Re: CEO pay: What those involved in the financial meltdown made

[David Farber <dave () farber net>]

Begin forwarded message:

From: "Perry E. Metzger" <perry () piermont com>
Date: September 25, 2008 4:14:34 PM EDT
To: dave () farber net
Cc: "ip" <ip () v2 listbox com>
Subject: Re: [IP] Re:   CEO pay: What those involved in the financial  
meltdown made


> From: Rich Kulawiec <rsk () gsp org>
>
> And the pay is just the beginning.  Note that Lehman Brothers, which
> just want belly-up, is still planning on paying out 2.5 billion in
> BONUSES.
>
> See:
>
>         http://digbysblog.blogspot.com/2008/09/untidy-by-digby-moral-hazard-nah.html

That's a slanted way to view the situation at the very least.

Barclays bought Lehman's broker-dealer operations and wants the
employees to stay instead of flee. If they flee, the purchase would
have been worthless, because such a firm has few important assets
other than the staff. To keep people from leaving, Barclays, the
purchaser, is paying bonuses to the staff to keep them from leaving.

Why do they have to pay bonuses? Because it is typical on Wall Street
for a professional to get paid a pittance as their base salary and most
of their compensation as end of year bonus. No bonus pool, and people
will (rightfully) say that they can't afford to pay the rent on their
apartments and get other jobs. The money is coming from Barclays as an
investment from them, and not from a bail-out or any other such source.

This is not the part of Lehman that invested in CDOs anyway --
people in the broker-dealer part of the organization had nothing to do
with such things. This is the portion that does things like
maintaining brokerage accounts for people, and running the computers
to print their statements, etc. Things like Lehman's institutional
real estate investments, merchant banking, etc., are not part of it.

Perry




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