Obama's Bank Boost
For a guy who doesn't want Wall Street's elite to make any more money, President Obama sure did a good job lining their pockets last week.
President Obama introduced his plan to curb proprietary trading and "obscene" bonuses last week at nearly the exact time when banks such as Goldman Sachs (Stock Quote: GS) and Morgan Stanley (Stock Quote: MS) were pricing their employee stock awards. Therefore, as Bloomberg rightly pointed out first, when the president struck out at the banks last week, the subsequent plunge in financial stocks only helped their employees get better strike prices. The capper is that now, more than ever, Wall Street's biggest banks are awarding more of their bonuses in stock to tie pay to performance.
Ah, the law of unintended consequences can be so cruel, can't it Mr. President?
Goldman Sachs, for example, priced its bonus shares at $154.12, the closing level on Jan. 22, according to a Bloomberg source, after Obama's attack prompted a 8.1% slide in the stock. As a result of the biggest two-day drop in Goldman shares since March, employees will receive more shares than they would have earlier in the week, and have greater upside should the stock move higher.
Morgan Stanley's squad also benefited from Obama's bashing. Morgan Stanley priced its stock awards on Jan. 21, the day Obama announced his plan. Morgan Stanley shares tumbled 4.2% that day.
The real losers were over at JPMorgan Chase (Stock Quote: JPM), according to Bloomberg. The bank priced stock for most employees on Jan. 20, just prior to Obama's declaration of war. Its shares dropped 9.8% during the next two days.
Sorry guys. Just wait till next year and maybe the president will attack you again.
Dumb-o-meter score: 95 -- It's truly extraordinary. Goldman Sachs can't even cut compensation when it wants to!