Morgan Paying Out 62% of Revenues in Bonuses and Pay While Average Families Face 'Years of Pain'

One has to wonder how much of that 'revenue' is merely the result of artificial mark to market accounting and prop desk speculation, and not real cash flow from commercial banking operations.

That is not the pay method for a bank. That's a hedge fund. And that would be all very well and good if they were a hedge fund and responsible for their own failures and successes, but they are obtaining the discount window and federal guarantees and subsidies from the taxpayers as though they were a commercial bank.

This highlights the problem with this 'trickle down' approach that characterizes neo-liberal stimulus versus the approach of, let's say, the Roosevelt administration, that of putting people to work and keeping their savings safe as the first priority.

The US and UK are packing the banks with public money to 'save the system.' Their hope seems to be that as the banks recover, they will start lending to the private sector again, and eventually this money will trickle down to the public as real wages generated by organic economic activity.

Another approach would have been to guarantee the people's savings in banks and Credit Unions, the cash value of insurance policies, and money market funds, up to let's say $2,000,000 per individual and $5,000,000 per couple.

Keeping the people whole, the government would have then been able to effectively place the banks in receivership as required, and work them through the resolution of their problems, handing out some stiff losses to shareholders and speculators and the debt-holders.

No mechanism to do this? They could have nationalized the banks temporarily with a single executive order, as readily as it took Hank Paulson and Tim to type up a ten page document to give away $700 billion. The guarantees on all savings and private investments would have prevented a panic from the public, but quite a few more bankers and hedge funds might have taken the hard results of their recklessness.

This would have placed all the bailout money in the hands of the people, who could have chosen where they wished to place it after the nationalization process as the banks were either shuttered or restored. We would have ended up with fewer big banks, but more regional banks with real depository bases.

As it is now, the money being given to the banks is being 'taxed' at a fairly stiff rate by the unreformed bonus system, and the problems are not being resolved, since the bankers have every incentive to keep the money and not write down their losses, which is the great lie in this 'profit' picture being spun for the bailouts.

This is not over, not by a long shot. And if the bankers keep taking 50+% of all the cash that touches their hands from the public subsidy, then what trickles down to the people won't accomplish anything. Years of zombie-like stagflation look to be the prognosis.

As Bank of England Governor Mervyn King said, "Families face years of pain...The patience of UK households is likely to be sorely tried over the next couple of years" as inflation cuts into their meager wages in order to pay for this. Families Face Years of Pain - UK Telegraph. Don't expect such honesty from the US Federal Reserve or the government. The realization of how bad stagflation is going to be will sift slowly down through the smug layers of the stuporati.

The economic hitmen and the corrupt politicians are taking their pay, and the people and their children and most likely grandchildren will be stuck with unpayable debts. Just like a third world nation, which is what the US will look like when they get done cutting health, infrastructure, education, and basic services to pay for this.

Daily Mail UK
Morgan Stanley ignores calls for restraint and doles out £8.8bn to bankers
By Simon Duke
20th January 2010

Wall Street giant Morgan Stanley has defied the growing calls for restraint after doling out huge rewards to its staff.

The salary and bonus pot at the bailed-out U.S. firm jumped 31per cent to £8.8billion last year (about $14.4 Billion), despite turning a profit of just £705million (about $1.15 billion) in 2009, it revealed today. An astonishing 62 per cent of revenues were set aside for pay - the highest level in at least a dozen years and nearly twice the 33 per cent level earmarked by rival JP Morgan.

Under Morgan Stanley's Premier League-style wage structure, an average employee will have banked £144,500 ($235,400) in salary and bonuses for their efforts last year. However, many of its high-flying traders and rain-makers will have 'earned' seven- and eight-figure pay days.

In 2008, the average Morgan Stanley worker took home £150,000. The company, which employs around 5,000 staff in the City, added 15,000 to its global workforce after buying the Smith Barney brokerage from ailing rival Citigroup.

The lavish payouts are likely to anger taxpayers on both sides of the Atlantic, who will have to pay for the cost of the mammoth banking bailout for many years to come.

President Barack Obama last week slammed the 'obscene' rewards dished out on Wall Street at a time when many 'continue to face real hardship in this recession'. The U.S. government is now planning to hit American banks with a punishing levy to help re-coup the estimated £72billion US taxpayers have lost from bailing out its financial industry.

New York-based Morgan Stanley was rescued from the edge of oblivion with a £6.1bn taxpayer handout in late 2008. Although it has since re-paid the loan, it still operates with an effective guarantee of the taxpayer.

Morgan Stanley's pay-outs came as rival Goldman Sachs prepared to publish its 2009 financial results tomorrow. Wall Street's most profitable firm is expected to reveal a dramatic bounce in the bank's profits thanks to the colossal economic packages implemented across the world.

The earnings bounce is expected to see Goldman raise its total pay pool to more than £12 billion. This equates to a pay and bonus of nearly £400,000 for each every worker of the firm, which employs around 5,500 people in London.

However, Goldman has delayed telling its staff how much they'll receive for their efforts in 2009 in the wake of Obama's planned raid on Wall Street.

US Dollar (DX) Longer Term Charts

Here is the longer term view of the US Dollar as measured by a basket of currencies.

Can it 'break out' here? Yes, certainly. Europe and Japan have their problems, and in the world of fiat, the grading of the paper is done 'on a curve.' The central banks and their mavens, who intervene at least indirectly in the currency markets with a certain obsessiveness these days of non-stop financial engineering, like to shove their manipulation around the plate as well. They don't 'tweak' the economy; they are the economy, at least at the margins.

Can it also fail and break down here? Yes, certainly. A stronger dollar will step hard on the weak US economic recovery. It will serve to lower import prices, but dampen exports, which is what they call 'bad news' when your domestic demand is slack.

There is the fundamental detail an enormous amount of dollars being held overseas that are not in circulation so to speak. At some point they, like the swallows of Capistrano, will return, and have trouble finding a place to comfortably roost.

But the market does not care about our theories, or even the charts. They are just rough estimates of a very complex reality. This is a disclosure that all pundits should place on their prognostications.

And in these days of thin markets and bank prop desks as a major source the income, the fundamentals are less relevant than the short term reality of the squid's need to feed.

Let's see what happens. Then we will know something actionable.

There Can Be No Bubble in China and the Madness of the Nobility

Just now on Bloomberg Television Peter Levene, the former Lord Mayor of London and distinguished chairman of Lloyds of London, said that there is no bubble in China because "China is so big, their domestic markets are so big, you cannot have bubbles there."

A sincere interpretation of the theoretical underpinnings of this statement would be that the potential demand in China is so great, there can be no possible bubbles there because they are incapable of excess. Interesting theory. Perhaps the US relief effort in the Caribbean is on the right track but insufficient. They can ship their excess and foreclosed housing for the poor souls there. Think of the demand gap that exists between sub-Saharan Africa and Europe. Well perhaps not.

My God, could this be a variant of Efficient Markets Theory? Or a cousin of Too Big To Fail? Apparently the logic in 'The bigger they come the harder they fall" has been repealed.

Of course China is in a financial bubble. It has been caused by years of pegging their currency at an artificially low rate to stimulate exports, multiplied by a state banking system that acted with command and control subsidies. And of course the US can been exporting monetary inflation for years through its dollar reserve currency. Someone had to absorb it.

But it is what China does next, how they react to the bubble, how they manage the consequences of their financial engineeering, that matters. The US has been in several bubbles of late, and is handling them rather badly, as a result of their tolerance for Mad Hatters like Larry, Tim, and Ben in key policy positions.

To be fair, Chairman Greenspan came out with his own howlers of this caliber, and was accepted by many intelligent people in the States for years. In fact, a whole industry was based on ideas and falsified evidence about the impossibility of a housing bubble in the US that in retrospect seems like barking madness.

Come to think of it, both of these fine men are nobility, KBE, Knights of the British Empire. Perhaps it is something deleterious, or even contagious, that occurs when one is subsumed into nobility? Caligulitis? Did the Queen give them a concussion in the ceremony?

I suspect Lloyds is exposed rather badly to China, and m'Lord is talking his book. What is Greenspan's excuse? Whose book was he talking?

This is why the banks and financial organizations must be retrained, because they seem to be peopled by an ersatz nobility that is disposed to spectacular flights of self-serving fantasy. Come to think of it, there is room in the asylum for the government as well.

The US needs a political system that is not so amenable to soft bribery in campaign contributions, and the world needs a reserve currency that is not controlled by the Anglo-American banks. Control the currency, control the world.

And as for the bubbles that keep taking down the developing nations, well, here is their mother.







When these trends break, and they will as all Ponzi schemes do, it will be notable.

US Financial Markets: A Broader Perspective

Wall Street feeds on a short term mentality, as it herds the crowd from one investment to the next. This is because it makes its steady income on transactions, as well as front running the short term moves and gaming the system in general.

Yesterday some of the Wall Street mouthpieces were urging the rally on because of a potential Republican victory in Massachusetts. Today the market sells off hard on that Republican victory. In the short term, its all a game.

Let's see if the support holds, or if we are finally getting that correction to the intermediate trends. I would like to finally be able to hold a short position for more than a day. 1110 on the SP futures is key support if the trendline at 1126 breaks.

Here is some perspective from the daily charts.