Goldman Sachs Bonuses Doubled Due to Bailout

The issue of health care reform took a huge step yesterday, with the House of Representatives voting to pass the plan reported out of committee by Democratic lawmakers. Nearly one out of every five dollars nationwide is spent on health care; it’s one of the few industries in America experiencing both employment and fiscal growth, and yet millions of Americans aren’t covered under any provision of the current system. Reformers aim to change that, but they also, the New York Times reports, included provisions on nutrition labeling for vending machines, programs to educate parents on child interactions, tax reductions for gay couples, and, in a last-minute concession to conservative Democrats, a ban on coverage of abortions by federally funded insurance plans.

In the paper’s main story on the House action, Senate Majority Leader Harry Reid promised to bring the bill up for a vote, “as soon as possible.” Republican representatives fought hard against the vote, introducing legislative obstacles that were defeated and promising to fight every step of the way. “This bill is a wrecking ball to the entire economy,” said Rep. Jack Kingston, R-Ga., said, by way of explaining the opposition. Most opposition centers around mandatory insurance coverage, provided by employers, on penalty of increased payroll taxes. There’s also a tax penalty for individuals who decline coverage. The legislation aims to offset both penalties by providing a variety of low-cost options, including a government insurance plan, and a national insurance exchange. Democrats backing the plan also claim the changes will contain costs, or at least the rate at which health care costs increase. Regardless, a major hurdle in what can be viewed as a restructuring of a huge portion of the American economy has been cleared.

In the meantime, banks would like to continue paying their executives large amounts of money, thank you, except in the form of stock. (They call it compensation.) As bank stocks crashed last year, firms issued their bonuses in the form of stocks and stock options. Once the government bailout of the banking industry was under way, stock prices rebounded, making the grants worth more, in some cases much more, than their original value. The Times has the story, along with the example of Goldman Sachs’ (GS) general counsel, who has watched his bonus’s value double to nearly $12 million in less than a year thanks to the rebound in the firm’s stock price. Perversely, many compensation experts have advocated for stock-based bonuses as a way to tie compensation to performance. Most did not seemingly consider a scenario in which stock performance was backstopped by billions of dollars of taxpayer money and guarantees. One academic told the paper “When you issue stock in a period of economic distress, you’ve often given someone a gift.”

The Times also digs into the “global gold frenzy.” As in nearly every time of economic uncertainty, investors are turning to the asset of last resort. It’s not just investors who are buying, but apparently, shoppers in Harrod’s gold department, where the venerable store sells ingots, bricks, bars, and coins of the stuff. The only argument in the sector seems to be over how high the price of the precious metal will go, and the only question is which big investor, from Asian central banks, to Paul Tudor Jones, will get into the market next.

One market some investors would like to get out of, but can’t, are auction rate securities. As markets froze up everywhere last year, auctions did too. The problem is, auctions have yet to resume; banks simply can’t find buyers to match with sellers. Yet many ARS were sold as being almost as secure, liquid, and safe as cash. Investors have filed lawsuits and generally thrown the kitchen sink at banks, but it’s been arbitration that has shown the most promise in getting them their money back, reports the Times. The process is not without risk, but many investors who thought they were holding safe assets have been able to get at least some capital returned.

Finally, Ruby Tuesday (RT) has spent years and $100 million repositioning itself as a purveyor of refined cuisine for the masses, the paper reports, going so far as to include wine pairing information on its menu. “If you really care what you put in your body, Ruby’s is a good place for you,” Ruby's CEO and founder told the paper, suggesting that those who care about the foods they ingest need not fret about Ruby Tuesday’s ice cream, which managed to stay unmelted on the Timesman’s plate for 20 minutes.