You've got to hand it to Andrew Cuomo. The New York attorney general is following a well-worn path to New York power. Like Rudy Giuliani and Eliot Spitzer, Cuomo is using his crackdown on Wall Street corruption as a stepping stone to higher office. The only problem for Cuomo is that he has not yet announced his run for New York governor.
But he is coming up with some great numbers to illustrate just how badly broken Wall Street's compensation system is. Despite losing billions in 2008, 4,793 bankers and brokers who work there got paid at least $1 million. What is amazing to me is how many of those people worked for firms that lost billions of dollars. Where did they get the money to pay the bonuses if they lost money? I am guessing from government bailouts, like the $700 billion TARP.
The worst of the lot were Citigroup (C) and Merrill Lynch. Citi paid 738 bankers and traders at least $1 million in 2008 -- even though it lost $27.7 billion it paid $5.33 billion in bonuses. Next from the bottom was Merrill Lynch which lost $2.76 billion in 2008 while paying $3.6 billion in bonuses. Meanwhile, Merrill's parent, Bank of America (BAC), paid a total of $3.3 billion in bonuses on $4 billion in earnings.
Then there were the "winners" who made money in 2008 and paid themselves the biggest bonuses. That list included Goldman Sachs Group (GS), Morgan Stanley (MS), and JPMorgan Chase (JPM). Here are the totals:
- 953 Goldman bankers and traders took home bonuses worth at least $1 million -- it earned $2.3 billion and paid bonuses totaling $4.8 billion;
- 428 Morgan Stanley employees got bonuses over $1 million -- it earned $1.7 billion and paid $4.5 billion in total bonuses; and
- 1,626 JPMorgan employees got bonuses of at least $1 million in 2008 -- it earned $5.6 billion and paid $8.69 billion in bonuses.
One thing is very clear from these numbers: these companies are run for their employees not for shareholders. Many paid out bonuses that were several times bigger than their profit. For example, Morgan Stanley's bonus/profit ratio (BPR) was 265 percent; Goldman's BPR was 209 percent; JPMorgan's BPR was 155 percent and Bank of America's BPR came in last at 83 percent. Buy these stocks at your own risk.
In the meantime, don't be surprised to see Andrew Cuomo throw his hat into the ring when it comes time to elect a new governor in New York.
Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College. His eighth book is You Can't Order Change: Lessons from Jim McNerney's Turnaround at Boeing. Follow petercohan on Twitter. He owns Citi shares and has no financial interest in the other securities mentioned.