the Federal Reserve, which he finds “beyond idiotic.”