Saturday, April 18, 2009

Bankruptcy Judges Love Bonuses

A bankrupt Lehman Brothers paid $2 billion in bonuses to high ups, including Jeb Bush and cousin George Herbert Walker. Now, bankrupt Hawaiian Telecom will pay $6 million in bonuses.

What is it with bankruptcy judges? Performance pay caused CEO's to undertake riskier strategies, to swing for the fences. The big money boys love pay for performance.

Lehman was a Wall Street investment bank. Hawaiian Telecom is an affiliate of The Carlyle Group, a politically connected private equity underwriter (PEU).

The greed and leverage boys set up Lehman and HT for failure. Both firms were highly leveraged. The big money lenders lost faith in Lehman's ability to pay on its obligations. Carlyle purchased HT in the PEU bubble and wants to cram down debt holders.

How many financiers will do business with the Carlyle Group after being burned? Lehman imploded overnight. It might take longer for Carlyle to feel the effects, but an absence of trust is toxic for future deals.