Goldman Set to Pay the Biggest Bonus Payouts in its 140-Yr. History

Many companies’ system of incentives and excessive bonuses have been partly blamed for causing the financial crisis which nearly brought down the entire banking system. But apparently it didn’t take long for the same bonus culture to return.

From The Guardian: Goldman Sachs staff can look forward to the biggest bonus payouts in the firm’s 140-year history after a spectacular first half of the year…

Staff in London were briefed last week on the banking and securities company’s prospects and told they could look forward to bumper bonuses if, as predicted, it completed its most profitable year ever. Figures next month detailing the firm’s second-quarter earnings are expected to show a further jump in profits. Warren Buffett, who bought $5bn of the company’s shares in January, has already made a $1bn gain on his investment.

In April, Goldman said it would set aside half of its £1.2bn first-quarter profit to reward staff, much of it in bonuses. It is believed to have paid 973 bankers $1m or more last year, while this year’s payouts are on track to be the highest for most of the bank’s 28,000 staff, including about 5,400 in London.

David Williams, an investment banking analyst at Fox Pitt Kelton, said: “This year is shaping up to be the best year ever for investment banks…These banks are intermediaries in the bond markets where governments and companies are raising billions of pounds of new money. There is also a lack of competition that means they can charge huge sums for doing business.”

Last week, the firm predicted that…Obama’s government could issue $3.25tn of debt before September, almost four times last year’s sum. Goldman, a prime broker of US government bonds, is expected to make hundreds of millions of dollars in profits from selling and dealing in the bonds.

emphasis added

The bonuses announcement comes several days after federal regulators said they would allow 10 of the nation’s 19 largest banks to return their TARP funds. The banks had been lobbying incessantly for weeks to pay back the government loans, mostly to escape the restrictions on bonuses and executive pay.

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