The days of outrageous Wall Street bonuses may be limited, depending on your definition of outrageous, of course. A recent Bloomberg story reported that Morgan Stanley, the owner of the world’s biggest brokerage, is capping cash bonuses at $125,000 and is deferring more compensation for senior level executives.
It has been almost one year since the subprime problems first surfaced last July as two Bear Stearns hedge funds acknowledged that they had lost virtually all of their funds. It was the beginning of a slow drip of disturbing information regarding the extent financial institutions, primarily investment banks, were affected by subprime holdings.
While it was the collapse of a couple of hedge funds that introduced us to the problem, it was the investment banks that had the greatest exposure. So much so that the Federal Reserve had to open its lending window to these institutions for the first time in 80 some odd years and arrange the bailout of Bear Stearns. And while hedge funds continue to be watched with suspicion, it is the banks who have had to book billions of dollars of losses due to this exposure.
The April 27 Sunday New York Times had an incredible article on Robert Rubin, former Treasury Secretary under President Bill Clinton and former co-chairman of Goldman Sachs. Oh, and yes, currently is on the board and is chairman of the executive committee at Citigroup, which has lost billions of dollars in the recent mortgage mess. The question asked in the article was, Where was the wise man?
Rubin has always been brilliant, perhaps one of the smartest men on the street and in politics. But he has been noticeably absent during the Citigroup crisis, and this article describes his role at Citigroup and other aspects of his career.
It’s a couple insights that deal with the futures industry that make this article especially interesting.
