Bonuses Fueled Meltdown

Bonuses will be paltry on Wall Street this year, at least relative to the excesses of past years, but this may be for the best, according to The New York Times. "Critics say bonuses never should have been so big in the first place, because they were based on ephemeral earnings. These people contend that Wall Street's pay structure, in which bonuses are based on short term profits, encouraged employees to act like gamblers at a casino — and let them collect their winnings while the roulette wheel was still spinning." In 2006, Merrill Lynch's head mortgage honcho made a $35 million bonus. That same year, Goldman Sachs paid more than 50 people $20 million each. "Compensation was flawed top to bottom," said Lucian A. Bebchuk, an expert on compensation from Harvard Law School. "The whole organization was responding to distorted incentives."