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Spin Control


One group that isn't having a tough time of it, but may still need some spin control anyway, is the investment bankers on Wall Street.

"Of course tonight is a very special Friday night. It is the first night of Hanukkah. Happy Hanukkah, everybody! Very busy party season starts in Los Angeles now. Tonight after the show, I'll be going to Mel Gibson's Hanukkah party. Then I'm going over to Kramer's to celebrate Kwanzaa!" -- Craig Ferguson

Sometimes the only way to get through tough times is to poke fun at yourself. When Ashlee Simpson was caught lip-syncing on "Saturday Night Live," her people had her mock herself by pretending to get caught doing it again at a concert. That sort of spin control worked for Jessica's little sister, but I doubt if either Mel Gibson or Michael Richards could make their issues go away by adopting the laugh-at-yourself solution. Only sincere apologies and time can help Mel and Michael.

Spin control is a wonderful thing to behold. One group that isn't having a tough time of it, but may still need some spin control anyway, is the investment bankers on Wall Street. It may be interesting to see how they try to spin the mind-numbing bonuses that are being reported, but I doubt if we're going to see John Mack, CEO of Morgan Stanley (MS), poking fun at himself on Saturday Night Live!

In case you hadn't heard, Mr. Mack, head of the No. 2 U.S. investment bank, was just awarded $40 million in stock and options, which briefly gave him the distinction of being the highest-paid in a field of extremely high-paid execs. Mr. Mack's compensation surpasses the $38.3 million that former Goldman Sachs (GS) CEO Henry Paulson (who's now the U.S. Treasury secretary) received in 2005 and set the new high-water mark.

The record stood only about as long as record closing highs for the DJIA this year, as Mr. Mack's compensation was crushed by Goldman CEO Lloyd Blankfein, who set the bar a tad higher with his $53.4 million award!

Goldman Sachs made headlines last week when it said it paid $16.4 billion in salary and bonuses to their 26,000 employees. Their spin was that this came to about $622,000 per employee, but we all know the cash wasn't split equally. In fact, I believe the 250 partners took home an average of $6.7 million each!

Lehman (LEH) was next to declare they would pay $7.7 billion to their 26,000 workers, but again, the split was not equal -- as CEO Richard Fuld took home $11 million in 2006.

Now, the reason we're seeing what these massive and extremely profitable firms are paying is because the vast majority are publicly held, meaning they have to disclose such things to the shareholders. One way these firms will use this information, or spin it in a positive way, is in their recruitment of young associates.

The graduates of business schools will note which firms are paying the most and make up their interview lists accordingly. A salary range of $175,000-$250,000 isn't chump change, but it's also not why the top grads are willing to put in 70-hour weeks. Bonuses are critical because traders get up to 90% of their compensation from year-end bonuses, so they want to see what Morgan, Bear Stearns (BSC), Lehman and Goldman are doling out.

For the record, Goldman's $622,000 per employee put them at the top of the heap this year, followed by Lehman at an average of $335,000 and Bear Stearns at $321,000. So if you're coming out of Wharton, or Stanford, or Harvard, I think we know which firm will be at the top of your interview schedule!

As mind-blowing as the figures are, the customers of these i-bankers have even more eye-popping bonuses. Figures for the hedge-fund folks are harder to come by as they are not under the same obligations of publicly traded securities, but published figures by Alpha Magazine are widely believed to be very accurate.

James Simons of Renaissance Technologies took home $1.5 billion, followed by T. Boone Pickens at $1.4 billion, George Soros at $840 million, Steven Cohen at $550 million, Paul Tudor Jones at $500 million, Eddie Lampert at $425 million, Bruce Kovner at $400 million, David Tepper at $400 million and David Shaw at $340 million. Finally, Stephen Mandel rounds out the top 10 at $275 million.

So if the i-bankers want to put a positive spin on it, they could say something like, "Our CEO took home less than 10% of what our top customers made!" Whether or not you feel like they deserve all those zeros, you're not supposed to really notice them. Like I said -- it's all in the spin!
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