Outrage: GS employees earned 80% more than stockholders!!

By Daniel at 21 October, 2009, 6:02 pm

NOW WE ARE BEING RAPED!

In my previous post, we saw that Goldman shareholders are making a return on equity of 21.67%

But, amidst all this noise and clamor over exorbitant pay and obscene bonuses ….

How are Goldman’s employees doing?

Back to the numbers:
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The New York-based firm reported net income for common shareholders of $3.03 billion, or $5.25 a share.
Goldman set aside $5.4 billion for compensation during the third quarter, raising its total to $16.8 billion for the year. In the first half of the year, it averaged $5.7 billion per quarter, or just under half its revenue.
http://news.yahoo.com/s/nm/20091015/bs_nm/us_goldmansachs_1
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As you can see, in the last quarter, stockholders – in aggregate – earned $3.03 billion.
But in the same quarter, employees – again, in aggregate – earned $5.4 billion!!!!!!!

Employees earned 80% more than stockholders!!

(NOTE that in the previous 2 quarters, – i.e. Jan-Jun 2009 – when the crisis was at its worst, Goldman ‘reserved’ even larger amounts for their employees!)

So, if what the company is doing to us can be characterized as us being ‘RIPPED OFF’, how should we characterize what the employees are doing to us?

Can you say, RAPE!

It gets worse … you can’t even participate and share in the bounty by investing in Goldman because …
The employees get paid FIRST – so they have a PRIORITY claim …
The shareholders get paid LAST – so they have a RESIDUAL claim ?

There is this tired argument that employees need to be compensated for their efforts. Look at the National accounts and you will see that ‘Labor’ is getting a smaller and smaller share of the National Income (inflation-adjusted, real incomes & wages have been more or less stagnant even as the economy and GDP grew) while ‘CAPITAL’ is getting a higher and higher share ….. except at Goldman (and the other ‘banks’).

Stockholders provide the RISK CAPITAL – employees provide the LABOR …
So how come employees get paid 80% more than stockholders??

(In this context, the taxpayers provided the RiskIEST capital – and should have been paid THE MOST!
And in the case of the $12.9 Billion that was shoveled to Goldman through AIG (see my next comment), not only will the taxpayers never get any return but we have probably lost the entire investment itself!)

HEADS THEY WIN, TAILS WE LOSE!

And let’s not forget HOW Goldman is making money.

Low, LOW interest rates – kept low by the Fed – and a steep yield curve!
It’s almost like FREE MONEY!

Yes, low interest rates are needed for the economy at large – and they are helping the economy …… but apparently not nearly as much as they seem to be helping the banks!

So what’s the harm?

Have you seen how consistently and significantly the dollar has fallen – read all the headlines about ‘Dollar debasement’, loss of the country’s credibility/authority, pending (potentially high) inflation, etc. etc.?

Part, if not MOST, of that is because of the low rates – and, to that extent, the entire country/population is paying the price – while the banks get most of the benefit!!

You can read more about this ‘Transfer of Wealth’ and its effects/consequences on the citizenry in this article: “The burden of savers: propping up Wall Street” at … http://finance.yahoo.com/news/The-burden-of-savers-propping-hftn-2991921712.html;_ylt=At4EtWT77eHDNnEFq90Rwj.7YWsA;_ylu=X3oDMTFhbzJ0dGthBHBvcwM2BHNlYwNzcGVjaWFsRmVhdHVyZXMEc2xrA3RoZWJ1cmRlbm9mcw–?x=0

But, as if that weren’t bad enough, Goldman is still carrying subsidized capital that they raised with the Government’s explicit guarantee – which lowered their cost of that capital significantly – and too that extent, increased their profitability!

One final point. When the Govt. bailed out AIG, they told AIG (as per the Congressional testimony of Edward Liddy, then CEO of AIG) to make Goldman ‘whole – that is, to pay them 100 cents on the dollar, even though the (CDS) securities were trading in the public market at a considerable discount …..

The Government forced AIG to ensure Goldman made abnormal, above-market profits!?!

http://www.huffingtonpost.com/raymond-j-learsy/billions-for-aig-to-prote_b_172102.html
AND
http://www.reuters.com/article/creditCrisis/idUSN1548789520090315?sp=true

- TheProf