Friday, September 18, 2009

Justice on Wall Street - 3?

A classic Wall Street question. If a talented trader and his division are capable of generating a billion dollar profits, shouldn't he and his staff be entitled to a percentage of that profits. Perhaps a $100 million a year? Sounds reasonable? Ask say Lloyd Blankfein, he would most likely say yes.

This is not a hypothetical situation. A trader at Citibank is expected to walk away with $100 million bonus because his trading division has been very profitable. Read this.

Spare a moment to think through this. A George Soros,, founder and owner of Soros Management who has generated many billions over the years starting from scratch with a two person office has earned his bonuses by proving to the world that he did it "his way", none others.

Citicorp, a giant corporation with a global reach, whose origin goes back to Citibank, founded in 1812, has access to more privileged information without much cost of gathering and at a speed unavailable to most of us. So a trader working for Citicorp would have an advantage that comes with the corporation he had done nothing to contribute.

To reward him with a $100 million without rewarding to many others in the same corporation to have helped gathered whatever information he needed, or who have given the trader insights to make a big profit for the company is simply mindless and unfair which was, indeed, symptomatic of the twisted values during a bubble.

By the way if he had bet wrong, the shareholders of Citicorp would have suffered, and indeed, many shareholders and clients of Wall Street firms have due to that very same reason.

But when he bet right, he and other traders would walk away with a prince ransom.

If Soros had bet wrong, his own personal pocket would have suffered along with his clients. The worse that could happen to the Andrew Halls of the world would be just their job.

So, it would be interesting to see how the US Government is going to handle this case. The guy had a contract signed, of course, during the bubble years that, I guess, would bind Citi legally to pay him.

During those years Wall Street firms would sign any similar contracts to traders who they thought were geniuses. Those Wall Street leaders forgot and will continue to forget that in a bubble "everyone" is a genius, until the bubble bursts.

1 comment:

Foxwood said...

What is George Soros' game?
What are his plans for the U.S.?
How did he make his billions?