Wall Street Bonuses: Good for America?

After reporting blowout earnings last week, Goldman Sachs (NYSE: GS  ) said it has set aside close to $17 billion for employee compensation so far this year (or about half its net revenue). It's no surprise that Goldman now finds itself in the crosshairs of public outrage.

It's a familiar gripe: In the last year controversy has surrounded bonuses at AIG (NYSE: AIG  ) and Bank of America's (NYSE: BAC  ) Merrill Lynch unit. Citigroup (NYSE: C  ) avoided having to dish out millions to a star trader by selling its Phibro unit to Occidental Petroleum (NYSE: OXY  ) .

But according to one of Goldman's international advisors, the bonuses are something we have to "tolerate." Brian Griffiths argued this week that pay inequality helps achieve "greater prosperity and opportunity for all." The spending, he claims, will also help stimulate the economy.

Who's buying it? Sound off in the comments section below.

Brian Richards does not own shares of any companies mentioned in this article. The Fool has a disclosure policy.


Read/Post Comments (12) | Recommend This Article (9)

Comments from our Foolish Readers

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  • Report this Comment On October 21, 2009, at 11:50 AM, PhulishMortal wrote:

    It's difficult to know the thrust of Griffiths' argument given the limited information available in the linked article. I'm particularly hesitant to slam him since he appears to be making an appeal for morality in the marketplace. Regardless, the size of the GS commissions has gotten out of hand if they are eating up that much revenue.

  • Report this Comment On October 21, 2009, at 12:14 PM, megabuc wrote:

    Citibank will avoid paying a bonus because it has been CLOSED BY THE FED and it is drifting until the FED IS ABLE TO UNWIND IT TO GET BACK A SMALL AMOUNT OF THE $500 BILLION SECRET LOAN FROM A SECRET $2 TRILLION SECRET ACCOUNT THAT A FEDERAL JUDGE ruled that it must be disclosed to the taxpayers. CITIBANK'S LIGHTS HAVE BEEN TURNED OFF. What a joke that Citibank is. Wells Fargo took a done deal from under Citibank's nose, and Citibank was to broke to do anything about it. CITIBANK HAS LOST ITS WILL TO FIGHT. FAREWELL CITIBANK IN THE POOR HOUSE.

  • Report this Comment On October 21, 2009, at 12:41 PM, USNCPOFOOL wrote:

    A bonus should be determined by the behavior of the enterprise! Professional sports included! Should not be automatic/and/or part of a CEO's salary! I have no qualm about providing a motivation to an individual to increase profitability and thus receive a reward..The levels of achievement could be established by a non-partisan board!

  • Report this Comment On October 21, 2009, at 2:45 PM, Notkidding wrote:

    These days, people seemed to have lost their sense and sensibility. It is a free market/enterprise, but if everyone is only for HIMSELF then we lose the sense of comminity. Thus, each needs to be a bit reponsible for what his/her action which may affect other negatively. I personally don't have a problems with people getting their bonuses for their work, but $36K for a toilet seat is an example of stupidity and arrogance. If we want to live in a more civilized community, each should contribute the best we can. It is sad that we now live in a culture of blame....when one screws up, he/she blame it on someone else...sad sad sad sad..

  • Report this Comment On October 21, 2009, at 5:14 PM, SailorFritz wrote:

    Any company that took federal "bailout" funds should drastically reduce compensation for even their best employees especially this year. (Even if they have paid back the loans.) If they refuse to do this, the Congress should impose income taxes of 80-90 percent on personal income above say a half-million dollars. Since this level is more than ten times the average personal income, no one can complain legitimately that they are bearing an unfair burden. Yes we had to provide assistance, but to pay huge salaries and bonuses to employees is putting a stick in our eyes! If there is no sense of moral responsibility we need to impose some restraint legally.

  • Report this Comment On October 21, 2009, at 6:57 PM, maccdw wrote:

    Some say the free market s/b left alone and Gov't s/n mess with it. OK, if that was true, how many of these mega banks (to use a term which no longer applies) would still exist without having been bailed out by you and me? While Gov't has no business telling privates what to pay their staff, shareholders SHOULD be in a position to play "say on pay." And, because my tax $ went to save these mega banks, then Gov't should be a shareholder, not just a debt owner, and should be encouraged to have a "say on pay."

    On another tangent, any bonus system that rewards people for taking HUGE risks (with other peoples' money) and ignores the pain from losses in later years from those same risks, is just plain stupid.

    Too big to fail = too big to exist.

    Google "Barksley Born" and "Sheila Bair" to learn a bit more.

  • Report this Comment On October 21, 2009, at 7:30 PM, Gorm wrote:

    I have no problem with GS doling out bonuses PROVIDED they relinquish their commercial bank charter.

    If they take the risks, they are entitled to the gains. However, if they lose, I do not want them sucking up for TBTF support from Congress.

    From my perspective, if they fail America will NOT come to their aid. While I recognize they did not ask for TARP $$, they did seek the commercial bank charter as a safety net just in case....

    As for any other institution we are PROPPING up they get nothing. NO WAY can they play it both ways when I (the American taxpayer) is funding them.

  • Report this Comment On October 21, 2009, at 7:32 PM, xetn wrote:

    Sorry Notkidding, but it is not a free market/enterprise, it is a mixed economy. If it were a free market, there would have not been any bailouts or government ownership of GM, Chrysler, AIG, and the many banks that are now "owned" the the US government. And, there would absolutely not be any government intervention into who gets paid what or how much. Lastly, since when is it the business of firing company executives? We have now entered in to Fascism in this country.

    As for maccdw, they should not have survived or been bailed out for their misdeeds. They should have gone the way of LB, et.al.

    You people continue to amaze me with your desire to have the government step in and protect you from your own greed. You all want the profit, but are unwilling to accept any losses when you err.

    Perhaps you have all forgot WWII, a war we fought in large part to destroy Fascism in Germany and Italy and their dictators. Now we are going down the same path; nationalizing private companies, telling them how to run their business by politicians who cannot not even manage to balance the budget and who are driving the US dollar off the face of the earth.

    At the same time we have evolved the US presidency to the point of giving him dictatorial powers and the congress and supreme courts just go along with it.

  • Report this Comment On October 22, 2009, at 10:43 AM, lobo1023 wrote:

    Griffith's comments aside since I think he was not really saying that these bonuses are good for the economy (I believe he was saying that they are a "lost cause" and we should try to think good thoughts). However, the issue as to whether this bonus money IS good for the economy I think has been established. The top 1% continue to get richer and the other 99% worse-off, so obviously they are not spending money that "trickles" its way down. Does the common man benefit from luxury yachts, Swiss chalets, custom suits, Harry Winston purchases? I think not. But, put that $16billion into the hands of the other 99% and it might actually do something.

  • Report this Comment On October 22, 2009, at 11:51 AM, bjc65 wrote:

    Goldman Sachs has brilliantly manipulated the government and the market for the past 25 years. They and others like them are the ones who caused the crashes, got bailed out by the government (advised by former Goldman Sachs executives under both Republican and Democratic administrations), and go on to new markets to manipulate. They have very long tentacles. It is very frustrating to see them again help destroy the economy and then reap huge profits from manipulating the price of oil, and give out huge bonuses while so many people suffer.

  • Report this Comment On October 22, 2009, at 6:57 PM, whitesmith wrote:

    I think "our" system is taking on too much water when it's 'OK" and acceptable to rip people off in the name of capitalism. Think about this, Mr. Nelson Bunker Hunt cornered silver and got spanked by United States Commodity Futures Trading Commission (USCFTC) and it was JUST silver! Who did he hurt? I argue nobody. Silver isn't a fundamental commodity to me. On the other hand Mr. Andrew J. Hall literally floats oil and plies his Black-Scholes magic and drives up the cost of oil (energy, plastics, & more) that hurts millions of taxpaying consumers. How can normal people, the middle 2/3s, tolerate this kind of pain for much longer? USCFTC should go for Hall's throat.

  • Report this Comment On October 24, 2009, at 8:58 AM, ReferenDem wrote:

    GET THEM OUT OF GOVERNMENT - VIRTUAL MEETING (Meeting)

    at http://my.barackobama.com/page/event/detail/meeting/gpc5tq

    When you sign up for this event, you are saying to President Barack Obama - we want you to stop the bankrupting of our country by the large financial institutions, with policies and programs that give them taxpayer money with which they can gamble and make record profits.

    We want Geithner, Summers, Bernanke, (Paulsen, Rubin) OUT and we want you to bring honest advocates of reform such as Elizabeth Warren and Brooksley Born IN.

    Please watch Frontline's "The Warning" at http://www.pbs.org/wgbh/pages/frontline/warning/view/

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