Sunday, September 28, 2008

Wall Street's 2003-07 Housing BOOM Exces$

During the 5 year U.S. Housing 'BOOM' from 2003 to 2007, Wall Street's 5 Largest firms (Goldman Sachs, Morgan Stanley, Merrill Lynch, Bear Sterns and Lehman Brothers) paid their Top 5 Executives a total of more than $3 Billion in compensation!


Three BILLION dollars is of course a stunning amount of money in ANY context but especially so when considering the rather DIRE solvency/financial challenges these same firms have faced over the course of the past 6 months...NAMELY:

* Bear Sterns (the artist formerly known as BSC) was forced into bankruptcy in March

* Lehman Brothers (the artist formerly known as LEH) was forced to declare bankruptcy in September

* Merrill Lynch (MER), in order to avoid being forced into bankruptcy, was forced to sell itself to Bank of America (BAC) in September

* OH yeah, don't forget about that little $700 BILLION Wall Street 'Bailout/Rescue Plan' that was just approved by Congress this weekend !

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According to the informative Bloomberg article linked below:

* The 5 Wall Street firms had combined Net Income (profits) of $93 Billion during the five years through 2007
* Of the $3.1 Billion paid to the top five executives at the firms between 2003 and 2007, Goldman Sachs (GS) paid the highest total with $859 million, followed by Bear Stearns at $609 million...CEO pay at the five firms increased each year, doubling to $253 million in 2007, according to data compiled from company filings

* Merrill Lynch (MER) paid its chief executives the most, with former CEO Stanley O'Neal taking in $172 million from 2003 to 2007 and John Thain receiving $86 million, including a signing bonus, after beginning work in December 2007

* Bear Stearns CEO James Cayne made $161 million before the company collapsed in March and was sold to JPMorgan (JPM) with monetary backing provided by the U.S. Federal Reserve

 * Hank Paulson, the current U.S. Treasury Secretary and former CEO of Goldman Sachs, made about $111 million from 2003-2006...current Goldman Chief Executive Officer Lloyd Blankfein received $57.6 million in 2007

* Morgan Stanley's (MS) current and former chief executives, John Mack and Philip Purcell, were paid about $194 million over the last five years.

* Lehman's Chief Executive Officer Richard Fuld made $165 million between 2003 and 2007


* Lastly, it should be noted that Excessive compensation was NOT limited to Wall Street's top executives as Wall Street firms have paid employees a greater share of revenue than any other industry, about 50%...The five Largest firms paid their 185,687 employees $66 Billion in 2007, including about $39 Billion in bonuses...That amounts to an average pay of $353,089 per employee, including an average bonus of $211,849.


Data Courtesy: Bloomberg
Full Disclosure: I own shares of GS.
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