In a statement Sunday, Mr. Cuomo said, “This gesture by Goldman Sachs is appropriate and prudent and hopefully will help bring Wall Street to its senses. We strongly encourage other banks to follow Goldman Sachs’s step.”
This is most unfortunate. The top seven get only a fraction of what is paid out in bonuses. The goal should be: no bonuses for anyone. As the NYT says in the same article,
There is a widespread belief that the way Wall Street awarded bonuses in recent years helped feed the risky behavior that eventually created big losses on exotic debt securities and helped create the current crisis.
By and large executives at financial firms don't know about the risk their firms are taking. If you want inappropriate risk to be cut, you need to cut the bonuses of the underlings as well.
The IB model needs to end. By the IB model, I mean: paying a lot of money to people in order for them to overcome their natural sense of morality and be willing to do bad things to lots of people. For instance, without the huge pay-out at the end of the year, salespeople in IBs wouldn't be willing to stuff school districts and pension funds with products they knew were toxic waste, as they have most willingly over the past couple of years. They do so, not because they like to naturally, but because they can count the dollars that it brings them; it overcomes their resistance.
So executives don't get any money this year. That's like Steve Jobs accepting, for one year, one dollar as his compensation. It's a fake. They know, as long as the model stays in tact, that they will get more than enough in the future to compensate for their seeming virtue this time.
Bloomberg had an excellent article, which I linked to a few posts ago, saying that Americans wanted the bonuses of financial workers - all financial workers - to be zero this year. Cuomo is selling them out. Let's hope that Congress, at least, is paying enough attention, and cares enough, to raise a howl.