After Off Year, Wall Street Pay Is Bouncing Back.

by: LOUISE STORY
Published: April 25, 2009.

The rest of the nation may be getting back to basics, but on Wall Street, paychecks still come with a golden promise.

Workers at the largest financial institutions are on track to earn as much money this year as they did before the financial crisis began, because of the strong start of the year for bank profits.

Even as the industry’s compensation has been put in the spotlight for being so high at a time when many banks have received taxpayer help, six of the biggest banks set aside over $36 billion in the first quarter to pay their employees, according to a review of financial statements.

If that pace continues all year, the money set aside for compensation suggests that workers at many banks will see their pay — much of it in bonuses — recover from the lows of last year.

“I just haven’t seen huge changes in the way people are talking about compensation,” said Sandy Gross, managing partner of Pinetum Partners, a financial recruiting firm. “Wall Street is being realistic. You have to retain your human capital.”

Brad Hintz, an analyst at Sanford C. Bernstein, was more critical. “Like everything on Wall Street, they’re starting to sin again,” he said. “As you see a recovery, you’ll see everybody’s compensation beginning to rise.

In total, the banks are not necessarily spending more on compensation, because their work forces have shrunk sharply in the last 18 months. Still, the average pay for those who remain — rank-and-file workers whose earnings are not affected by government-imposed limits — appears to be rebounding.

Of the large banks receiving federal help, Goldman Sachs stands out for setting aside the most per person for compensation. The bank, which nearly halved its compensation last year, set aside $4.7 billion for worker pay in the quarter. If that level continues all year, it would add up to average pay of $569,220 per worker — almost as much as the pay in 2007, a record year.

“We need to be able to pay our people,” said Lucas van Praag, a spokesman for Goldman, adding that the rest of the year might not prove as profitable, and so the first-quarter reserves might simply be “sensible husbandry.”

Indeed, last year, when Goldman lost money in the fourth quarter, it did not pay out some of the compensation it had set aside when earnings were stronger.

At other banks, pay scales tilt in favor of particular units. JPMorgan Chase, for example, is setting aside what would total $138,234 on average for workers. But in the bank’s trading and investment banking unit, if revenue stays at first-quarter levels, workers are on track to earn an average of $509,524 over the year. That figure was $345,147 in 2006.

To try to blunt criticism of high pay, some banks have introduced reforms to take back bonuses from individual workers whose bets later lose money. Moreover, executives say that for many well-paid bankers, a good portion of their bonus compensation is in stock, whose value can decline if the performance of the bank lags.

Representatives of several of the largest banks said much of their compensation budget covered expenses other than bonuses, like salaries, health care, pension plans and severance.

Still, the compensation expense is the only publicly disclosed figure related to pay at the banks, and it is the best figure for calculating pay per worker.

This expense includes money for year-end bonuses. For high earners, bonuses can account for three-quarters of pay.

Compensation is among the most cited causes of the financial crisis because bonuses were often tied to short-term gains, even if those gains disappeared later on. Still, as profits return, banks do not appear to be changing the absolute level of worker pay — or the share of revenue dedicated to compensation.

Historically, investment banks have paid workers about 50 cents for every dollar of revenue. The average is lower at commercial banks like JPMorgan Chase and Bank of America, because they employ more people in retail branches where pay is lower.

But every dollar paid to workers is a dollar that cannot be used to expand the business or increase lending. Some of that revenue, too, could be used by bailed-out banks to pay back taxpayers.

Wall Street, of course, has a long history of high wages. Not all that long ago, most investment banks were private partnerships, and the workers were also typically the owners. Even when those firms began listing their shares on public stock exchanges, a standard was set in which half of their revenue was paid out to workers.

LET THE REVOLUTION BEGIN!

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Live your values. Love your country.
And, remember: TOGETHER, We can make a DIFFERENCE!

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It's Amazing How Fast Representatives Can Act FAST When they REALLY WANT to!

Crain's NY
March 19, 2009 2:58 PM

House approves 90% tax on bailout bonuses. The House of Representatives approved a bill to steeply tax big employee bonuses from firms bailed out by taxpayers, including American International Group Inc. and others.

(AP) - Acting with lightning speed, the Democratic-led House has approved a bill to slap punishing taxes on big employee bonuses from firms bailed out by taxpayers.

The vote was 328-93.

Said House Speaker Nancy Pelosi: "We want our money back, and we want our money back now for the taxpayers."

Republicans called it a legally questionable ploy to paper over Obama administration missteps.

Minority Leader John Boehner, an Ohio Republican, said the bill was "a political circus" diverting attention from why the administration hadn't done more to block the bonuses before they were paid.

The bonuses, totaling $165 million, were paid to employees of troubled insurer American International Group Inc., including to traders in the unit that nearly brought about the company's collapse.

LET THE REVOLUTION BEGIN!

Thanks for all you do!
Live your values. Love your country.
And, remember: TOGETHER, We can make a DIFFERENCE!

FAIR USE NOTICE: This blog may contain copyrighted material. Such material is made available for educational purposes, to advance understanding of human rights, democracy, scientific, moral, ethical, and social justice issues, etc. This constitutes a ‘fair use’ of any such copyrighted material as provided for in Title 17 U.S.C. section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. If you wish to use copyrighted material from this site for purposes of your own that go beyond ‘fair use’, you must obtain permission from the copyright owner.

Bailout King AIG Still to Pay Millions In Bonuses

Geithner Gets Firm To Make Revisions

by: David Cho and Brady Dennis

Washington Post Staff Writers
Sunday, March 15, 2009; Page A01

Insurance giant American International Group will award hundreds of millions of dollars in employee bonuses and retention pay despite a confrontation Wednesday between the chief executive and Treasury Secretary Timothy F. Geithner.

But the company agreed to revise some executive payments after what AIG's leader, Edward M. Liddy, called a "difficult" conversation.

The bonuses and other payments have been exasperating government officials, who have committed $170 billion to keep the company afloat -- far more than has been offered to any other financial firm.

The issue came to a head when Geithner called Liddy and told him the payments were unacceptable and had to be renegotiated, said an administration official who was not authorized to comment on the Geithner conversation.

In a letter to Geithner yesterday, Liddy agreed to restructure some of the payments. But Liddy said he had "grave concerns" about the impact on the firm's ability to retain talented staff "if employees believe that their compensation is subject to continued and arbitrary adjustment by the U.S. Treasury."

Lawyers at both the Treasury Department and AIG have concluded that the firm would risk a lawsuit if it scrapped the retention payments at the AIG Financial Products subsidiary, whose troublesome derivative trading nearly sank AIG. The company promised before the government started bailing out the firm in September that employees would be awarded more than $400 million in retention pay this year and next.

"I do not like these arrangements and find it distasteful and difficult to recommend to you that we must proceed with them," Liddy wrote.

At the same time, the company said in documents provided to the Treasury, any steps that encourage specialists at AIG Financial Products to leave could open the U.S. government to further risk because of the hazards still posed by the $1.6 trillion portfolio of complex derivatives those employees are working to dispose.

AIG's top seven executives, including Liddy, already agreed in November to forgo their bonuses through this year. Last week, AIG agreed to restructure bonuses for the next 43 highest ranking officers at the company, who are to receive half of their bonuses -- which total $9.6 million -- immediately, the administration official said. Another quarter of that would be disbursed on July 15 and the rest on Sept. 15. But these last two payments would depend on whether the company makes progress in restructuring its business and paying back taxpayers.

In addition, federal officials plan to recoup some of this bonus and retention pay in restructuring the company, an administration official said.

Officials at the Treasury Department and the Federal Reserve took over AIG in the fall, fearing one of the world's most successful conglomerates had grown so intertwined with the global economy that the firm's impending failure could have disastrous consequences.

In return for the bailout, the government took an 80 percent ownership stake in the company. Liddy was recruited by former Treasury secretary Henry M. Paulson Jr. to run the company. Since then, the rescue package has ballooned. But both the Bush and Obama administrations have been reluctant to completely and explicitly nationalize the company, though this could have avoided the current flap over bonus payments, first reported by The Washington Post.

AIG officials said debate over the bonuses and retention pay has been simmering for months. During the past year, the company has repeatedly disclosed these payments in public financial filings. But as lawmakers increasingly clamored for details of their size, outrage grew in Congress and beyond.

Although the AIG Financial Products unit is proceeding with the payments, Liddy said the company would try to reduce future retention pay by at least 30 percent. In addition, the 25 highest-paid employees at Financial Products have agreed to reduce their salary to $1 for the remainder of 2009, Liddy wrote. Salaries for the rest of the firm's employees will be cut by 10 percent.

The Obama administration has been sensitive to how companies receiving government bailout money indulge their employees. Spending on jets, extravagant office furniture and bonus checks -- while not always a significant portion of corporate spending -- sours the public's view of the financial rescue effort at a time when the administration is considering asking Congress for billions of dollars more to help banks.

AIG officials say that some of the upcoming bonuses are relatively modest once they are divided among employees. About 4,700 people in the company's global insurance units are receiving $600 million in retention pay. In addition, about $121 million in corporate bonuses will go to more than 6,400 people, for an average payout of about $19,000, according to AIG.

"These are not Wall Street bonuses," said one AIG executive, who was not authorized to speak on the record. "This is an insurance company." That executive also noted that the retention bonuses at AIG Financial Products were put in place in early 2008 at a time when it hadn't yet melted down. "They knew that the book was running into trouble," the executive said. "They thought they could weather the storm. But they thought they needed to keep people in their seats. They were worried."

Then, of course, everything changed. Financial Products kept posting bigger and bigger losses, burying AIG under a cash crunch from which it has not recovered.

Since that collapse, company officials say, many Financial Products employees have lost nearly two-thirds of their compensation under the firm's deferred payment plan, in which bonuses are doled out over several years based on the firm's profitability.

The new cutbacks raise the risk that more employees will depart before the firm can be wound down and closed.

"These employees are highly specialized and/or are part of businesses that control billions of dollars of revenue and value that will be needed to repay the U.S. taxpayer," Liddy wrote in a letter last month. "Our competitors understand how valuable our top executives are, and we are acutely aware that they would like to siphon off our most talented leaders."

Over time, both the amount of retention pay and the number of recipients throughout AIG have grown.

Since taking over the rescue effort of AIG, the Obama administration has imposed stricter compensation rules, banning golden parachute payments for executives leaving firms and barring executive compensation above $500,000, except in the form of stock that cannot be cashed in until the government's loans are paid back.

But the government could not revoke bonuses promised before the government's rescue efforts began, officials said.

Sen. Christopher J. Dodd (D-Conn.), a leading critic of excessive executive compensation, backed a measure earlier this year to curb the practices but it included an exception for bonuses agreed to before Feb. 11, 2009.

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SIGN THE MOVE ON "Stop the AIG Bonuses" PETITION HERE.

"The people in AIG's financial products division are perhaps more responsible for the severity of our economic meltdown than anyone else.

And yet, they're getting $450 million in bonuses.

That's just plain unacceptable. We have to tell Secretary Geithner and Congress that they need to do everything in their power to cancel these bonuses.

A compiled petition with your individual comment will be presented to Secretary Geithner and Congress"

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LET THE REVOLUTION BEGIN!

Thanks for all you do!
Live your values. Love your country.
And, remember: TOGETHER, We can make a DIFFERENCE!

FAIR USE NOTICE: This blog may contain copyrighted material. Such material is made available for educational purposes, to advance understanding of human rights, democracy, scientific, moral, ethical, and social justice issues, etc. This constitutes a ‘fair use’ of any such copyrighted material as provided for in Title 17 U.S.C. section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. If you wish to use copyrighted material from this site for purposes of your own that go beyond ‘fair use’, you must obtain permission from the copyright owner.

Corporate CEO's Caught Scheming on Tape: Your Bonuses Are Safe.

OPERATION ACCOUNTABILITY

The average CEO received an overall compensation (salary, bonuses and other perks) of more than $18 million in 2007, a 20.5 percent increase from 2006. During that same year, the average pay for workers was only $36,140, an increase of 3.5 percent.

And even though CEO's are saying their salaries were slashed in 2008, they're still receiving huge perks & stock options.

My fellow Americans, this is simply outrageous.

I'm sure you - or someone you know - are worrying about the rise in unemployment, foreclosures & general state of our fast - tanking economy. The fact that these CEO's --> many of whom work for companies receiving taxpayer money from the financial bailout <-- continue to rake in astronomical salaries, bonuses & perks, amidst these worries is, unacceptable.

Public Citizen is calling for an effective cap on executive pay and the restructuring of executive compensation as part of the next step in "Operation Accountability," our campaign to BRING ACCOUNTABILITY and TRANSPARENCY to the FINANCIAL BAILOUT.

Both Congress and the Obama administration have talked about capping executive pay. But so far, the plans are riddled with problems. The White House has indicated it wants to follow its own guidelines for restricting executive pay, but these are less stringent than those issued by Congress and contain hefty loopholes.

And, even if the White House doesn't try to backtrack and ask Congress for "corrective legislation" to soften the blow to CEO's, Treasury Secretary Tim Geithner has an entire year to develop regulations implementing the law - giving companies plenty of time to figure out a way to circumvent pay caps.

Please, sign our petition today demanding the Treasury Department devise a NOW plan to restructure executive pay ---> one without loopholes ---> one BOTH swift and decisive <---

Pay restrictions are a crucial part of fixing the problems from within our own financial regulation system so we don't have an economic crisis like the current one again.

Lobbyists are flocking to Washington, D.C., to fight these pay restrictions, so we must act immediately.

Please, sign our petition today, and help us reach our goal of 100,000 signatures BY THIS THURSDAY.

Thank you for all you do,
Maureen Backman
Public Citizen
feedback@citizen.org

P.S. - Act Today!

LET THE REVOLUTION BEGIN!

Thanks for all you do!
Live your values. Love your country.
And, remember: TOGETHER, We can make a DIFFERENCE!

FAIR USE NOTICE: This blog may contain copyrighted material. Such material is made available for educational purposes, to advance understanding of human rights, democracy, scientific, moral, ethical, and social justice issues, etc. This constitutes a ‘fair use’ of any such copyrighted material as provided for in Title 17 U.S.C. section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. If you wish to use copyrighted material from this site for purposes of your own that go beyond ‘fair use’, you must obtain permission from the copyright owner.

Report: Wall Street bonuses decline 44%

UPDATE:
"Shameful." - Omaba comments on the irresponsibility of Wall Street bankers' who gave themselves $20 BILLION in BONUSES, same amount as 2004.

Visit msnbc.com for Breaking News, World News, and News about the Economy

Original Post: Crain's NY, January 28, 2009 7:13 AM
Photographs: A. Golden, eyewash design, c. 2009.

State Comptroller Thomas DiNapoli estimates that the securities industry paid its New York City employees $18 billion in bonuses for 2008, compared with nearly $33 billion in 2007.

(AP) - New York state will lose nearly $1 billion in revenues because cash bonuses to Wall Street employees declined 44% last year, according to a report state Comptroller Thomas DiNapoli issued Wednesday.

Mr. DiNapoli estimates the securities industry paid its New York City employees $18.4 billion in bonuses for 2008, compared with nearly $33 billion in 2007.

The drop in bonuses will cost New York City $275 million, Mr. DiNapoli said.

"The securities industry has already lost tens of thousands of jobs and the industry is still continuing to write off toxic assets," Mr. DiNapoli said in a written statement. "It's painfully obvious that 2009 will probably be another difficult year for the industry."

He evaluated personal income tax collections and other factors, including industry revenue and expense trends.

The decline is the largest on record in dollars and the largest percentage decline in more than 30 years, but the bonus pool is still the sixth largest on record.

Before the financial crisis, business and personal income tax collections from Wall Street activities accounted for up to 20% of state tax revenues and 12% of New York City tax revenues.

The average bonus declined by 36.7% to $112,000 in 2008. The decline in the average bonus was smaller than the decline in the bonus pool because the pool was shared among fewer workers as the industry shed jobs.

It's important to make sure the federal bailout packages aren't paying for corporate jets, pay dividends or executive bonuses when the economy is suffering to this extent, Mr. DiNapoli said.

"Taxpayers have invested billions of dollars to stabilize the nation's banks and financial institutions and there are plans to make additional investments to shore up the banking system," Mr. DiNapoli said. "There needs to be greater transparency and accountability in the use of these funds. Every dime counts."

Mr. DiNapoli also estimated that the traditional broker and dealer operations of the member firms of the New York Stock Exchange lost more than $35 billion in 2008. Industry losses were actually much greater when other business services, such as mergers and acquisitions, were factored in.

Employment in the securities industry in New York City declined from 187,800 in October 2007 to 168,600 in December 2008, a loss of 19,200 jobs.

LET THE REVOLUTION BEGIN!

Thanks for all you do!
Live your values. Love your country.
And, remember: TOGETHER, We can make a DIFFERENCE!

FAIR USE NOTICE: This blog may contain copyrighted material. Such material is made available for educational purposes, to advance understanding of human rights, democracy, scientific, moral, ethical, and social justice issues, etc. This constitutes a ‘fair use’ of any such copyrighted material as provided for in Title 17 U.S.C. section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. If you wish to use copyrighted material from this site for purposes of your own that go beyond ‘fair use’, you must obtain permission from the copyright owner.