The reported announcement of US-based investment banking major Goldman Sachs to hand out the biggest bonuses in its 140-year history to its staff barely eight months after a $10 billion government-assisted bailout programme, has stunned experts who have questioned the need for such payouts amid the rubble of a credit crisis.
Media reports and blog posts by columnists said such payouts would promote a culture of excessive risk and bonuses, the same factors that were largely responsible for the collapse of several Wall Street icons.
Last week, Goldman Sachs repaid the government the $10 billion borrowed in October 2008 as part of the Troubled Assets Relief Programme (TARP) formulated by the government to help embattled financial institutions tide over the credit crisis.
The United Kingdom’s Guardian newspaper reported last week that Goldman’s London staffers were told that the company expects to pay record bonuses in 2009.
“Goldman’s compensation guidelines will really be put to the test only when the economy and credit markets rebound and higher-risk investments become tempting again,” Michael Cokery said in the latest post in his Wall Street Journal blog.
Other columnists echoed similar opinions.
As the big Wall Street banks repay their loans and get back to the business of making “ungodly profits”, “political will to limit executive compensation or enact dramatic risk regulation will be weakened,” Derek Thompson warned in his column in The Atlantic.
John Aravosis, writing in Americablog.com, said “in light of the ongoing recession, record unemployment, foreclosures and a whole range of economic woes… some might wonder if this would be the best time for Goldman to pay out record bonuses.”