Goldman Sachs bonus pool estimated at $725,000 per employee

This week, business reporters told us that Goldman Sachs 2009 third quarter profits swelled, compared with 2008, to an estimated $3.19 billion. The bonus pool stands at $16.7 billion, and, by the end of the year, it could hit $23 billion, according to reports. However, Goldman reported first quarter profits (net earnings) of $1.81 billion; second quarter, $3.44 billion. Thus end-of-year net earnings should be about $11 billion.

How can bonuses be twice as much as profits?

Yeah, I get that the “cost” of the bonuses must have been deducted from quarterly reports. But that’s not how most businesses determine end-of-the-year bonuses. At least I don’t think it is.

To be dumped in a pool and calculated quarterly, these payments sound more like contractual obligations (“salary”) than “bonus.” Bonuses are “extras” that the employee can’t count on or expect to get. Yet, for Goldman, there appears to be a tax benefit to calling these payments “bonuses”:

Bonuses are considered taxable to employees, but are considered an expense of doing business and are, in most cases, a tax benefit to the employer.

On some level, it doesn’t matter if this is bonus or salary: the numbers are too huge to comprehend.

In October, Goldman employed 31,700. If the bonus pool hits $23 billion and the number of employees were to be constant, that’s $725,000.00 (rounded) per employee. (But the number of employees isn’t constant; Goldman employs about 4,000 more “staff” today than in March, which means the average “bonus” is much greater for those employed the entire 12 months.) And you and I know that every employee at Goldman isn’t going to get a bonus, much less one that is 28 times greater than average per capita income in the U.S. ($26,178).

The men (mostly) who brought the world’s economy to its knees are getting millions in “bonus” payments … for what? The governments of the world kept them from falling apart. In response, they have lobbied vociferously against Congressional reform and continue to gamble with derivatives ($95.6 trillion in December 2005 to $190.0 trillion as on June 2009) while jacking up credit card interest (Citigroup hits 29.99%) and watching foreclosures grow. (The financial sector also doesn’t seem to want to do much about “toxic” assets either; a friend tried for six months to buy a house where the owner was upside-down.) Maybe we shouldn’t have bothered — at least this culture of entitlement would have been busted.

Goldman Sachs is in the digital information business. With computerized trades and computer-generated-products (CDOs and the like), they are reaping the benefits of collapsed time and geographic boundaries (space). They must also be reaping monopoly rents, given that there are only a handful of firms in the world that do what they do.

Where are the citizen’s watchdogs? They’re not in the U.S. Treasury department: it’s populated with Goldman Sachs and other Wall Street used-to-bes, and many took home thousands from Wall Street last year (emphasis added):

The advisers include Gene Sperling, who last year took in $887,727 from Goldman Sachs and $158,000 for speeches mostly to financial companies, including the firm run by accused Ponzi scheme mastermind R. Allen Stanford. Another top aide, Lee Sachs, reported more than $3 million in salary and partnership income from Mariner Investment Group, a New York hedge fund.

As part of Geithner’s kitchen cabinet, Sperling and Sachs wield influence behind the scenes at the Treasury Department, where they help oversee the $700 billion banking rescue and craft executive pay rules and the revamp of financial regulations. Yet they haven’t faced the public scrutiny given to Senate-confirmed appointees, nor are they compelled to testify in Congress to defend or explain the Treasury’s policies.

[…]

Goldman Sachs paid Sperling the $887,727 for advice on its charitable giving. That made the bank his highest-paying employer. Even Geithner’s chief of staff Patterson, who was a full-time lobbyist at the firm, did not make as much as Sperling did on a part-time basis. Patterson reported earning $637,492 from Goldman Sachs last year.

Where is the watchdog press? Where are the 21st century trustbusters? Where?

This post also appeared at Newsvine.

KATHY GILL, Technology Policy Analyst
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Copyright 2009 The Moderate Voice
  • StockBoySF

    “Where are the citizen’s watchdogs?”

    Goldman Sachs provides investment banking and advisory services. They are not a “brick and mortar” bank. Yes, Goldman Sachs did receive $10 billion in TARP money, but they also paid it back, returning a 23% return to the taxpayer. I think that’s a fair return.

    As far as I’m concerned it’s a free market and as long as Goldman Sachs, its employees and shareholders are all happy and successful, then so be it.

    Now if GS still had TARP money and was in trouble financially, then that would be a different story. But I just don’t see where they are hurting the consumer, any taxpayer, employee or shareholder.

    The most unfortunate part I see is that many of its employees won’t receive any bonus and the big executives will receive obscene amounts.

    But the overall success of GS and bonus amount…. so what? Are we suddenly against US companies making large profits and sharing with their employees?

    http://www.nytimes.com/2007/11/21/business/21donate.html

    • michaelD

      how about …

      if it wasn’t for taxpayer dollars and gov’t actions favorable to GS [at other financial entities expense] then GS would have ceased to exist

      if not for ZIRP then GS wouldn’t be able to massively leverage taxpayer dollars [their profits, our risk]

      if not for HFT, huddles, insider info and other nefarious actions GS wouldn’t have been able to manipulate dollars to their coffers via the equities, bond and commodities markets [with the express approval and participation of the treasury and fed, of course]

      if not for their regulator allowing them to cram all of their bad news into december 2008 and then exempting that month from their books and earnings they would likely be as financially crippled as C and WFC. after all, we’re now seeing some indications that JPM doesn’t have a whole lot of excess liquidity sloshing around in spite of their massive and ill-gotten GS-esque gains.

      if they’re making an honest buck with their own resources and risk, thats one thing. their current ponzi scheme should not be tolerated, much less rewarded. “free market” has become nothing but a synonym for “heads, we get filthy rich; tails, you pay for it”

      • StockBoySF

        michaelD, “their current ponzi scheme should not be tolerated, much less rewarded. “free market” has become nothing but a synonym for “heads, we get filthy rich; tails, you pay for it”‘

        I didn’t realize GS was running a Ponzi scheme. What evidence do you have? GS has a wide range of business, including lucrative (sometimes) investment banking M&A and other advisory services. most of the income from these sorts of operations are strictly fees and not based on market performance. In contrast Madoff’s company showed “false” returns by using newer investors’ money to pay existing investors as returns. Goldman does a lot more than just “investing” others’ money.

        michaelD: “if not for their regulator allowing them to cram all of their bad news into december 2008 and then exempting that month from their books and earnings they would likely be as financially crippled as C and WFC.”

        I don’t know what you mean by this. How did their “regulator” allow them to cram all of their bad news into Dec, 2008 and then exempting that month from their earnings? I have not heard anything about that.

        By the way, what do you mean that C and WFC are both financially crippled? Certainly C is but WFC has just had record earnings (again). For years various people have said that WFC is headed for trouble but it doesn’t seem to materialize. If you’re referring to the commercial RE portfolio…. well that hasn’t crippled WFC yet. I agree that C is financially crippled (and I think the federal government should have let it die) but WFC at the moment is doing fine. If WFC becomes crippled, then you can say that WFC is crippled.

        • michaelD

          I didn’t realize GS was running a Ponzi scheme. What evidence do you have? GS has a wide range of business, including lucrative (sometimes) investment banking M&A and other advisory services. most of the income from these sorts of operations are strictly fees and not based on market performance. In contrast Madoff’s company showed “false” returns by using newer investors’ money to pay existing investors as returns. Goldman does a lot more than just “investing” others’ money.what is the classic definition of ponzi scheme? a gimmick where wealth is redistributed rather than being created. can you think of a better description for what they’re doing? they’re redistributing money to their collective pockets from taxpayers. if that was their only transgression it would be enough to bestow ‘ponzi artist’ upon them. they may have paid back TARP but their bonds are still guaranteed by the fed. they’re enjoying ZIRP. seems like there was another plan they took advantage of but i can’t keep track of all the acronyms and bailouts any more. unless you are one of the deniers who don’t believe in their widely reported huddle strategy then that might also be deserving of less-than-charitable labels. isn’t it downright fascinating how they can have a sell on a company, until that company agrees to using GS for a secondary then suddenly GS’s analysts are pumping the heck out of the company to drive up their take? ponzi might not fit their practice of littering the gov’t with their cronies and then leveraging legislation and lawmaking to their favor but that doesn’t exclude them from wrong-doing. the resolution in their favor [and apparently only their favor] of their AIG swap book was a very curious event … and not one that will win them any awards from me. certainly speaks volumes about ‘free markets’ though. ‘free’ as in free to do whatever bulks up their bottom line and in the finest example of greenspanian logic, fraud be damed. the markets will work it all out, right? I don’t know what you mean by this. How did their “regulator” allow them to cram all of their bad news into Dec, 2008 and then exempting that month from their earnings? I have not heard anything about that.

          they changed their accounting period so that after the fact all of the Bad Things™ were crammed into december then retroactively made part of their previous quarter. it was widely reported on when they reported their quarterly earnings back in [i think] march or april. i just did a quick google search for you and this is the first reference i came to. pretty sure there will be others.http://www.ritholtz.com/blog/2009/04/how-to-puf

          By the way, what do you mean that C and WFC are both financially crippled? Certainly C is but WFC has just had record earnings (again). For years various people have said that WFC is headed for trouble but it doesn’t seem to materialize. If you’re referring to the commercial RE portfolio…. well that hasn’t crippled WFC yet. I agree that C is financially crippled (and I think the federal government should have let it die) but WFC at the moment is doing fine. If WFC becomes crippled, then you can say that WFC is crippled.by this logic none of the big falls could be considered crippled until they actually tipped over. was not LEH a crippled institution before they actually declared? was not WAMU a walking dead bank before they collapsed? the illusory cushion of mark-to-market alone is enough reason to suspect that WFC [and many others] are little more than animated zombie institutions, but there are plenty of indications of off-book activity with WFC that i wouldn’t go near them without a good supply of embalming fluid. dick bove, clown that he is, doesn’t seem to share your enthusiasm.

          • thanks for the link re GS and hiding the “toxic assets”. Ugh.Parenthetically, the “reply” function is working properly today (in-line). Yeah! 🙂

            Added: If you look at a Google Search on “orphan month” (the fact that Dec 2008 does not appear on ANY Goldman balance sheet because they changed their fiscal year from Dec – Nov to a calendar year) … you’ll see that almost NO MSM covered this. Blogs did.

            In fact, the press was so obviously oblivious that Columbia Journalism Review wrote about it in April: “The Press, NYT’s Norris Excepted, Gives Goldman a Pass.” The worst offender? WSJ.

            How in the world could the financial press write about GS first quarter profits WITHOUT mentioning this little niggle? HOW? I have two possibilities: (a) Lazy, write from press release; (b) Clueless, can’t read financial statements and understand the implications.

          • michaelD

            (a) Lazy, write from press release; (b) Clueless, can’t read financial statements and understand the implications.

            my vote goes to (c) willingly complicit in perpetuating the fraud … MSM is such a farce. we have right-wingers who are supposed to hate left-wingers and we have left-wingers who are supposed to hate right-wingers. why? because the powers-that-be don’t want us noticing that there is a curtain, much less to give any thought as to what is going on behind it. fox’s detractor’s are correct, fox isn’t a news network. they’re a network that sometimes reports ‘news’. but how are they different in that respect from any of the others?

            i was under the impression that dec’08 was crammed into the previous quarter after it had been filed as part of their transition to the new reporting schedule so the bad stuff wouldn’t show up on the then current 10-q. my bad. this is worse. really, any defense of GS is unconscionable. its like voting against an amendment that would preclude the gov’t issuing contracts to businesses that condone gang-rape.

            thank you for the clarification and the ‘orphan month’ search. i knew there was more out there. the sad thing is that for every GS scandal [of course, its not just GS, is it?] we manage to remember there are a half dozen others we’re forgetting to list. we truly are sipping information from a fire hose.

            cheers.

    • shannonlee

      The entire industry owes the taxpayer billions of dollars. I agree to a point that once the money is paid back, let the free market decide salaries….but…we still have hundreds of billions of missing dollars.

      • StockBoySF

        Shannonlee: “The entire industry owes the taxpayer billions of dollars. I agree to a point that once the money is paid back, let the free market decide salaries….but…we still have hundreds of billions of missing dollars.”

        GS paid their money back and this post is about GS.

        • shannonlee

          As it has been pointed out by others, GS took more than just the money allotted to them…they received funds indirectly…MANY companies received funds indirectly. Some of the things that went on with our dollars is criminal in my opinion…but also as it has been said…

          Our people in Washington are really to blame….no strings attached money…insane.

  • Don Quijote

    After the Billionaires Plundered Alabama Town, Troops Were Called in … Illegally

    One of this year’s more disturbing stories that were ignored was the illegal Army occupation of Samson, Alab., in March following a shooting spree that raged across two towns by a disgruntled worker, leaving 11 people dead.

    As I wrote at the time, Michael McLendon, 27, went on a killing rampage following years of relentless corporate exploitation and harassment against him, his mother (whom he mercy-killed), and the entire rural Alabama region, which suffered like so many parts of rural America at the hands of billionaire goons like chicken oligarch Bo Pilgrim of Pilgrim’s Pride notoriety.

    On the other side of the deal, serving Gold Kist, was Merrill Lynch, which also collapsed last year. But Merrill’s banker in the Pilgrim’s Pride acquisition is still doing well, thank you very much. In fact, he was recently hired by JPMorgan Chase as vice chairman of mergers and acquisitions.

    Which makes perfect sense, because JPMorgan Chase has been laying waste to Alabama on a level that makes Pilgrim’s Pride’s destruction look downright humanitarian. JP Morgan Chase has plundered so much wealth from one county in Alabama, using a complex derivatives scheme and old-fashioned bribery, that some locals are calling it “Armageddon.” According to Bloomberg:

    In its 190-year history, Jefferson County, Ala., has endured a cholera epidemic, a pounding in the Civil War, gunslingers, labor riots and terrorism by the Ku Klux Klan. Now this namesake of Thomas Jefferson, anchored by Birmingham, is staring at what one local politician calls financial “Armageddon.”

    The spectacle — a tax struck down, about 1,000 county employees furloughed, a politician indicted over $3 billion in sewer debt that may lead to the largest municipal bankruptcy in history — has elbowed its way up the ladder of county lore.

    “People want to kill somebody, but they don’t know who to shoot at,” says Russell Cunningham, past president of the Birmingham Regional Chamber of Commerce.

    Jefferson County’s debacle is a parable for billions of dollars lost by state and local governments from Florida to California in transactions done behind closed doors. Selling debt without requiring competition made public officials vulnerable to bankers’ sales pitches, leaving taxpayers to foot the bill for borrowing gone awry.

    [T]he county bet on interest-rate swaps, agreements that a representative of New York-based JPMorgan Chase & Co. told commissioners could reduce their interest costs. Instead, the swaps — covering more than $5 billion in all — blew up during the credit crisis after ratings for the county’s bond insurers fell.

    JPMorgan, through spokeswoman Christine Holevas, declined to comment for this story.

    Yeah, why bother commenting to the public when you own the bastards? JPMorgan, which took $25 billion in direct bailout money and tens of billions more in backdoor subsidies and handouts, just posted a massive $3.6 billion quarterly profit, and has set aside at least $11.1 billion for management bonuses. Meanwhile, Alabamans can’t afford to flush their toilets.

    This is what inequality looks like. From Wall Street, it must look extremely appealing; for the rest of America, it’s a nightmare that’s only getting worse.

    There you see the results of conservative policy…

  • merkin

    Best argument yet for the return of the confiscatory millionaire’s tax bracket.

    Our government is run by the wealthy for the benefit of the wealthy. Shouldn’t they provide a little more of its support? Rather than who supports it now, our present and future children.

    • Don Quijote

      Best argument yet for the return of the confiscatory millionaire’s tax bracket.

      What are you a communist? Don’t you know that of we did that all those bright people would go Galt on us…

    • JeffersonDavis

      The reason we should NOT have a millionaire’s tax bracket is right in Article 1 of the Constitution:”The Congress shall have the power to lay and collect taxes, duties, imports, and excises, to pay the debts and provide for the common defense and general welfare of the United States, BUT ALL DUTIES, IMPORTS, AND EXCISES SHALL BE UNIFORM THROUGHOUT THE UNITED STATES.”And I agree about how our government is run by the wealthy for the wealthy. Constitutionally, however, it is our duty to reform the government instead of punishing the wealthy. Our government is not operating within its Constitutional bounds, which has allowed for the gross misrepresentative of the wealthy and corporate interests.You and I agree on the problem (as with healthcare reform), but we apparently disagree on how to fix it. I contend that we do it within the framework of the Constitution.

      • TheMagicalSkyFather

        You of course realize that the only choice other than progressive taxation is inflation since we will be forced to invent new money right? This is where the flat tax arguments fall apart and oh yea the “uniform” just means you cant pick on states or districts if they had intended it to mean tax brackets they would have said so since they had such things in many countries at the time. Specifically it was to ensure the slave holding states were not picked on by the non-plantation states and the other way around due to England taxing different colonies differently. We can also get inventive and tax specific things like say large amounts of interest in bank accounts or investments or wall street in general there are many ways to skin that cat but the line you are speaking of is a word parse to twist it into your argument. We are not talking about the top 1% here we are talking about the top .01% that are the problem. They give to “charities” that lobby their interests like giant megaphones give to “foundations” that do much the same and give their children and grand children multi million dollar jobs via tax loop hole to push agendas and the remaining money sits where it often has already for generations in banks accruing more interest between it and their investments to stay well ahead of inflation which actually helps them. I am not even saying take it all away I am saying either have sane progressive taxation or embrace inflation because the other choice is them having money and me and you trading chits back and forth that we call “money” but they ignore in the interest of avoiding food riots. When all of the money moves up and none moves down this is what you get. The last time in history we had this large of a market fall also coincided with the last time the top 1% hold so much more of the capitol in this nation than the bottom 99%, do you think that is a coincidence?

        • JeffersonDavis

          I realize the requirement of “uniformity” was in reference to states, but the direct versus indirect tax issue within it may still apply. I just find it hard to believe that a “30% for you and a 20% for you” type tax structure would ever be intended by the founding fathers. The 16th Amendment was not properly ratified in my opinion as well.

          I totally understand how the different tax structures effect inflation after a lot of research. I did not understand that a year ago. I’m against a flat tax or a VAT but for a fair tax.

          And I agree about the flow of money you described. I think the root of that problem is the power that corporations hold, not necessarily the wealthy individuals IMHO.

          As far as the GS issue, I personally support a regulated pay structure where the top person in a corporation cannot make “x” amount times the rate the lowest person makes. This would include bonuses. That way, success is not punished, but the workers benefit from the company’s success as well. That statement will drives my more conservative friends nuts, but I think it is fair.

          • TheMagicalSkyFather

            I agree in many ways except I believe the way to deal with different income levels is a flat tax but 100% inheritance tax. Meaning you only get what you earn and your kids only get what they earn. Its the only way I can see around the inflation/mulit generational consolidation of wealth problem. That ladies and gentlemen is equality.

          • JeffersonDavis

            100% Inheritance Tax?
            Ouch. It’d be hard to sell that one, although I agree in principle.
            The government didn’t “earn” that money either. It may also prohibit small business owners from leaving the family business to their children. I do agree that all should earn their own way in life. My children will find that out the hard way as I did.

            What would it take to get the previous pay structure I mentioned through Congress? Has that ever been thought of or approached before?

          • TheMagicalSkyFather

            Any type of regulated pay structure would be painted as a communist plot but it has been done before by Nixon and FDR setting wages for certain industries. As far as small businesses my idea is to make a points system. For instance being their kid would get you a point having a realistic business strategy would give you a point an education in the subject and work experience would also give you points. Farm kids and small business kids grow up working in the family business, the amount of points they would gain before graduation no less after education should suffice to put them at the front of the line for the loan that would then be able to buy the business, if they cant pay off the loan then they lacked the talent and the business should be passed on since this is how capitalism works. This would also give workers a chance that have given their lives to businesses if the children were not interested or incompetent or anyone else that wanted to make a go at it. In the current system their kids or rich people and corporations are the only ones that need apply which has done little to improve the businesses nor keep them locally owned no less family owned.

            If our money was tied to gold I would agree with you but our money is either owned by the banks or the US gov because otherwise how do you explain the constant shrinkage? Even if they do not “own” it if they have total control of it and its value they still control it and therefore own it by default. In the end the 100% tax would be a trade off, no taxes but you give what you earned back to the society that made it possible for you to do so upon death for the next generation to have the same chances. Not to different than now with the exception that it is not tied to the babies that happened to win the lottery by popping out of the correct womb while the rest of our children fall further and further behind every year due to multi generational wealth consolidation since money is finite. I just think work is so wonderful that everyone should have to do it. If you do not contribute to society I do not care who your father is, you should starve if you refuse to even try(the disabled excepted).

          • JeffersonDavis

            I agree with your second paragraph, but the first has me shaken.

            To me, it is natural to want to leave a business to a child. I’m not sure how to react to a requirement to make Junior borrow money for Dad’s business. You may have something there, but I guess I’d need time to digest that one.

          • Read Father, Son and Co. about IBM. The junior Watson writes at the end of the book why it might make sense to turn over (sell) a corporation to its communities when the founder moves on.

            Look at how many of the super-wealthy in the U.S. are related to the robber barons of the late 19th / early 20th century. Look at how many of the super-wealthy in the U.S. can trace their wealth to WAR (either government action or tit). See anything by Kevin Phillips.

          • JeffersonDavis

            I know, Kathy. That’s why I proposed the pay structure regulation:

            A regulated pay structure where the top person in a corporation cannot make “x” amount times the rate the lowest person makes. This would include bonuses. That way, success is not punished, but the workers benefit from the company’s success as well.

            The “X” could be 100 times or whatever would be deemed as fair. If a CEO makes $10,000,000 in that example, then the lowest paid worker would have to make $100,000. It would spread wealth among the citizens without “redistributing” it in a socialist framework. It would also not punish sucess, but would reward everyone in the company’s success.

            Just a thought. What do you think?

          • Hi, Mr. JeffersonDavis (I was born and reared in Georgia, BTW):My heart applauds the thinking behind such a restriction but I really don’t want the *government* to be making this decision. If you look at compensation in Europe versus the U.S., for instance, the “wage gap” is much MUCH smaller. Why? Is it the ta code? Is it the culture? I don’t know (and I haven’t done a search in a long time to see if any researcher has tried to tease this apart).One problem imposing such a restriction here: the myth that anyone — even if they start dirt poor — born in the U.S. can grow up to be filthy rich. Another is that we over-emphasize money as the measurement of “success.”Sigh. Here’s data released last month:

            In 2007, the average ratio between salaries for a chief executive and American worker was 344 to one. That figure dipped to 319 in 2008, but is likely to rise this year, which is “really worrisome,” says John Cavanagh, the Institute’s director.”If nothing is done — if the federal government does nothing this fall in terms of CEO pay, the ratio will likely go up this year and there will be huge stock option gains by the CEOs of some of the worst-run companies,” he says. […]”If you go back a generation in this country, on average it was about 30-to-1.”

          • And here’s another:
            The 16th annual Institute for Policy Studies “Executive Excess” report exposes this year’s windfalls for top financial bailout recipients (emphasis added):

            Ten of the top 20 financial bailout firms have revealed the details of stock options pocketed in early 2009. Based on rising stock prices, the top five executives at each of these banks have enjoyed a combined increase in the value of their stock options of nearly $90 million…

            The Bounty for Bailout Barons: From 2006 through 2008, the top five executives at the 20 banks that have accepted the most federal bailout dollars since the meltdown averaged $32 million each in personal compensation. One hundred average U.S. workers would have to labor over 1,000 years to make as much as these 100 executives made in three.

          • TheMagicalSkyFather

            Here is a question, why are my children that have yet to contribute anything to my society or my ability to generate the wealth I wish to give to them more deserving of my wealth than my teachers and neighbors that helped me become a success? The only one I can find is my desire to give it to my children but of course everyone desires to leave their children better off than they were but the only way to ensure that is true for everyones children of course is 100% inheritance tax since otherwise very few people will be able to make that desire a reality. More often than not inherited money has turned into a curse and not a windfall, in this case you would not be trying to improve your childs life and maybe succeeding maybe failing, every generation you would be collectively improving the lives of all future children in your community including your own which sounds like about the best use of resources devoted to a legacy that I can think of. Then you can get into what about your children that you may not have been told about, accidents happen and I have been around a bit, why should those kids not get a cut? What about the worker’s that I fired to turn a larger profit kids? Do I not owe them anything for possibly having a hand in destroying their possible futures and should I not therefore give them a cut as well? If I choose to give it to a single child and not the others how is that fair considering most of them will have little survival skills built up if I have always cared for them? Will their sibling be expected to take care of them and what about their children? Will the loan inheritor give only to his chosen child cutting out the rest of the families offspring? When it comes right down to it inheritance in western culture is built around the ideas of monarchy and aristocracy and is not meant for the lower classes, it is intended to further strengthen the hand of the upper classes generation after generation which it has done just as successfully here de-coupled from monarchy as it did in europe to build monarchy.

          • JeffersonDavis

            Thanks for the clarification.
            Good point.
            I’m in……..>TENTATIVELY.

          • You are to be commended for publicly changing your mind. 🙂

          • JeffersonDavis

            “You are to be commended for publicly changing your mind.”

            Thanks. That’s what makes me a moderate, Kathy. There are many true moderates here. Others here, will never change their mind – be they ultra liberal or ultra conservative. We are all “supposed” to be here to learn from one another – not simply repeat ideological sound bite. That’s what NBC/MSNBC and Talk Radio are for.

          • TheMagicalSkyFather

            I am offended that you forgot the ultra crazy contingent but I am I mean we are few.

          • One of the reasons that I have enjoyed TMV for a LONG time (before there were multiple authors, when it was just Joe) is because the community here is willing to dialog instead of just diatribe.

          • Thinking inheritance tax is simplistic, IMO. There are many MANY ways to move assets prior to death so that there is nothing left, so to speak, to inherit. Farmers are encouraged to create Chapter S corporations; there are LLCs, trusts. Lots of ways.

          • TheMagicalSkyFather

            I agree they are just as hide able as they are in the current system but I think a militant meme could be built out of that tax system much like the “free market” chanters. Progressive taxation is a good deal less popular to discuss as is actually going back to a gold standard since they lack romance. I think 100% tax could capture a large segments ideals from the right and left just not the ruling class for obvious reasons. Randites would no longer be talking out both sides of their mouth though which is what drives me insane.

  • michaelD

    its much easier to explain the math when your regulator lets you cram all of your red ink into one month [dec 2008] and drop it from your books.

    sooner or later i would think it might come to light. after all, if i have to take $5k out of savings to pay for ‘something’ or have to liquidate some stocks/bonds to pay for ‘something’ its all well and good i suppose if i pretend it didn’t happen by not including the debit on my books. but that doesn’t change the fact that my accounts are $5k lighter than they were.

    i’m sure GS regulators are working with them to help conceal the shortcoming just as the suspension of mark-to-market has given FDIC a little fiscal cover in not shutting down the hundreds [thousands?] of banks [at great distress to the DIF] which appear to be functionally insolvent.

    perhaps we need a law requiring prompt corrective action when banks’ reserves can no longer cover their obligations.

    • Mike, I missed that little detail — move all “toxic assets” (can we please just call them “bad loans made knowingly”) to one month and then drop them … no need to carry them???

  • Zzzzz

    BUT ALL DUTIES, IMPORTS, AND EXCISES SHALL BE UNIFORM THROUGHOUT THE UNITED STATES.

    I agree we should operate within the framework of the Constitution, too. However, I don’t interpret this passage the way you do. What this passage was meant to do is to prevent the federal government from punishing certain states, by imposing greater taxes in those states than others. If a tax on millionaires is the same tax on millionaires in all 50 states, then it meets that Constitutional requirement.

  • SteveK

    The top five percent have to love it (while snickering, chortling, chuckling, giggling, guffawing, smirking, sneering and shaking their heads in wonder) every time that folks, barely getting by, stand up for their right to pillage and plunder our country and the economy… Only in America.

    • michaelD

      point up for you … very very well said

    • shannonlee

      What is even more ironic is that those same people have some delusion that in this America, they can some day become just as rich. Sadly, numbers have proven that economic mobility is better in commie Europe than it is in America.

      There is a serious disconnect in this country over what we were and what we are now.

  • StockBoySF

    So… for all the commenters on here…. what would YOU have Goldman Sachs do? Right now. Forget about the government changing the tax code… this is about GS making money and distributing it… So what’s the solution?

    • TheMagicalSkyFather

      They paid back the money so its no ones business but their stock holders.

      • michaelD

        AND they’re still borrowing via ZIRP

        AND their bonds are still back-stopped by us

        as me old pappy is fond of saying, “where there’s smoke, there’s fire” … there is plenty of smoke around GS and their dirty dealings

    • mikkel

      Well I don’t point the finger at Goldman, I point it at our elected representatives and the populace more generally for allowing them to operate like they have.

      Former IMF chiefs, regulators that cleaned up the S&L and sitting Fed governors have all said that there has been complete regulatory capture and the best description of our current system is an oligarchy where every single regulation and law is written to benefit the most powerful entities at the expense of the populace and regional entities.

      I’m also kind of surprised you haven’t heard about the things that michaelD was referring to (I’d add one, which is temporarily getting rid of mark to market so the Fed could step in and start buying all these “AAA” rated bonds to monetize them). The Dec 2008 thing was that their fiscal year ended in November but the new one started in January. December was just “lost” to history.

      Not to mention how Goldman has ripped off the taxpayers indirectly. For instance they were funneled $18 billion through AIG by the government…after they were hired (and thus paid) to determine how to handle AIG cds! Or cit, which was considered a too-moderate-to-fail company since it is responsible for so much mid-tier credit. A few months ago when it was close to bankruptcy, they managed to get $2.3 billion from the government as part of a “deal” with creditors that was supposed to restructure. The main creditor was Goldman which a) made a loan to them at prohibitive interest rates with insane terms and b) was the firm that led new stock issuance to take advantage of the “restructuring.”

      Of course a few months later it turns out that cit has to due another restructuring or else go into bankruptcy. Well it’s going poorly because there is no way that it can last, and if they do declare Goldman will net a profit of $1 billion that they will get in front of creditors (including the government which is expected to lost its entire position since it is in preferred shares).

      wfc is also definitely crippled due to its wachovia purchase, which is having outrageous default rates (in part because large parts of their portfolio was actually outright fraudulent). Of course because they are allowed to lie about their current position then they are “adequately capitalized” but in a few weeks mark to market is supposed to start again and — if it’s not delayed — then instantly all banks will need another bailout or run afoul of regulations. And that’s not even talking about current off the book stuff which is supposed to be merged onto the book next year if there is evidence of supporting of the securities (which is true for most credit card securitization according to naked capitalism).

      That’s why the banks have been saving all the money its being funneled and keeping them as excess reserves (to the tune of nearly $1 trillion).

      I could write 10 pages of stuff about how these major banks are front running the government in order to profit and then collect on the backend too, and dozens upon dozens of articles from major regulators and international monetary experts that back all this up and call it “looting” at best.

      I believe it was Geithner (but may have been Bernanke) that said that currently the entire banking system was dependent on the government continuing its policy of implicit backing and that if they stopped their MBS purchases and ended that backing (i.e. going back to pre crisis state) then everything would most likely fall apart again.

      We have bent over backwards to give them everything they asked for and there are no thanks, available credit is decreasing faster than ever and they are getting record bonuses. The whole “they paid back so they can do what they want” is completely BS because they couldn’t do anything without hte government having policies that every single person that foresaw the crisis says is making it worse.

    • michaelD

      instead of asking what GS should do, why don’t we ask about what we should do about GS.

      if danny ocean manages to rip off the bellagio casino by robbing their vault of $160mm has danny ocean made money we should then quibble about as to how he distributes it amongst ocean’s eleven?

  • Note, too, MagicalSkyFather that one intrepid Treasury adviser made almost a million last year advising Goldman on … their CHARITABLE giving. What a bunch of bunk that is.

  • StockBoySF — the CDOs that everyone seems to have been trading/issuing that trigger as one of the catalysts in the 2008 meltdown are not unlike a Ponzi scheme: unsustainable pyramiding of debt. You can’t take 100 pounds of s**t, cut it into one ounce portions, and sell a fifth of it as caviar. But that’s what the “investment bankers” were doing with their trenches and when they valued as AAA trenches of CDOs manufactured from subprime loans.

    • mikkel

      Did you know that GS was shorting cdos that it was simultaneously selling in another department? How it’s not fraudulent to sell “nearly risk free” securities and collecting fees while at the same time opening a major short position is amazing.

      • It seems that there are MANY things that would be “fraudulent” to someone with common sense (ie, a lay person) that is perfectly legal in the byzantine world of finance. See the two-part series on Washington Mutual in the Sun/Mon Seattle Times. It’s truly hard to believe/fathom… at some point, I kept thinking “this behavior is suicidal — why would any CEO follow this path?” The answer is short-term profits (for the CEO) and, I believe, self-delusion (I know it could fall apart, but it won’t be on MY watch).

  • DLS

    Jeff Davis — “uniform” here means “consistent” (throughout the USA).

    A per capita or “head” tax is ideal where everyone benefits equally (as before the law in the USA, etc.), but it is impractical under our current system. (An ideal constitutional federal arrangement would have no programs that directly affect or benefit individuals, and a per capita tax could therefore be justified to pay for the federal government, and the ideal system would have this per capita tax collected from the states, leaving it to the states to design their tax systems to provide the revenue as each saw fit to do.)

    An income tax should have a single rate (the “flat tax”), of course; progressive taxation is envy-based and is inherently unjust. (Ironically, proponents often engage in dishonesty about it and consider it an example of “fairness” [sic].) A net progressive tax (with decreasing marginal rates, which is ideal) is achieved by providing for an exemption for basic needs (the poverty level is appropriate for this purpose) and subjecting all other income to the single tax rate. One then merely decides to make the trade-off between the exemption amount and the tax rate (a higher exemption will require a higher tax rate on everything else to yield the same revenue, assuming a static condition with no incentive effects). The maximum tax rate should obviously be limited to fifty per cent, for moral reasons; above 50% is slavery.

    • JeffersonDavis

      The tax rate is ALREADY at 50% for most of us. After you add in state income tax, county property taxes, municipality taxes, social security, sales tax, and all of the fees paid to state’s for life’s necessities (driver’s licenses, etc) – we are well over 50% for the most part. So, in essence, we are now slaves.

      So far, Huckabee’s “fair tax” is the best idea going. Not perfect, mind you, but it’s a good start.

  • A rallying cry from MSNBC

  • DLS

    Jeff Davis: Yes, the total of all government payments by people should be limited to fifty per cent.

    If we’re subjected to slavery, I have to retreat to another philosophical position: approx. 61.8 per cent (a natural or true super-majority threshold). There’s no question whatsoever that above this amount is not only slavery, but truly is oppressive and possessing every other negative connotation possible!

    • JeffersonDavis

      Ah yes. Corporatocracy? Oligarchy?
      I’m hittin’ the Constitution Party in 2012.

  • DLS

    “A regulated pay structure where the top person in a corporation cannot make “x” amount times the rate the lowest person makes.”

    A few leftists have advocated the “maximum wage” for quite some time (Pizzigati is well-known now).

    The maximum-wage idea (even more than a high-to-low ratio) is at least as old as the New Deal.