The Brain Drain

[techs]

Originally posted by: ebaycj

Originally posted by: techs

Originally posted by: LegendKiller


Let's say I work for Citibank analysis division. I produce tons of sell-side research that Citibank's brokerage uses to get clients to buy stocks through Citi's brokerage. Naturally, the better my research (more accurate), the more clients they bring in the door, the more brokerage fees they gain, the better off my bonus is. Clients would be investment funds, wealthy individuals, and mom and pops. All would pay for my research. I pull down $2m/yr for my stellar research since the bank pulls in $50mm in commissions from the brokerage.

Since nobody but the investors lose money off of my research and I have nothing to do with Subprime loans, I create no incremental risk for the bank. However, when the bank takes losses and eventually gets hit with TARP restrictions, my pay goes down to $200k.

Now, Deutsche bank comes around and offers me my $2mm back. Keep in mind, I never was involved in risk taking, nor did I lose my bank a penny. I am pure profit. I go to DB. There goes $50mm in business from Citi to DB.

This is the same story with M&A sides of a bank, advisory, pure investment banking, underwriting of IPOs, underwriting of bonds (all sold), underwriting of securitizations. All of it sold for underwriting fees, none of it held. All of it pure profit. Almost no risk.

What's sad is that your ignorance is Deutschebank's profit. If stupid people in this country would wise up the problem wouldn't exist. But I guess that's why we are in the position we are in.

People need to get it through their thick skulls that some divisions are hugely profitable. The few divisions that threw off risk and losses are already marginalized. The ones that currently exist, that did and will pull profits, are the ones that WILL leave. They didn't cause the problem but they are getting punished for it.

Apparently reading comprehension is not your strong suit. Try this:

Truly epic fail.
Yes, the people who lost a couple of hundred BILLION dollars are going to leave their banks?
HaHa.
Basically it sounds like they don't want to work under rules that keep them from losing another couple of hundred BILLION dollars while making tens of millions of "bonuses"
Could you post the names of these bankers and which banks they are going to? I want to get my money out quick.

Like I said this thread is:
/epic fail

The people who are leaving (that the article talked about) are the ones who WERE IN PROFITABLE DIVISIONS OF THE BANK AND WERE MAKING A SHIT TON OF MONEY FOR THE BANK.

They WERE NOT involved with the divisions that caused all this mess, yet they saw their pay drop by massive amounts due to TARP regulations on said banks.

It'd be like if you worked in a manufacturing plant for a company, and the director of finance for that company had sex with his secretary, and she filed and won a 10 billion dollar lawsuit against the company, and for that reason, and that reason alone, your pay (as a manufacturing plant worker) was dropped from $60k per year to $18k per year. If the company with a manufacturing plant in the next town over offered you the same type job, making your old $60k plus a raise of $5k, you would take it, no questions asked. Do not lie and tell us otherwise.

The financial regulations that allow companies to give massive bonuses for short term profits, along with massive tax cuts for the rich that will run out in a few years have set up a situation where ANY means necessary are to be used to generate short term profits. The people who generated these short term profits are NOT good executives, merely the most ruthless and underhanded who will do anything, including bankrupting their companies, to show a paper profit.
These are exactly the type of people we want out of decision making positions.

 

[senseamp]

Originally posted by: LegendKiller

Originally posted by: senseamp

Originally posted by: LegendKiller

Originally posted by: senseamp
If these people were "good" and did "perform" then why did their banks need TARP money?

Did the people who can make money lose money?

Someone lost the money. And we heard leading up to the collapse the same reasoning that banks had to pay out huge bonuses to retain the best performers.

The ones that lost the money were fired or wouldn't get a bonus in the first place.

You do realize that in a bank there are different operating groups. A trading desk investing in CDOs isn't the same one who does FX trades, or equity analysis, or M&A.

The ones that lost money may or may not have been fired eventually, but until everyone realized they lost the companies hundreds of millions, they got huge bonuses and huge pay for their work and everyone was telling us how they were top talent that needed to be retained.

 

[Slew Foot]

Originally posted by: LegendKiller
I predicted this would begin to happen the second the USG stepped into the role of dictating free market pay. People who DO perform and DO deserve good compensation, because they perform, are not going to sit around accepting pittance. It just doesn't work like that.

Many said "where else are they going to go" with regards to AIG and TARP banks. Well, now you know. They are going to foreign banks, boutique firms, and private equity, all of whom will pay for performance. Now what did our taxpayer dollars buy? Soon to be empty husks of formerly competitive banks, all because you punished the unguilty.

http://money.cnn.com/2009/06/2...postversion=2009062311

Now replace bankers wth doctors, and youll see the future of healthcare in America under Obamacare.

 

[LegendKiller]

Originally posted by: Slew Foot

Originally posted by: LegendKiller
I predicted this would begin to happen the second the USG stepped into the role of dictating free market pay. People who DO perform and DO deserve good compensation, because they perform, are not going to sit around accepting pittance. It just doesn't work like that.

Many said "where else are they going to go" with regards to AIG and TARP banks. Well, now you know. They are going to foreign banks, boutique firms, and private equity, all of whom will pay for performance. Now what did our taxpayer dollars buy? Soon to be empty husks of formerly competitive banks, all because you punished the unguilty.

http://money.cnn.com/2009/06/2...postversion=2009062311

Now replace bankers wth doctors, and youll see the future of healthcare in America under Obamacare.

What have doctor's salaries done in comparison to the other costs of healthcare?

 

[StageLeft]

I predicted this would begin to happen the second the USG stepped into the role of dictating free market pay...Soon to be empty husks of formerly competitive banks, all because you punished the unguilty.

Conflicting arguments. Pay was only dictated because the banks had received so much money, so these "unguilty" would have been completely out of a job anyway if their employer hadn't had money thrown at it.

If these people are leaving, they're probably going to a better employer.

 

[ebaycj]

Originally posted by: techs

Originally posted by: ebaycj

Originally posted by: techs

Originally posted by: LegendKiller

Let's say I work for Citibank analysis division. I produce tons of sell-side research that Citibank's brokerage uses to get clients to buy stocks through Citi's brokerage. Naturally, the better my research (more accurate), the more clients they bring in the door, the more brokerage fees they gain, the better off my bonus is. Clients would be investment funds, wealthy individuals, and mom and pops. All would pay for my research. I pull down $2m/yr for my stellar research since the bank pulls in $50mm in commissions from the brokerage.

Since nobody but the investors lose money off of my research and I have nothing to do with Subprime loans, I create no incremental risk for the bank. However, when the bank takes losses and eventually gets hit with TARP restrictions, my pay goes down to $200k.

Now, Deutsche bank comes around and offers me my $2mm back. Keep in mind, I never was involved in risk taking, nor did I lose my bank a penny. I am pure profit. I go to DB. There goes $50mm in business from Citi to DB.

This is the same story with M&A sides of a bank, advisory, pure investment banking, underwriting of IPOs, underwriting of bonds (all sold), underwriting of securitizations. All of it sold for underwriting fees, none of it held. All of it pure profit. Almost no risk.

What's sad is that your ignorance is Deutschebank's profit. If stupid people in this country would wise up the problem wouldn't exist. But I guess that's why we are in the position we are in.

People need to get it through their thick skulls that some divisions are hugely profitable. The few divisions that threw off risk and losses are already marginalized. The ones that currently exist, that did and will pull profits, are the ones that WILL leave. They didn't cause the problem but they are getting punished for it.

Apparently reading comprehension is not your strong suit. Try this:

Truly epic fail.
Yes, the people who lost a couple of hundred BILLION dollars are going to leave their banks?
HaHa.
Basically it sounds like they don't want to work under rules that keep them from losing another couple of hundred BILLION dollars while making tens of millions of "bonuses"
Could you post the names of these bankers and which banks they are going to? I want to get my money out quick.

Like I said this thread is:
/epic fail

The people who are leaving (that the article talked about) are the ones who WERE IN PROFITABLE DIVISIONS OF THE BANK AND WERE MAKING A SHIT TON OF MONEY FOR THE BANK.

They WERE NOT involved with the divisions that caused all this mess, yet they saw their pay drop by massive amounts due to TARP regulations on said banks.

It'd be like if you worked in a manufacturing plant for a company, and the director of finance for that company had sex with his secretary, and she filed and won a 10 billion dollar lawsuit against the company, and for that reason, and that reason alone, your pay (as a manufacturing plant worker) was dropped from $60k per year to $18k per year. If the company with a manufacturing plant in the next town over offered you the same type job, making your old $60k plus a raise of $5k, you would take it, no questions asked. Do not lie and tell us otherwise.

The financial regulations that allow companies to give massive bonuses for short term profits, along with massive tax cuts for the rich that will run out in a few years have set up a situation where ANY means necessary are to be used to generate short term profits. The people who generated these short term profits are NOT good executives, merely the most ruthless and underhanded who will do anything, including bankrupting their companies, to show a paper profit.
These are exactly the type of people we want out of decision making positions.

You obviously know nothing of the financial industry. I find your blind ignorance hilarious.

 

[WhipperSnapper]

Originally posted by: ebaycj

Originally posted by: WhipperSnapper
Aren't some of these people the very same people who put the banks into the position they are in today?

NO. That's the whole fucking point of this thread.

I know, I know. I understand the situation. It's just difficult to resist saying what I said. But, consider this:

Perhaps these failed companies deserved to lose these people. Perhaps it's better if these people leave rather than continue supporting the awful upper management that caused this mess. Maybe they'll find jobs working for Hank Rearden instead of Orren Boyle.

 

[waggy]

well duh. really is this a suprise?

 

[Engineer]

Citi says no big bonuses?...no problem...raise base pay by as much as 50% to most employees.

Citi flips the bird to pay control and says we will pay our employees large salaries regardless of how they perform!

 

[waggy]

Originally posted by: Engineer
Citi says no big bonuses?...no problem...raise base pay by as much as 50% to most employees.

Citi flips the bird to pay control and says we will pay our employees large salaries regardless of how they perform!

lol

they have to pay them to keep them. why would someone stay with them if they could get a job somewhere else for more?

 

[DealMonkey]

Originally posted by: her209
Weren't they going to go to foreign banks anyways if the bank they worked at failed?

This is the most salient point in this entire thread. Had we allowed these banks to simply implode, the same f'ing thing would have happened (i.e. this "brain drain" theory), only at a more accelerated rate. Oh, but bonus! In this scenario, we'd enjoy the added bonus of the banks dragging our entire economy down with their sorry asses.

 

[LegendKiller]

I predicted this would begin to happen the second the USG stepped into the role of dictating free market pay. People who DO perform and DO deserve good compensation, because they perform, are not going to sit around accepting pittance. It just doesn't work like that.

Many said "where else are they going to go" with regards to AIG and TARP banks. Well, now you know. They are going to foreign banks, boutique firms, and private equity, all of whom will pay for performance. Now what did our taxpayer dollars buy? Soon to be empty husks of formerly competitive banks, all because you punished the unguilty.

http://money.cnn.com/2009/06/2...postversion=2009062311

Note: Please leave out personal attacks or off-topic posts.

--------------------------------------------------------------------------------------------------

This thread was locked for sweeping up the dirt. Now that it is fairly clean , one more chance will be allowed.

For details, see my post this AM

CC

 

[waggy]

not a suprise. why would you stay if you were able to get a job someplace else?


you get higher pay and away from a place where morale is low and has a bad reputation. seems like a good idea to run.

 

[Cattlegod]

Good, let those idiots ruin other banks and economies. The problem with a performance based compensation system is it incites the players to take too much risk for the big paycheck. Maybe now we will see our banks be a little more conservative and less risky and thus not turn the world economy into a mess.

 

[LegendKiller]

I think the most important thing people need to realize is that we invested in the companies to keep our *whole* system afloat, at least until we could come up with a better solution. Had they been allowed to utterly fail, sure, the talent would have gone to other banks, but most would be foreign banks. Our domestic banking system would be severely undermined and would have hurt the general economy far worse.

That being said, now that we have invested in the banks, we should try to protect our investment, which means investing in the right people at the right price. Those same people would not be the ones who caused the problem, but the ones who weren't involved. Blanket limiting the pay will only entice the good people to leave.

 

[StageLeft]

Blanket limiting the pay will only entice the good people to leave.

True.

 

[Engineer]

Originally posted by: LegendKiller
we should try to protect our investment, which means investing in the right people at the right price. Those same people would not be the ones who caused the problem, but the ones who weren't involved. Blanket limiting the pay will only entice the good people to leave.

Would you say the same about the current government run automotive sector (GM, Chrysler)?

I know it's OT...just curious if the stance is the same.

 

[waggy]

Originally posted by: Engineer

Originally posted by: LegendKiller
we should try to protect our investment, which means investing in the right people at the right price. Those same people would not be the ones who caused the problem, but the ones who weren't involved. Blanket limiting the pay will only entice the good people to leave.

Would you say the same about the current government run automotive sector (GM, Chrysler)?

I know it's OT...just curious if the stance is the same.

well it should be interesting to see what happens to GM. with as much government control as it has the next year will be fun.

 

[KMFJD]

I don't understand the concept of receiving a bonus when your company lost money...

 

[spidey07]

Why is anybody surprised? We predicted this (I know I and many other people did), it's common sense.

 

[LegendKiller]

Originally posted by: KMFJD
I don't understand the concept of receiving a bonus when your company lost money...

The biggest problem is the "game" banks played and the current perception of the "game".

I-Banking salaries are technically composed of 3 things. Your base salary, your "deferred" salary, and your performance bonus. Deferred salary doesn't really exist, but it is technically there and was, traditionally, wrapped up into your "bonus".

Why? Mainly for tax, accounting, and cash management purposes.

Take for example any Director level employee. The monthly "base" salary might be ~180K. That same person in many other industries, or in a non-3 level pay system, might make $300K. That would be the "normal" market level pay for somebody at that level. However, the bank doesn't pay him $300K, they pay him $180K and "defer" the $120K to the end of the year, investing the 120K and getting tax benefits.

At the end of the year the guy's business lost money, but he might still get $120K "bonus", or maybe $60K. However, he wouldn't get the third component, performance.

If a "normal" bonus was $120K, then a "good" bonus is anything above that. Let's say that his business made lots of money, thus he gets a $300K "bonus".

Did he really get a $300K "bonus" or did he get a $180K bonus?

See, realistcally, if he doesn't get *any* "bonus", he's taking a pay cut compared to what he should make. The "deferred compensation" part of the "bonus" is eliminated, essentially a pay cut of 40% (120/300).


This is why Citi, BoA, JPM, among others, are increasing the base pay of employees now. They are stopping the "deferred compensation" BS and just straight up compensating people, like any normal company.

How fair is it for your company to withold 40% of your paycheck, then, at the end of the year, decide not to pay it out because people think that that witholding is a "bonus" and not your normal base pay?

Wouldn't you just move to a company that was going to NOT withold that amount, or, if they do, not face any pressure to not pay you the witholding?

 

[ElFenix]

nm

 

[Special K]

Originally posted by: Skoorb

Blanket limiting the pay will only entice the good people to leave.

True.

Don't worry, in 10 years we will be in another recession, having gone through yet another boom-bust cycle. Today's top performers will be tomorrow's crooks, villains, etc. Just replace "housing" with whatever new get-rick-quick scheme today's superstars manage to cook up.

The government talks about increased regulation to prevent financial institutions from becoming too big to fail, but I have a feeling the banks will always remain one step ahead of the regulators.

 

[waggy]

Originally posted by: KMFJD
I don't understand the concept of receiving a bonus when your company lost money...

so joe in accounting who has nothing to do with this mess shouldnt get one? even though he bust his ass and finds mistakes and keeps everything going? so he should suffer?


not everyone who recieved a bonus were the reason the banks got in the mess. And how the people were hired teh "bonus" was a pretty much a gurentee.

 

[halik]

Originally posted by: Cattlegod
Good, let those idiots ruin other banks and economies. The problem with a performance based compensation system is it incites the players to take too much risk for the big paycheck. Maybe now we will see our banks be a little more conservative and less risky and thus not turn the world economy into a mess.

Ummm tell me how are bankers compensated again?