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I have been unequivocal in characterizing the excessive “bonuses” paid out by members of the U.S. financial crime syndicate as “theft”. Now a new report from Andrew Cuomo, New York's Attorney General confirms that characterization in objective terms.

The report analyzed 2008 earnings and bonuses of Wall Street banks, but also looked back several years – in order to place 2008 compensation in context with other years. Not only did those Wall Street banks who reported “profits” pa y out more than 100% of those profits as “bonuses”, but even the fraud-factories which reported losses paid out bonuses near the same level as when they were reporting record profits.

The conclusion of the report was that there was absolutely no connection between employee performance and the bonuses he/she received. However, such a conclusion is much too timid. Paying out “bonuses” which exceed 100% of profits, or paying out any bonuses at all when a company loses money is plainly and simply theft.

In the case of Merrill Lynch, even this characterization is inadequate. Merrill Lynch lost $7 billion in 2007, while paying out $16 BILLION in total compensation. It was on the way to losing much more than that in 2008, when it went “belly-up”, but still shoveled out another $15 billion in compensation even though it didn't manage to survive to year-end.

However, even more interesting (or repugnant) was an additional observation by the New York AG: Merrill's losses in 2007 and 2008 erased more than 100% of the profits earned between 2003 and 2006 (and, of course, it paid out enormous bonuses in those years, too). Thus, we have a Wall Street fraud-factory which had less-than-zero net earnings for a six-year period from 2003 through 2008 – the era of Wall Street's “record profits”.

Regrettably, the report did not provide numbers for Merrill Lynch's bonuses from 2003 to 2007. However, if bonuses exceeded $3 billion in the year where it reported its largest losses in history, a conservative estimate would be that Merrill paid around $20 billion more over the previous five-year period. This means that during a six-year period where Merrill Lynch had less-than-zero earnings, it paid its employees somewhere in excess of $20 BILLION, in bonuses alone. Put another way, without that extended bonus-orgy, Merrill Lynch would have remained solvent (or, at least no more insolvent than the rest of the U.S. financial crime syndicate).

Obviously, this establishes clear legal liability for the senior executives responsible for this suicide-through-bonuses compensation policy. In this case, the corporate greed went beyond simply stealing from shareholders. Indeed, with all these firms slashing their dividends while retaining their huge bonuses, every penny of dividend-reduction (and more) was confiscated by these thieves.

Yet, with Merrill, this excessive greed goes well beyond merely stealing the dividends of shareholders. Merrill's executives wiped-out their own shareholders solely through paying out excessive bonuses. I have been very outspoken since the collapse of Wall Street began, that once the litigation started against these thieves and fraudsters that litigants should not only be attempting to claw-back the “bonuses” paid out in 2007 and 2008, but also all the bonuses paid out in several previous years – when Wall Street pretended it was making record-profits.

I have referred many times to the interview of former senior, banking regulator William Black – on Bill Moyer's PBS news program (see “U.S. bank-fraud SYSTEMIC and INTENTIONAL – William Black”). In that program, not only did Black unequivocally accuse Wall Street, its regulators, and senior U.S. government officials of conspiring together in Wall Street's multi-trillion scamming, but Black also referred to the entire scam as a “Ponzi-scheme”.

I should remind people that during the same years where Wall Street was claiming it was “earning record profits” that Bernie Madoff was making the exact same claims. We no longer consider Madoff's claims of “profits” as credible, so why is anyone still taking claims of “profits” seriously from a bunch of fraud-factories whose own Ponzi-scheme made Madoff look like some mere nickle-and-dime operator?

Here is a table of Wall Street's shareholder-theft just from 2008, along with their reported “earnings”:

                                        2008 “earnings”      2008 bonuses       TARP hand-out

Citigroup                 -$27.7 billion               $5.3 billion              $15 billion

Merrill Lynch            -$27.6 billion               $3.6 billion              $10 billion

Goldman Sachs         $2.3 billion                 $4.8 billion              $10 billion

Morgan Stanley         $1.7 billion                 $4.5 billion              $10 billion

JP Morgan                $5.6 billion                 $8.7 billion              $25 billion

Wells Fargo             -$42.9 billion               $1 billion                 $25 billion

__________________________________________________________________________

Totals                  -$88.8 billion              $27.9 billion          $95 billion

While these numbers for the six largest survivors on Wall Street tell a clear story, I'll add a few quotes from Mr. Cuomo's report:

“...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.”

Cuomo concludes that “there is no clear rhyme of reason to the way banks compensate and reward their employees.”

Here I must completely disagree with the New York Attorney General. There is a clear guiding “principle” on how Wall Street compensates itself: they steal as much as they can every year. For those who can remember back to last fall, there was no talk of “bonuses” coming out of Wall Street until after they had walked away from the U.S. Treasury with their TARP-cheques in their greedy hands.

For those who point to the “profits” Wall Street is reporting this year, and claim that 2008 was nothing but an aberration, there are two obvious rebuttals. First of all, with all categories of U.S. debt simultaneously hitting record default-levels, there would be no “profits” without the fraudulent accounting legitimized by the U.S.'s “accounting watch-dog” (now there is an oxymoron!).

Secondly, what has driven Wall Street's “earnings” this year are their “trading profits”. Who are they doing most of their trading with? The U.S. government, of course.

An interesting article I spotted over the weekend from the Financial Times pointed out that not only is the U.S. government Wall Street's largest “trading partner”, but it usually pre-announces its purchases. This is the equivalent of going to a used-car dealer and telling him “I must buy a car today,” and then beginning negotiations.

In other words, even with the aid of totally fraudulent accounting, and in the case of Goldman Sachs, hiding a bunch of losses in an “orphan month”, the only way these fraud-factories could torture a profit out of their bottom-line was through the U.S. government continuing to grossly over-pay for Wall Street feces.

Thus, the chronology goes like this: Wall Street mooches $100 billion in TARP money from the Treasury Department in 2008 in order to come up with roughly $30 billion in “bonuses”. Then in 2009, it gets the Treasury Department to buy $10's of billions of “toxic assets” which no one else will touch, and at grossly inflated prices – then it uses those “trading profits” to “repay” its loans.

In other words, all Wall Street did was use a new type of hand-out to pay off an old type of hand-out. This sham-scam with the Treasury Department is just as transparent as the sham-scam which Wall Street has rigged with the Federal Reserve: Wall Street “borrows” money from the Fed at 0% interest, then simply leaves hundreds of billions of that money in the Fed's hands, and gets paid over 1% “interest” on that money. Essentially, this is nothing more than the Fed paying Wall Street more than 1% for simply holding the Fed's money!

The fact that these thieves can use their servants in government to help cover up those crimes does not change the nature of those activities.

I suspect that if any of us had a bank which would loan us money for free – and then pay us interest on these loans that we could manage to “turn a profit” on such an arrangement. And if we also had a perpetual “sucker” who would grossly over-pay us for anything and everything that we wanted to sell that we could also make fat profits on that.

However, when Goldman Sachs does this, it tells its shareholders that because it has been so skillful in generating such “profits” that its employees deserve $10 billion in “performance bonuses”. First it steals its “profits” from the federal government to put into its corporate coffers, then it steals that money from its own shareholders.

This is the Wall Street “business model” for the 21^st century.

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