Wall Street Financial Truth

Chapter 5 The Truth About Wall Street (3)
6. Who supported the Goldman Sachs carnival

At the end of each year, the size of the red envelopes of Wall Street investment banks is always the most eye-catching financial news.When the year is good, the bonuses reported by the major investment banks are higher than that of the other, as if to show off their achievements: "Merrill Lynch averages 45 US dollars", "Lehman averages 50 US dollars", "Morgan averages 55 US dollars", "Goldman Sachs averages $60"!Especially in the years after the outbreak of the financial crisis, how many bonuses Wall Street will pay is more concerned by the public.Originally thought that Wall Street, which had caused a catastrophe, should be restrained. Unexpectedly, Goldman Sachs took the lead in reporting the company's 31000 employees in a high-profile manner. The per capita account is expected to be 70 US dollars, which will set the highest value in Goldman Sachs' 136-year history!Eye-popping!

As everyone knows, the average annual income of American office workers is only 5 US dollars, and a single red envelope for Wall Streeters is close to 15 times the average annual income of ordinary office workers.Wall Street has caused a catastrophe that brought the global economy into recession, and caused a large number of innocent people to lose their jobs, but they are still relentless in offering bonuses. Can this hateful situation make people angry?

So far, I have been on Wall Street for nearly 18 years, and have worked in 5 investment banks, large and small. I clearly know that the "average" calculation method of the media is very inaccurate and misleading.Let’s show off your income over the years here.

I broke into Bankers Trust in October 1994 right after I got my Masters.At that time, newcomers entered Wall Street with a starting salary of around $10.However, due to my status, I need a company guarantee to work legally. My starting salary is 5 US dollars.Although it is lower than the market price, this is an unspoken rule.It can be seen that employees who need to guarantee status earn 3.8% to 25% less than those who hold green cards and American citizenship.Naturally, I didn't complain, but I was very excited because I broke into the world of white people in one fell swoop.I thought that as soon as the status issue was resolved, "equal pay for equal work" would naturally be granted.

I am one of the most Chinese people who entered Wall Street with computer financial software development and management.If you specialize in financial software development all year round, your salary will reach its peak after 10 years. Generally, the basic salary is 10 US dollars, plus a bonus of 2 to 3 US dollars. The total income is about 12 US dollars, and then increases with the speed of inflation.However, if you are unlucky and encounter a financial tsunami, you may also have a salary cut.Generally speaking, the income growth is the fastest in the first five years, increasing at a rate of 5% to 10% per year. If you change jobs every two years, your salary will double after five or six years.

Experts working on financial product models on Wall Street, especially PhDs in mathematics, physics, and electrical engineering from prestigious American universities, earned more than double the salary of financial software development managers 15 years ago.Later, due to a large number of Chinese and Indians entering the field, the relationship between supply and demand has changed, and the income gap has gradually narrowed.At present, the salary of model experts with more than 10 years of work experience is about 50% higher than that of financial software engineers, with a total income of 18 to 20 US dollars.

Most of the high-talented students who entered Wall Street with finance majors are engaged in securities analysis, risk control, and financial product trading. Their basic salary is similar to that of financial product models.But their bonuses go up and down quite a bit.When the year is good, you can get a bonus equivalent to the basic salary for half a year or even a year. That is to say, if you have more than 10 years of experience, your total income can reach around US$25.

In recent years, almost all the pure computer positions on Wall Street have been outsourced to India, Russia and Southeast Asia.Therefore, to do computer software development on Wall Street, you must understand finance, otherwise you will not be able to "survive".Because I have taken a lot of financial courses in my spare time, coupled with the fact that I have gained real knowledge and gained talents through practice, I can be regarded as half a financial expert. A few years ago, I became a senior consultant of investment system, and my annual income is comparable to that of a financial product model expert.

After writing here, everyone can’t help asking, it seems that among the people you mentioned, no one has an annual income of more than 50 US dollars?yes!This is the income situation of the vast majority of ordinary employees on Wall Street.On Wall Street, those who can get more than the average bonus (about 50 US dollars) are either executives above MD (Managing Director), or big-name traders, gold medal analysts or senior fund managers. Thousands of dollars, tens of millions of dollars are not uncommon.These people are less than 2% of the total number of people on Wall Street.It can be seen that this so-called average bonus is just a fig leaf for less than 2% of people on Wall Street, and ordinary people don't even think about it.

The annual income of more than 98% of middle and low-level employees in various investment banks seems to be much higher than that of other industries.But they work 10-12 hours a day for years and months, and often work overtime on weekends and even holidays.If the overtime pay of employees in other industries in the United States is 2-3 times the basic salary, those bonuses are nothing more than "overtime pay".Therefore, ordinary employees on Wall Street, if calculated by unit hour, do not earn much more than the same professionals in other industries. In addition, the pressure on Wall Street is huge (the survey report shows that the average life expectancy of Wall Street employees who have worked for more than ten years is shortened. five years), these bonuses are simply not worth the candle.What's more, the turbulent working environment on Wall Street makes the bonuses of ordinary employees unable to be guaranteed. Once the economy is in recession, bonuses become severance pay.

In response to the American public's continuous doubts about the huge bonuses on Wall Street, Lloyd Blankfein, Chairman and CEO of Goldman Sachs, plausibly defended: "We are doing God's work (God's work)". The implication is that they The high income is justifiable. It is really "I have seen shameless ones, but I have never seen such shameless ones."

The financial crisis in 2008 has clearly proved that the core cause of the financial crisis is asset securitization.However, the most profitable investment banks on Wall Street are exactly the business of asset securitization and leverage.In the process of securitization, those 2% rare animals on Wall Street package garbage into gold, such as subprime mortgage securitization.The more money they make, the greater the losses for the majority of investors.In this way, the public's money is transferred to the pockets of those who call themselves "workers for God" without anyone noticing.

We might as well take a look at what kind of "God's work" those financial predators at Goldman Sachs have done.

Goldman Sachs profits for the first three months of 2009 fall into four categories:

(1) Financial consulting: USD 3.25 million;
(2) Stock sales: $3.63 million;
(3) Bond sales: US$2.11 million;
(4) Transactions and asset investment: US$100 billion.

Everyone, please note that the last 100 billion is much more than the sum of Wall Street's traditional businesses. This 100 billion is Goldman Sachs' profit magic.Since that financial crisis, Goldman Sachs has received the following bailouts from taxpayer pockets:
(1) TARP: $100 billion;
(2) Federal Reserve: $110 billion;
(3) FDIC: $300 billion;
(4) AIG: $130 billion.

That's $640 billion in total.Without a $640 billion bailout, Goldman Sachs, like many other banks, would never have survived today.At the peak of the crisis, Goldman Sachs obtained these rescue funds, and once again used a high leverage of 20 to 30 times to borrow funds equivalent to US$2 trillion, becoming the richest bank at that time.Then use the money to buy in large quantities when the stock market crashes and various assets are at their lowest prices.Then, in the name of "rescuing the financial system and the national economy", the Federal Reserve and the Treasury Department invested 23.7 trillion U.S. dollars, and then re-inflated those assets, so as to benefit from the taxpayer's money that was bought at the lowest price. assets, set a record profit.And taxpayers get no benefit.This is what is called "God's work."Then he took half of the profits he earned—more than 210 billion U.S. dollars—into his own pocket.

Goldman Sachs is the poster child for Wall Street investment banks.To quell public outrage, Goldman Sachs later said that the company's 30 most senior executives would not accept cash awards in 2009 and would instead receive cash in stocks.

Over the years, relatives and friends in China have often advised me to return to China to buy a house.They enthusiastically helped me do the calculations, saying that my annual bonus is half a million. After more than ten years of accumulation, I should be a millionaire. If I spend 500 million yuan to buy a good house in China, it will It's like buying a Chinese cabbage.Helpless, I have to spend a lot of time explaining: I am not a multi-millionaire, and my annual bonus of US$50 is "averaged". In fact, what I get is just the bonus of ordinary people.I'm ashamed, I really can't afford houses in China, especially houses in Beijing, Shanghai, and Hangzhou!In fact, due to high housing prices and high living costs, living in Manhattan, New York, with an annual income of US$18 to US$20 is only a middle class.

7. Investment bankers in the age of bloodthirsty
In the past, Goldman Sachs, Morgan, Merrill Lynch, Citigroup, Lehman, the most shining names on Wall Street, investment bankers with a lot of wealth, they entered the market because of greed, and would they also get out because of greed?
January 2010, 1, Washington, Hall of Congress.

The four most powerful bankers on the planet: Goldman Sachs Chairman Blank Fein, JPMorgan Chase Chairman James Dimon, Morgan Stanley Chairman Mack Jinheng, Bank of America Chairman Ryan Moynihan, Seemingly sincere and solemnly raising their right hands, at the first hearing held by the "U.S. Financial Crisis Inquiry Committee", they promised that everything they said was true, without deceit or lies.

One and a half years have passed since the worst of the financial tsunami, and the investigation and hearings are only now coming. The efficiency of the US government is obviously not high, but such efforts are better than nothing.This hearing, at least opened a window for the public. In the heated debate, they were placed on the moral bench, and they could see the thinking patterns of those high-ranking financiers.Facing the instigator of the financial crisis and Wall Street's condemnation of "bloodthirsty high salaries", they collectively admitted for the first time that they failed to take due responsibility in the financial crisis, but apparently did not show due apology for their actions.These financiers with the highest IQ and the best eloquence of human beings plausibly argue that the financial crisis is more like a hurricane, and no one can predict its destructive power; and one of the main characteristics of a free economy is that income is highly linked to profitability , and "the majority of employees in the financial sector did nothing wrong in the economic crisis and should not be punished by salary cuts".

These insincere and remorseful remarks are really shocking.

Although, the U.S. financial industry temporarily escaped the collapse of 2008 under the government rescue.However, after experiencing the worst financial crisis in 100 years, the unemployment rate in the United States is still hovering near the highest point in 26 years, and many bankrupts are still in the predicament of being homeless.Wall Street quickly ignited the bloodthirsty nature that had been declining.If it weren't for the pressure of increasingly angry public opinion, Wall Street executives could not wait to pay out high bonuses while whitewashing the 2009 financial report.Allegedly, major US banks have set aside $500 billion for bonus payouts.Even with the capped bonuses, JPMorgan Chase employees will receive an average of $46.3 each, while Goldman Sachs employees will pocket an average of $59.5.While the trauma of many ordinary investors a year ago is gradually healed, the "high salary door" of Wall Street executives undoubtedly sprinkled salt on everyone's wounds.

It is true that finance is an irreplaceable lever for creating huge material wealth in modern society. Only finance can accumulate huge wealth at such a high speed, and only finance can control resources so effectively.However, finance is also a chain with many links, and each link bears risks that affect the overall situation. Its destructive power is as far-reaching as its creativity.The power and responsibility in the hands of financiers who have huge resources and energy are far from symmetrical.

Even Bear Stearns, Lehman Brothers, Merrill Lynch and other scapegoats have collapsed and received the punishment they deserved.But the surviving investment bank tycoons have intensified, and the establishment, which has fewer competitors, is more comfortable making money.They are more willing to talk complacently about the strong rebound of stock prices and the rapid recovery of profits, but they rarely reflect on the financial crisis from the bottom of their hearts, or promote financial supervision and risk control.

As long as this view of "man-made disasters" as "natural disasters" is still the mainstream in the minds of investment bankers, it is impossible to avoid the next serious financial crisis.

The underlying causes of the financial crisis are intertwined and intertwined.In the long run, the efforts made by the government, the supervision of public opinion, and reflections from all walks of life will be of great value.Morgan Stanley has announced that it has begun to reform its compensation system, so that bonuses are linked to profits and stock prices, rather than transaction volume; executives at the meeting also admitted that the responsibility for excessive lending should be borne by government regulators, but regulators lack adequate management of the market. Power, the feasibility of this aspect should be actively explored in the future.These positive signals, as Phil Angelidis, the chairman of the US Financial Crisis Inquiry Committee, said, the reconstruction of the system and reputation cannot be completed overnight, but the spark of hope always emerges in the game after game .

Goldman Sachs CEO Blankfein——a faded golden signboard
Outstanding performance in a harsh economic environment has not brought the Goldman Sachs head the reputation it seems to deserve.As a strong-willed and calculating investment banker, Blankfein won government aid and the market, but he also won the wrath of being the world's highest paid professional manager for many years.

At the hearing, while the other three bankers remained silent or due modesty, Goldman Sachs Chairman and CEO Blank Fein was speaking impassionedly, confronting Angeli Diss, chairman of the investigative committee.

Angeli Diss: "Why did Goldman Sachs force AIG to pay in full on below-par bonds last year?"

Blankfein: "I've never had a request from regulators to lower the price of a swap contract. I have no recollection of that in any conversation that I can recall."

Angeli Diss: "Don't you think that Goldman Sachs made AIG pay for subprime mortgage securities, and you don't think that's the same as selling a car with brakes out and buying the buyer an insurance policy?"

Blankfein: "We're sorry that this type of trading has caused some people to lose money, but this is the practice of financial risk management, and until now there is still demand for this product."

Angelidis: "Investment banks can be said to be the instigators of the financial crisis. Why do you still pay huge bonuses to employees?"

Blankfein: "Goldman Sachs has not announced this year's bonus plan. Of course, shareholders are in favor of employees sharing profits, free economy income is linked to profitability, and most of our employees have done nothing wrong in the economic crisis and should not accept salary cuts punish."

These soft and hard nails have greatly reduced the two-hour inquiry of the investigation committee.

No doubt, Blankfein's peers applauded secretly, because he said what they wanted to say but feared the public's resentment.

After the financial crisis faded away, the bald, funny-looking little man has clearly become the backbone of the major bankers.

Meanwhile, Goldman and Blankfein have become symbols of Wall Street greed, given its strong profitability and suspicions that it has gained an unfair advantage through its close ties to the government.

"Rolling Stone" magazine writer Matt Taibi even described Goldman Sachs as "a giant vampire squid wrapped around the face of humanity."

In this unprecedented economic crisis, Blankfein reacted calmly and acted like a dancer with long sleeves. He won the support of the government, the partners of Goldman Sachs, and the help of Warren Buffett, and obtained high profits.

(End of this chapter)