Again Public money into the rescue?

[cynical lady]

Lehman chief receives $41m share bonus

 

James Rossiter 13 Dec 2007

Thousands of bankers at Goldman Sachs and Lehman Brothers will celebrate record bonus payments today, despite the global credit crunch.

 

Lehman kicked off the good cheer as it emerged that it had handed Richard Fuld, 61, its chief executive, a $41 million (£17 million) share award.

 

Goldman began to tell staff on both sides of the Atlantic yesterday of their share of what is expected to be an $18.8 billion pool – $2.3 billion more than last year’s annual awards. The payouts average $600,000 for each of its near30,000 staff worldwide.

 

Heads of investment banking at Goldman are each thought to have been awarded cash and share payments worth up to $10 million, level with last year’s bonus. Lloyd Blankfein, chairman and chief executive of Goldman, is thought to be on course for a 30 per cent rise in his pay package, to about $70 million. Hundreds of high-performing dealmakers in their twenties – those with vice-president ranking and about five years’ experience – collected cash payments of $500,000 each, according to sources.

 

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Lehman’s 28,200 staff will learn details today. The bank will also reveal what is expected to be a record year of earnings, despite write-offs of more than $2 billion to its loan book, sources predict. Morgan Stanley staff will learn of their awards tomorrow.

 

Lehman awarded Mr Fuld $35 million of restricted stock, which vests over the next three to five years and is worth about 4 per cent more than last year’s award. He received $6 million of performance- based restricted stock as well.

 

Five other executives received a total of $58 million in stock for 2007, including $29 million for Joe Gregory, the bank’s president, and $9 million for Thomas Russo, the vice-chairman, according to filings with the US Securities and Exchange Commission.

 

The total pot of bonus awards for Lehman’s staff this year is expected to be about $9.4 billion – on average $335,000 per employee.

 

The average is likely to be slightly down at both Goldman and Lehman, but that will reflect a cut in awards to workers in the credit divisions that should allow for greater handouts to corporate financiers, equity traders and wealth managers.

 

The credit crunch has forced Lehman to shed about 1,000 staff since September, including about 100 from its European headquarters in Canary Wharf, where job losses were in the credit division only. Most of Lehman’s staff, who collectively own 30 per cent of the bank, will take home about two thirds of their bonus payments in cash and the rest in shares, sources said.

 

Goldman’s write-offs relating to the credit crisis – it took a $1.7 billion hit in the third quarter – have so far been less severe than at its Wall Street rivals Citigroup, Merrill Lynch and UBS. Bankers in those firms are likely to receive between 50 per cent and 75 per cent of their bonuses in shares, assuming that they receive a bonus. Many simply hope to keep their jobs.

 

UBS, which is cutting 1,600 investment banking jobs worldwide, is thought to have capped cash payouts at $700,000 this year, while some mid-level bankers will get all their bonus in shares.

 

CIBC, the Canadian bank, is axing 60 staff from its City office and closing its leveraged finance operation. Dresdner Kleinwort, the German investment bank, is set to lay off more than 200, but the total might rise to 350.

 

Emma Halls, of Finance Professionals, a recruiter, said: “People in wealth management, equities and corporate finance were worried their bonuses would go to pay top people in credit. Across the banks there will, however, be a lot of pay in stock and options.”

 

http://www.guardian .co.uk/business/ 2008/sep/ 15/lehmanbrother s.creditcrunch

 

Banking crisis: Lehman Brothers files for bankruptcy protection

In a separate development that underlines the tumultuous state of the financial world, Merrill Lynch was taken over by Bank of America for $50bn

Sept 15th 2008

 

 

Lehman Brothers, one of the most prestigious players on Wall Street, filed for bankruptcy protection this morning after a frenzied weekend of negotiations failed to find a way of saving the company.

 

Heralding a tumultuous day in the financial markets, Lehman announced at around 5.30am BST that it will file for Chapter 11 bankruptcy protection, making it the biggest victim so far of the credit crunch and sub-prime crisis. It said it is making the move to "protect its assets and maximise value".

 

The collapse of Lehman – one of the biggest financial shocks in years - puts tens of thousands of jobs around the world at risk, including over 3,000 in the City.

 

It also sent shockwaves around the banking world, with commentators predicting that the damage could be felt across the industry. The FTSE 100 plunged by 200 points this morning, and the Dow Jones industrial average is tipped to tumble by as much as 4%.

 

Until late last night, Lehman was locked in talks with potential buyers after the last-ditch restructuring plan it announced last week failed to deter investors and trading partners from fleeing.

 

Barclays pulled out of talks on Sunday evening, because it could not win the government guarantees it wanted to protect itself against future losses on Lehman's trading positions - thought to be as large as $300bn (£167bn). It said this morning that a deal would not have been in the best interests of its shareholders.

 

In a separate development that underlines the tumultuous state of the financial world, Merrill Lynch was taken over by Bank of America for $50bn - a move that will spare it Lehman's fate.

 

Most of Lehman's UK staff are based at its headquarters at Canary Wharf, where the mood was sombre this morning. Employees arriving for work this morning said they did not know anything about what was likely to happen.

 

One worker told the assembled journalists, who were kept away from the building by security staff, that "I'm as much in the dark as you but I can't talk to you. We've been told not to talk."

 

And speaking on BBC Radio 4 this morning, Lib Dem Treasury spokesman Vince Cable described the situation as "very grave".

 

"I think the least we are going to have to learn from this is that the whole of the financial sector simply cannot return to where it was before," Cable said. "It is going to have to be much more tightly regulated in the public interest."

 

Sub-prime woes

 

Merrill Lynch and Lehman both expanded aggressively into property-related investments, including so called sub-prime mortgages - loans to people on low incomes or with poor credit histories. The bank has lost $14bn in the past 18 months after being forced to take huge write-downs on the value of those investments.

 

The breakdown in talks between Barclays and Lehman came after government officials and senior Wall Street executives gathered for a third day at the US central bank, the Federal Reserve, in lower Manhattan, arriving in a funereal procession of black limos.

 

The Fed, and the US Treasury, had been hoping to secure a saviour for Lehman ahead of the Asian markets opening on Monday.

 

The collapse of Lehman sent traders rushing into government treasury bonds – seen as a safe haven in troubled times. The dollar fell against both the euro and the yen.

 

Peter Kenny, managing director at Knight Equity Markets in New Jersey, said the financial world is on the verge of a complete reorganisation. "The US financial system is finding the tectonic plates underneath its foundation are shifting like they have never shifted before," he told Reuters. And Bill Gross, chief investment officer at Pacific Investment Management, warned of an "imminent tsunami" as dealers are forced to unwind complicated derivative and swap-related positions.

 

Alan Greenspan, the respected former chairman of the Fed, warned yesterday that other big institutions could yet be vulnerable; a shocking situation for Wall Street where the big investment banks had for so long enjoyed an air of invincibility.

 

Greenspan described the credit crisis as a "once-in-a-century" type of event. "There's no question that this is in the process of outstripping anything I've seen and it still is not resolved and it still has a way to go," he told ABC News.