Wall Street Bonuses - Why Wall Street Screwed You Over

Unemployment and the continued deterioration of housing values have delayed the building (and rebuilding) of many retirement plans that were decimated in the previous year.

The eroding economy — despite government and Wall Street opinion to the contrary — has kept the value of the stock market well-below previous peaks, even though the market has been able to stage a monster rally (albeit a government manipulated and stimulated one).

But many of us are still looking at retirement accounts that are under-funded for our plans. Before the year turns over to 2010, you must first look at what went wrong in 2009, and determine how to avoid the situations that caused you problems.

You want to ensure that those same hurdles are removed before the new year, because you don’t want to quickly ruin the “fresh start feeling” for 2010, and substitute an “oh no, not again” feeling for the year.

What Went Wrong in 2009?

When looking back on 2009, we can see that the root cause of this economic crisis was greed.

Financial institutions were so greedy that the risks they took on in search of big profits — leading to big bonuses — almost destroyed not only the U.S. financial system, but the global system as well!

Governments took unprecedented actions to save the global economy from potential collapse. The financial crisis has been of epic proportions and has taken the largest coordinated intervention ever to bail out the world.

Governments, most notably the United States, left almost no stone unturned in the attempt to bail out the cash-strapped (and probably insolvent) financial institutions.

Mo’ Money, Even Mo’ Problems

The government used taxpayer dollars and printing presses to generate the necessary capital to keep afloat the financial institutions that were unable to raise funds on their own.

The situation proved to be as dire as advertised with the collapse of such Wall Street mainstays as Bear Stearns and Lehman Brothers. Merrill Lynch, Countrywide, Wachovia and other big names were merged or taken over by others simply to prevent them from going under as well.

The government even had to seize several institutions directly, namely mortgage monsters Fannie Mae and Freddie Mac, along with insurance giant AIG (AIG).

On the regional bank front, scores are no longer around, and unfortunately there are even more teetering on the brink of extinction.

Another problem that’s going to drag into the new year (and beyond) is the fact that the true situation with regional banks will not be known for another year or two.

And We Didn’t Even Get a Thank You!

The majority of these bailouts rest on the shoulders of the taxpayers, the same ones who saw their retirement accounts trounced by this crisis.

You and I saved the same greedy @#$^^&* who decimated our portfolios … talk about irony!

After bailing them out and saving them from themselves — and saving them from their uncontrollable greed — they pay us back by treating themselves. This is not an opinion. It has been documented in all sorts or news media.

These financial institutions rushed to the door in the last month of December to pay back TARP solely to get out from under government control.

Why?

Simply to be back in control of their own destiny … back in control of their bonuses!

With all that has happened — the near-destruction of the U.S. and global financial systems, with their livelihoods all but gone — you would think they would have learned a lesson about greed, or have been humbled by the carnage that they wrought.

At the very least, they could have been thankful for being saved … or at least made it look that way to pay tribute to the sacrifices you and I have made, and are going to make, as taxpayers to save them. However, they were not. They just want their bonuses, their money … and to hell with you and me!

They Get Bonuses, and We Get Stuck With the Bill

An important lesson I learned from looking back on 2009 before looking forward to 2010 is that, no matter what, come hell or high water, Wall Street cares about its money and not mine.

Wall Street has already gone back to its standard greedy practices. It has put the financial crisis behind it as if nothing ever happened. I am all about capitalism, but not about the blind greed that Wall Street practices … and practices with MY money!

So with 2010 about to start, Wall Street will be beginning this new year with big bonuses in its pockets (both Fannie Mae and Freddie Mac CEOs are receiving approximately $6 million bonuses) from 2009.

And you and I will be starting with the bill from the bailouts that allowed them to have the bonus … not to mention, to keep their jobs in the first place! The bill that has been paid by you the taxpayer contributes to the decrease in your portfolio, thus putting your retirement in jeopardy.

But there are another couple of pieces of the bill that many don’t see because they are a hidden charge of that bill.

Inflation Worries

This indirect bill will be the additional money you will be paying for the everyday goods and services that you need. This additional bill will result from the “I” word that no one wants to hear: inflation.

7 Ways to Hedge Against Inflation

With all of the money that the United States has pushed into the economy, a significant jump in consumer prices is inevitable. That means more necessity expenditure on your part, which leads to less discretionary spending and less saving. This is particularly distressing because of the portfolio losses that have been recorded. Our portfolio losses need to be rebuilt. Savings need to go up, not down.

With necessity spending increasing consistently and/or rapidly because of inflation, saving in general will be much more difficult at a time when it is needed the most!

Higher Inflation, Lower Markets

Added to inflation’s unwanted, devastatingly negative effect to savings is that we also may not have as much money as we used to.

All the money pumped into the system by the government has to come from somewhere. A good amount is being created in the printing press room. But some of it will need to be coming from the taxpayer. And that means higher taxes. Higher taxes mean less money in your paycheck again, making the all-critical savings harder to come by at a time when it is most important.

Along with this is the inevitable rise in interest rates stemming from the rapidly increasing level of inflation. Higher interest rates make money harder to get, due to the fact that money becomes much more expensive.

This will affect companies and individuals alike, not to mention the fact that rising inflation levels always bring higher interest rates and LOWER financial markets!

Now, not only are we going to have less money to save to help rebuild severely depressed portfolios, but the little money we can save to move into our portfolio is going to earn less as the market struggles to go up … let alone what happens if it goes down!

Saving Our Savings

With that being said, we all are fully aware of what Wall Street has shown us. In fact, what Wall Street has actually proven to us is that it can’t make money for us in a stagnant or in a down-trending market.

So, what are we going to do? We are in desperate need of a portfolio-rebuilding phase, but all signs show that Wall Street is not going to help us do that in 2010 — regardless of what they say and how optimistic they appear to be.

If Wall Street and the government are not going to be able to help us, then there is only one potential solution … we must now help ourselves.

As far as New Year’s resolutions, I suggest we all make it our resolution to take a much more active role in the management of our money. That is why I plan to dedicate my next few articles here to how you go about putting yourself in a position to become a competent and skilled manager of your own money.