The NYT is just superb with its Wall Street-compensation story today:

While top executives received the biggest bonuses, what is striking is how many employees throughout the ranks took home large paychecks. On Wall Street, the first goal was to make “a buck” — a million dollars. More than 100 people in Merrill’s bond unit alone broke the million-dollar mark in 2006. Goldman Sachs paid more than $20 million apiece to more than 50 people that year, according to a person familiar with the matter. Goldman declined to comment.

Let’s stop right there and just ponder that for a moment. It wasn’t just the CEO making $20 million a year at Goldman. Fifty people did. Incredible.

What’s great about this story is how it illustrates clearly the problem we’ve all talked about for months now: that Wall Street bonuses distort the incentives of its traders and executives in favor of short-term gain, longer-term risk be damned. The Times shows how Dow Kim, an executive with Merrill Lynch, got $35 million in 2006 for helping bring his company $7.5 billion in profit that year—a number the paper correctly calls a “mirage” because “The company has since lost three times that amount, largely because the mortgage investments that supposedly had powered some of those profits plunged in value.”

Ding ding ding!

And the following graph twists the knife:

Unlike the earnings, however, the bonuses have not been reversed.

How did Kim do it? By turning out garbage like this:

Back in New York, Mr. Kim’s team was eagerly bundling risky home mortgages into bonds. One of the last deals they put together that year was called “Costa Bella,” or beautiful coast — a name that recalls Pebble Beach. The $500 million bundle of loans, a type of investment known as a collateralized debt obligation, was managed by Mr. Gross’s Pimco.

Merrill Lynch collected about $5 million in fees for concocting Costa Bella, which included mortgages originated by First Franklin.

But Costa Bella, like so many other C.D.O.’s, was filled with loans that borrowers could not repay. Initially part of it was rated AAA, but Costa Bella is now deeply troubled. The losses on the investment far exceed the money Merrill collected for putting the deal together.

And again, the Times hammers home the short-term gain theme:

By the time Costa Bella ran into trouble, the Merrill bankers who had devised it had collected their bonuses for 2006. Mr. Kim’s fixed-income unit generated more than half of Merrill’s revenue that year, according to people with direct knowledge of the matter. As a reward, Mr. O’Neal and Mr. Kim paid nearly a third of Merrill’s $5 billion to $6 billion bonus pool to the 2,000 professionals in the division.

They just kept heading for the cliff—because that was what they were paid to do:

After that blowout, Merrill pushed even deeper into the mortgage business, despite growing signs that the housing bubble was starting to burst. That decision proved disastrous. As the problems in the subprime mortgage market exploded into a full-blown crisis, the value of Merrill’s investments plummeted. The firm has since written down its investments by more than $54 billion, selling some of them for pennies on the dollar.

And the Times repeatedly broaches the question of whether those bonuses ought to be returned, or “clawed back.” The emphasis is mine here:

Clawing back the 2006 bonuses at Merrill would not come close to making up for the company’s losses, which exceed all the profits that the firm earned over the previous 20 years. This fall, the once-proud firm was sold to Bank of America, ending its 94-year history as an independent firm.

Plus, the story even throws in a nod at something we like to see pointed out: That the financialization of the economy has been bad for the country:

The bonanza redefined success for an entire generation. Graduates of top universities sought their fortunes in banking, rather than in careers like medicine, engineering or teaching. Wall Street worked its rookies hard, but it held out the promise of rich rewards. In college dorms, tales of 30-year-olds pulling down $5 million a year were legion.

This is a really terrific effort by the Times, and another notch for its “The Reckoning” series, which is much better than what The Wall Street Journal has put forward.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.