Don’t feel too sorry about any of those folks working in those 5 big Wall Street firms that either collapsed or had to make big changes. Look at the whopping money they earned in the last 5 years.
While their top executives made $3.1 billion, “The five biggest — Goldman, Morgan Stanley, Merrill, Lehman Brothers Holdings Inc. and Bear Stearns — paid their 185,687 employees $66 billion in 2007, as problems with subprime mortgages mounted, including about $39 billion in bonuses.”
Of course they could do this, because they were busy making a lot of money out of nothing, taking risky assets like sub-prime mortgages and other kinds of loans and repackaging them and selling it to each other.
Wall Street firms and giant insurers weren’t the only ones in trouble as large banks also fell victims. It seems like many of these institutions, just like many American consumers and their customers, loaned too much money to the point where “Merrill Lynch commodities strategist Francisco Blanch writes in a report that the ratio of total loans to deposits in the U.S. hit 3.5 to 1 last year”. Explaining the problem with the banks and their overspending is this CNN article.
This article reveals how serious the situation was last week saying it was “the week America’s economy almost died.” Sure it’s probably a bit exagerrated but the situation was serious enough that if it continued for a protracted time, it would have had dire consequences.