The Real 'Reason' Bankers Deserve Big Bonuses

by: Wendy Fried

I must take issue with the title of Andrew Cuomo’s groundbreaking report on Wall Street bonuses, released Thursday: "No Rhyme or Reason: The 'Heads I Win, Tails You Lose' Bank Bonus Culture."

First of all, Wall Street’s bonus culture isn’t “heads I win, tails you lose.” It’s “heads I win, tails I win, and YOU don’t work here so who the hell cares about you anyway.” Or, to quote Nine Inch Nails:

There is no you
There is only me
There is no f*#g you
There is only me

Second, the bonus culture is not without “reason.” You simply start with the numbers you want to pay, and then you come up with a reason to pay them.

For instance, according to Cuomo, Merrill Lynch (MER) paid a total of 3.8 billion in bonuses in 2008, a year in which its net losses were 27.6 billion. So there are your numbers. Now comes the reason: “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.” So, you see, it was still performance-based compensation. It just happened to be based on somebody else’s performance (though exactly whose, at that juncture, is another question, since Merrill's competitors were hemorrhaging too).

Third. That part about “no rhyme.” That's irresistible:

There once were some Wall Streeters who
Had to live through a bad year or two.
With no rising tide to lift 'em,
They devised a new system
Where a giant black hole lifts 'em too.