High performers are getting paid. Time to stop that.

Posted by Marc Hodak on July 16, 2009 under Executive compensation, Reporting on pay | Be the First to Comment

Last year, Jamie Dimon and Lloyd Blankfein had a bad, bad year.  They took it on the chin, and paid themselves no bonuses.  Their JPM and GS colleagues collected little or nothing compared to earlier years, in some cases giving up millions that they might have legitimately earned based on their business units’ good performance in a tough year.  In return, GS and JPM got…pilloried with their lesser rivals in the press as paragons of greed.

This year, it looks like GS and JPM are doing much better thank you.  They will be increasing their pay accordingly.  Members of Congress, once again, are in a tizzy.

“Recently reported bonus pools do suggest that there may be a return to the old ways which caused such damage to our economy. It reinforces our determination to adopt a reasonable set of legislative goals,” [Barney] Frank said.

This first sentence actually contains two false statements.  First, the bonus pools don’t suggest anything, other than the fact that these two firms were quite profitable in the first half of 2009.  Second, no evidence has ever been offered that JPM or GS did any damage to our economy.  Of all the financial institution that were too big to fail, these two were farthest from failing and, in the case of JPM, saved a TBTF bank or two.

By the way, Members of Congress, including those on the finance committees directly overseeing Fanny and Freddie, suffered no diminution in pay in 2008.  In fact, Barney Frank is taking in record amounts, including from the financial firms he is supposedly overseeing.

Ironically, this was the day that Hank Paulson told Congress that, hell yeah, he put a gun to Ken Lewis’s head last year.  Congress professed to be shocked that one of their government agents would do such a thing.  At the same time, Congress conveniently ignores a similar episode of Paulson as their hatchet man when he forced Dimon and Blankfein to take government money they didn’t want.  Unlike Lewis, the JPM and GS chiefs had little reason to believe they were screwing their shareholders in what would turn out to be a Faustian bargain, where the devil got to fill in the terms after the contract was signed.