Now It's Not Just the Little Guys Yelling

Now it's the shareholders -- the owners, you should say -- who are yelling, too.

For weeks now, Main Streeters have been complaining about the huge bonuses Goldman Sachs is preparing to pay its top employees. For example, the Financial Times's Kevin Sieff reported on Monday about demonstrators from SEIU (Service Employees International Union) protesting outside Goldman's Washington offices. And I have written with considerable skepticism about Goldman CEO Lloyd Blankfein's claim to be doing "God's work" (which, to be fair, he came close to recanting Monday; as reported by Graham Bowley in the New York Times on Wednesday, Blankfein said, "We participated in things that were clearly wrong and have reason to regret. We apologize.")

Goldman received a $10 billion bailout from the taxpayer-funded Troubled Asset Relief Program in October 2008, but has already repaid that. As far back as June of this year, the firm reported that it had already earmarked more than $11 billion for employee bonuses.

As a result, most Wall Streeters have ignored the complaints from the little people. After all, making money, and lots of it, is what Wall Street is all about, isn't it?

Today's Wall Street Journal reports, in an article by Susanne Craig, that Goldman shareholders are starting to complain, too. As Craig notes, "Despite record net income and compensation at Goldman as markets rebound and the firm outmuscles weakened rivals for business, analysts expect its 2009 earnings per share to be 22% lower than in 2007 and roughly equal to 2006 earning." (italics mine)

Reducing the bonus pool could substantially boost per-share earning and the share price. Shares traded yesterday at more than $170, up nicely for the year, but still well below the $250 per share peak in 2007. Last time I checked, corporations were supposed to maximize shareholder value (or stakeholder value -- but that's a rant for another day). Considering that Goldman employees own between 10 and 15% of the company's stock, they might even appreciate the move. Or not.

Goldman's employees are on course to earn about $717,00 on average in 2009. This is far beyond Wall Street's previous high-water mark, set by Goldman in 2007, of $661,490 per employee (The per-employee figure, of course, a ruse in itself; the Goldman administrative assistants and janitors earn, um, somewhat less; as the Times noted back in July, three years ago, Goldman paid more than 50 employees more than $20 million each. Moreover, Goldman artificially reduced the bonus number by including temporary employees and consultants in its "employee count".).

I find it hard to believe that even the gifted Mr. Blankfein really warrants a one-year paycheck of this size, but that's just me.

The much more serious complaint is that Goldman is still using taxpayer money, so why is the taxpayer getting cut out of the Goldman payday? After all, Goldman has been borrowing Treasury (our) money at essentially 0%. Where does Treasury get the money? By borrowing it, at Treasury bond rates. Don't you wish your bank would let you do the same thing? Goldman has made great returns on its investments, but it wasn't playing with its own money, it was playing with ours, and I want some of mine back now, thank you.