"But We Can't Afford to Lose the Talent" and Other Bullsh*t

Attention Wall Street Banks:

YOUR EMPLOYEES AREN’T GOING ANYWHERE.  THERE IS NOWHERE FOR THEM TO GO.  PRIVATE EQUITY FIRMS ARE SCREWED, REAL ESTATE FIRMS ARE DEAD ALSO…AS ARE MOST HEDGE FUNDS.  STOP THE BONUSES, YOUR PEOPLE ARE STUCK WITH YOU ANYWAY.

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As B of A/ Merrill‘s Ken Lewis and John Thain continue to play hide-and-seek with New York State Attorney General Andrew Cuomo, details about some of the more absurd bonus and pay packages at that shop from 2008 continue to dribble out and the numbers are absolutely sickening.

Merrill Lynch paid its oh-so-talented employees $3.6 billion in 2008, a year that saw the firm lose an incredible $28 billion and be forced into a rescue takeover by B of A.  Apparently, profit or loss, these people are royalty, so instead of bonuses, why don’t we call these payments to the kings and queens what they really are, Tributes.

I keep hearing the same defense for giving out bonuses to employees of a de facto bankrupt company like Merrill Lynch:  “We can’t afford to lose the talent so we have to pay them.”

OMG, The Talent?  THE TALENT? Ha Ha Ha Ha Ha …. BWAAAHA HA HA HA!

Talent, in this case, is 30-to-1 leverage in a 5 year bull market.  He who has the guts and ability to borrow the most in a rising tide looks like an absolute genius…until, ya know, reality sets in.

I’m not very impressed with the “talent” at Merrill Lynch that led to the company losing the entire franchise in less than 18 months.  And I really don’t care whose daddy was friends with what managing director or which big-shot banker had the family connections and wealth to go through 8 years of fully paid-for law, grad and business school while the rest of us had to go out and earn.

Your so-called “talent” along with a Metrocard might get you on the subway, homeboy.  You’re certainly not deserving of tax money from the middle class of America.

Let’s take the case of Andrea Orcel, who ran a Merrill Lynch banking division that generated over half a billion dollars and was involved in some of the most high-flying deals of the last era.  They paid this banker $34 million, primarily on the strength of the mega-acquisition of Dutch bank ABN Amro for $101 billion that Orcel helped put together.  The lead buyer of ABN Amro was the Royal Bank of Scotland.  If RBS rings a bell, it’s because you’ve probably been hearing about the fact that the company has basically been bankrupted and then became nationalized shortly after.

Ooohh, what talent!  A banker who convinces two lumbering banks to merge in one of the most bloated, ill-advised deals in history, one which subsequently leads to failure and nationalization.  And for this service, Merrill earns a boatload in fees and pays their employee $34 million.

Below is a quote from ex Fed Chaiman Paul Volcker that sums up the insanity:

“RBS and ABN Amro are both bankrupt, yet the banker who put that deal together walks off with $30 million there’s something the matter with that system.”

And please stop with this “at big firms the bonus is part of the salary” stuff.  Tough luck.  When you work for a large company, the primary reason you are even in a position to earn a piece of business like the aforementioned mega-merger is that you are at one of a handful of large-enough, elite banks.  You take the good with the bad.

The flip side of that equation is that when your company is not doing well, you suck it up and stick with the team until things get better…or you leave.

This “we better pay them or else” nonsense has got to stop.  The talent has nowhere else to go.  With a national unemployment rate at almost 10%, we are a buyer’s market for investment bankers, end of story.

So stop giving away my tax money to “the talent”.  They were never worth it, anyway.

Full Story:  Merrill’s $10 Million Men (WSJ – Subscription Req)

Read Also:  The Quesadilla That Changed My Mind About The Bailout

Full Disclosure:  I have no positions in BAC or RBS

What's been said:

Discussions found on the web
  1. Jeffrey commented on Mar 08

    You know, before I read your piece I agreed with you. Now, I am not so sure.

    Take Ms. Orcel’s case, for instance. F-ing up huge takes a lot of skill. But earning millions for it and leaving your mess to be cleaned up by everyone else takes special talent. We might not be able to afford her skills in any other industry.

    /s

  2. Jeffrey commented on Mar 08

    You know, before I read your piece I agreed with you. Now, I am not so sure.

    Take Ms. Orcel’s case, for instance. F-ing up huge takes a lot of skill. But earning millions for it and leaving your mess to be cleaned up by everyone else takes special talent. We might not be able to afford her skills in any other industry.

    /s

  3. Jeffrey commented on Mar 08

    You know, before I read your piece I agreed with you. Now, I am not so sure.

    Take Ms. Orcel’s case, for instance. F-ing up huge takes a lot of skill. But earning millions for it and leaving your mess to be cleaned up by everyone else takes special talent. We might not be able to afford her skills in any other industry.

    /s

  4. Joshua M Brown commented on Mar 08

    indeed, she is hugely talented, I’d guess currently working with Geithner on TARP oversight

    lol

  5. Joshua M Brown commented on Mar 08

    indeed, she is hugely talented, I’d guess currently working with Geithner on TARP oversight

    lol

  6. Joshua M Brown commented on Mar 08

    indeed, she is hugely talented, I’d guess currently working with Geithner on TARP oversight

    lol