By Tom Randall and Jamie McGee

Sept. 26 (Bloomberg) — Wall Street’s five biggest firms paid more than $3 billion in the last five years to their top executives, while they presided over the packaging and sale of loans that helped bring down the investment-banking system.

Merrill Lynch & Co., once the largest U.S. brokerage, paid its chief executives the most, with Stanley O’Neal taking in $172 million from 2003 to 2007 and John Thain $86 million after a month’s work last year. The company agreed to be acquired by Bank of America Corp. for about $50 billion on Sept. 15. Bear Stearns Cos.’s James “Jimmy” Cayne made $161 million before the company collapsed and was sold to JPMorgan Chase & Co. in June.

Democrats and Republicans in Congress are demanding that limits be placed on executive pay as part of the $700 billion financial rescue plan proposed by U.S. Treasury Secretary Henry Paulson. The former Goldman Sachs Group Inc. CEO, who received about $111 million between 2003 and 2006, said in testimony to Congress on Sept. 24 that he would accept such limits as part of the plan, after initially opposing them.

“Shareholders and boards should have done something about this a long time ago,” said Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware in Newark. “They justified these levels of pay on the idea that they’re all geniuses. I think that balloon has burst.”

Wall Street firms have shared profits liberally with employees. The five biggest — Goldman, Morgan Stanley, Merrill, Lehman Brothers Holdings Inc. and Bear Stearns — paid their 185,687 employees $66 billion in 2007, as problems with subprime mortgages mounted, including about $39 billion in bonuses. That amounts to average pay of $353,089 per employee, including an average bonus of $211,849. The five firms had combined net income of $93 billion during the five years through 2007.
read http://www.bloomberg.com/apps/news?pid=20601103&sid=a96vQtgKS3BM&refer=news#

I too am glad it is all out in the open so the people are now better informed.

It is the rush to action I am opposed to. The threats being hurled that the mess must be fixed today. It is making the folks I see everyday even more uncomfortable with the financial system.

Luigi Zingales has this article at FT.com “Why Paulson is wrong”
http://blogs.ft.com/wolfforum/2008/09/why-paulson-is-wrong/#more-190

“Since we do not have time for a Chapter 11 and we do not want to bail out all of the creditors, the lesser evil is to do what judges do in contentious and overextended bankruptcy processes: to cram down a restructuring plan on creditors, where part of the debt is forgiven in exchange for some equity or some warrants.”

“Forcing a debt-for-equity swap or a debt forgiveness could be no greater a violation of private property rights than a massive bailout, but it forces much stronger political opposition.”

Is this a better idea? I don’t know – but let the folks who do know speak up.

I just want a chance for the best ideas to come forward. I don’t know what they are. But surely we can do better than a blank check handed over to Paulson before the weekend.

We tout ourselves as the nation of ideas. Well if creative destruction is about to destoy the shadow banking system, then what takes its place had better be well thought through.

*Sec. HANK PAULSON EXPOSED!!! by Rep. Peter Defazio

watch this and spread it out !!!

http://www.youtube.com/watch?v=ANGsBNMY1_c&eurl=http://www.itulip.com/forums/showthread.php?p=49468

HANK PAULSON EXPOSED!!! Rep. Peter Defazio – “We should not be rolled by a Wall Street exec who is masquerading as the Secretary of the Treasury”

He’s saying things are no long good so that we can give money to Wall St. Everything was rosy, the economy was great when we were told to spend and buy houses to give money to Wall St. The message seems to change depending what will send money to Wall St.

I just saw the speech. I would not consider it honest. The only thing that impressed me was that he didn’t mention terrorists.

By the way, you didn’t answer my question of what you do in Washington.

Now, banks don’t just make money on mortgages. I mean they shouldn’t. Investment banks do so much more than lend money to buy assets, right skep-tic? They make money on those transactions I would assume.

So what kind of business cannot take a 10% decline, without concerns of grinding to a halt, and still be considered sound?

I agree that thos administration has messed up badly in nearly every respect. That said, they have been masters of denying, resisting being honest, and pushing back when pushed. We are in a serious pickle at the moment and until tonight it was possible for Joe and Jane Main Street to believe we are not. bush could have done the usual tap dance and sugar coating. He did not. I was telling one of his aides the other day that he owed it to the nation to come clean and let us know thay things are bad and to explain how close we came to a meltdown last week. I think he at last did that.

I still think the plan sucks and I want serious changes, and punishment for many. I am just relieved that we are no longer pretending to the nation that things are pretty good.

Could be. One might do well to split things up between a hald dozen banks of different size. We use a credit union, a small-town bank, a couple regional banks, and a couple of money-center banks. Even though we are supposed to have multiple accounts insured to $100k in a single bank as long as the names are different (say one in the name of Shore, one in the name of Mrs. Shore, and a joint act), we don’t do that. Nothing is allowed to go above $90k total deposits in a given bank, that way any interest earned is protected as well.

I haven’t been on here too long so I’m curious what it is you do? I take it you work in DC in some capacity?

“No, I do not agree with all of the proposals but, for the first time, a member of this administration looked the public in the eye and spelled out just how profoundly screwed up things are currently. I was also glad to see him embrace a number of the changes the congress has been insisting upon.”

I didn’t even bother to see but I can tell you that you shouldn’t have been impressed. For the “first time” in 8 years, as this administration’s days are winding down, someone in the administration finally was open and honest.

The biggest problem is that people have been talking about these problems for a long time. Not just people on the internet but also in government. The message was the same the buzzword just changed. What people are now talking now as the subprime problems are the predatory lending issues that started buzzing around in 2001.

And there were concerns within the fed in 2000 about using their authority to send examiners out to lenders to keep an eye on them.
http://online.wsj.com/article/SB118134111823129555.html?mod=todays_us_money_and_investing

This isn’t honesty, this is nothing anyone should be impressed with. This is a bunch of people that had to admit the truth that they either were caught or were asleep. We see the crumbs on your face, we didn’t need to see your hand in the cookie jar.

“Tomorrow is the day to press congress and the WH to prevent overpaying for the assets and to preveny workouts that drop principal balances or reduce the return to lenders, as we all know this will create massive problems for correcting the bubble and for generating future loans.”

This is complete nonsense. Prevent workouts that drop principal balances? For some mortgages that means they go into foreclosure and if you visit my blog you can see how well that’s working out for the banks. Once we buy these mortgages the lenders have already gotten their money. These mortgages and securities being pitched to the american taxpayers are virtually worthless as is. If they had any value they would not be begging us to buy them.

The federal reserve is the lender of last resort. If the banks need money to keep the wheels of industry running, they can borrow from them. At the rates the fed is charging, they’re practically giving money away. But that is still not enough to keep these banks going. This is not a matter of greasing the wheels, the engine has blown due to reckless operation. It’s time for a rebuild and it’s the driver that should pay.

The threat is great, but not understood.

The real threat is government action.

What hurt America more? Planes flying into buildings, or the government reaction?

This time around, government action will be many times worse, should it come to pass.

Let’s say for sake of argument many banks were to go down in very close succession, meltdown of large/small etc- I would think they’d focus on stabilizing the biggest, since they represent much more in terms of systemic risk; and get to the small ones when they get to them…

Not a direct analogy, but Leh is toast and they stepped up for AIG. Say Citi in 100 countries 400,000 employees and a massive balance sheet, vs. Hudson City? If it all hit the fan at once, I know who’d be at the top of my pile to fix.

EW YORK – Republican vice presidential candidate Sarah Palin said Wednesday that the United States could be headed for another Great Depression if Congress doesn’t act on the financial crisis [snip].

On handheld and can’t grab link and text.

The amazing thing is in one months time “The Sky Is Falling”, apparently without any warning! This is like FDR and Pearl Harbor, except he had more time. No one said we have to build a navy & draft the country in one week, or the Country is gone. Now they are saying give away Trillions in a week or “Fall off a Cliff”. Either this is worse then WWII, or we need Cooler Heads to Prevail! It’s evidently worse then the “Great Depression, as they had more time, and did not “Fall Off A Cliff”.

Yes, I heard the threat. Congress will need to put the breaks on the worst aspects of this “plan,” perhaps slashing its cost, getting equity stakes, etc.

Still, bush has finally leveled with the public about how badly f@cked up things are. And it happened on his watch. And his administration is to blame. And his plan su(ks. Yadda yadda. But, there was little sugar coating tonight, and the public debate will be better for it, and Congress will be strengthened in dealing with the administration because of it.