Big Bank Bonus Time
Posted by Michelle Moquin on January 12th, 2010
In light of yesterdays short clip by Johan Kramer, here’s the latest on the big banks and their bonuses:
Banks Prepare for Big Bonuses, and Public Wrath
By LOUISE STORY and ERIC DASH
Everyone on Wall Street is fixated on The Number.
The bank bonus season, that annual rite of big money and bigger egos, begins in earnest this week, and it looks as if it will be one of the largest and most controversial blowouts the industry has ever seen.
Bank executives are grappling with a question that exasperates, even infuriates, many recession-weary Americans: Just how big should their paydays be? Despite calls for restraint from Washington and a chafed public, resurgent banks are preparing to pay out bonuses that rival those of the boom years. The haul, in cash and stock, will run into many billions of dollars.
Industry executives acknowledge that the numbers being tossed around — six-, seven- and even eight-figure sums for some chief executives and top producers — will probably stun the many Americans still hurting from the financial collapse and ensuing Great Recession.
Goldman Sachs is expected to pay its employees an average of about $595,000 apiece for 2009, one of the most profitable years in its 141-year history. Workers in the investment bank of JPMorgan Chase stand to collect about $463,000 on average.
Many executives are bracing for more scrutiny of pay from Washington, as well as from officials like Andrew M. Cuomo, the attorney general of New York, who last year demanded that banks disclose details about their bonus payments. Some bankers worry that the United States, like Britain, might create an extra tax on bank bonuses, and Representative Dennis J. Kucinich, Democrat of Ohio, is proposing legislation to do so.
Those worries aside, few banks are taking immediate steps to reduce bonuses substantially. Instead, Wall Street is confronting a dilemma of riches: How to wrap its eye-popping paychecks in a mantle of moderation. Because of the potential blowback, some major banks are adjusting their pay practices, paring or even eliminating some cash bonuses in favor of stock awards and reducing the portion of their revenue earmarked for pay.
Some bank executives contend that financial institutions are beginning to recognize that they must recalibrate pay for a post-bailout world.
“The debate has shifted in the last nine months or so from just ‘less cash, more stock’ to ‘what’s the overall number?’ ” said Robert P. Kelly, the chairman and chief executive of theBank of New York Mellon. Like many other bank chiefs, Mr. Kelly favors rewarding employees with more long-term stock and less cash to tether their fortunes to the success of their companies.
Though Wall Street bankers and traders earn six-figure base salaries, they generally receive most of their pay as a bonus based on the previous year’s performance. While average bonuses are expected to hover around half a million dollars, they will not be evenly distributed. Senior banking executives and top Wall Street producers expect to reap millions. Last year, the big winners were bond and currency traders, as well as investment bankers specializing in health care.
Even some industry veterans warn that such paydays could further tarnish the financial industry’s sullied reputation. John S. Reed, a founder of Citigroup, said Wall Street would not fully regain the public’s trust until banks scaled back bonuses for good — something that, to many, seems a distant prospect.
“There is nothing I’ve seen that gives me the slightest feeling that these people have learned anything from the crisis,” Mr. Reed said. “They just don’t get it. They are off in a different world.”
The power that the federal government once had over banker pay has waned in recent months as most big banks have started repaying the billions of dollars in federal aid that propped them up during the crisis. All have benefited from an array of federal programs and low interest rate policies that enabled the industry to roar back in profitability in 2009.
This year, compensation will again eat up much of Wall Street’s revenue. During the first nine months of 2009, five of the largest banks that received federal aid — Citigroup, Bank of America, Goldman Sachs, JPMorgan Chase and Morgan Stanley — together set aside about $90 billion for compensation. That figure includes salaries, benefits and bonuses, but at several companies, bonuses make up more than half of compensation.
Goldman broke with its peers in December and announced that its top 30 executives would be paid only in stock. Nearly everyone on Wall Street is waiting to see how much stock is awarded to Lloyd C. Blankfein, Goldman’s chairman and chief executive, who is a lightning rod for criticism over executive pay. In 2007, Mr. Blankfein was paid $68 million, a Wall Street record. He did not receive a bonus in 2008.
Goldman put aside $16.7 billion for compensation during the first nine months of 2009.
Responding to criticism over its pay practices, Goldman has already begun decreasing the percentage of revenue that it pays to employees. The bank set aside 50 percent in the first quarter, but that figure fell to 48 percent and then to 43 percent in the next two quarters.
JPMorgan executives and board members have also been wrestling with how much pay is appropriate.
“There are legitimate conflicts between the firm feeling like it is performing well and the public’s prevailing view that the Street was bailed out,” said one senior JPMorgan executive who was not authorized to speak for the company.
JPMorgan’s investment bank, which employs about 25,000 people, has already reduced the share of revenue going to the compensation pool, from 40 percent in the first quarter to 37 percent in the third quarter.
At Bank of America, traders and bankers are wondering how much Brian T. Moynihan, the bank’s new chief, will be awarded for 2010. Bank of America, which is still absorbingMerrill Lynch, is expected to pay large bonuses, given the bank’s sizable trading profits.
Bank of America has also introduced provisions that would enable it to reclaim employees’ pay in the event that the bank’s business sours, and it is increasing the percentage of bonuses paid in the form of stock.
“We’re paying for results, and there were some areas of the company that had terrific results, and they will be compensated for that,” said Bob Stickler, a Bank of America spokesman.
At Morgan Stanley, which has had weaker trading revenue than the other banks, managers are focusing on how to pay stars in line with the industry. The bank created a pay program this year for its top 25 workers, tying a fifth of their deferred pay to metrics based on the company’s later performance.
A company spokesman, Mark Lake, said: “Morgan Stanley’s board and management clearly understands the extraordinary environment in which we operate and, as a result, have made a series of changes to the firm’s compensation practices.”
The top 25 executives will be paid mostly in stock and deferred cash payments. John J. Mack, the chairman, is forgoing a bonus. He retired as chief executive at the end of 2009.
At Citigroup, whose sprawling consumer banking business is still ailing, some managers were disappointed in recent weeks by the preliminary estimates of their bonus pools, according to people familiar with the matter. Citigroup’s overall 2009 bonus pool is expected to be about $5.3 billion, about the same as it was for 2008, although the bank has far fewer employees.
The highest bonus awarded to a Citigroup executive is already known: The bank said in a regulatory filing last week that the head of its investment bank, John Havens, would receive $9 million in stock. But the bank’s chief executive, Vikram S. Pandit, is forgoing a bonus and taking a salary of just $1.
Readers: By the way, did you move your money yet? I’ve got a list of local banks I’m checking out this week.
Zen Lill: Ploveness right back at ya.
Gratefully your blog host,
michelle
Aka BABE: We all know what this means by now :)
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January 12th, 2010 at 9:30 am
I’ve closed my accounts and am going community. Wall Street is simply moving it’s money around and keeping the market moving. The little guy is no longer in the game…The record profits are off of their own money moving around. The large institutions are buying up the toxic assets due to clauses within the program, that they were supposed to be getting rid of, because of the bargain basement pricing. So, they crashed the economy in order to buy what they sold back again at pennies on the dollar. I guess many would say good work if you can get it. Some would also say, that if they don’t do it someone else will. That is not how my universe works…
Karma is a bitch.
January 13th, 2010 at 1:15 am
Helping a Loved One Break a Bad Habit?
Stephen Gullo, PhD
Institute for Health and Weight Sciences
ccording to health psychologist Stephen Gullo, PhD, most people will not eat more healthfully, stop smoking or change other harmful behavior, such as angry outbursts, until it gets in the way of the life that they want. As president of the Institute for Health and Weight Sciences in New York City, Stephen personally has helped thousands of people live healthier lives — and helped many more through his books, such as The Thin Commandments. Though “the lightbulb has to want to change,” he notes that loved ones can stir up readiness to make the change.
“Timing is everything,” Stephen says. “Wait for the person to be in a good mood. Start with a positive — something you admire about the person. Build the case for change around the habit’s immediate inconvenience — coughing, clothes that don’t fit, damaged relationships. Highlight the short-term benefits of changing, such as whiter teeth or improved relationships. People want quick gratification.” Next steps…
Follow up when the person is relaxed. Ask if he/she has thought about the conversation. If you meet resistance, either the timing is wrong or you need a new “lobbyist” — for example, a physician, close friend or an adult son or daughter.
Take advantage of people’s unwillingness to throw away money. More of Stephen’s weight-loss clients have come to him to save their wardrobes than to save their lives. Stephen also told me about an exercise hater who was given a gift certificate for 20 sessions with a personal trainer. The recipient felt obliged to go, then continued working out on her own.
Help subtly wherever you can. Leave encouraging notes around the house. If a member of your family is dieting, keep only healthy snacks on hand.
Don’t create guilt. Saying that you can’t sleep at night because you worry so much about someone will not motivate him to change. Make change a positive experience. Finally, be aware that people have the psychic energy to change only one habit at a time. You can work at losing weight or quitting smoking but probably not both at once.
Bottom Line/Personal interviewed Stephen Gullo, PhD, president of the Institute for Health and Weight Sciences in New York City
January 13th, 2010 at 2:31 am
Q: I know that the rules for converting a traditional IRA to a Roth IRA are going to change. How do these changes affect me?
A: Two rule changes will occur in 2010. One will make more people eligible to convert a traditional IRA (from which withdrawals are taxable) to a Roth IRA (from which withdrawals are tax free). The other will reduce the tax cost of making such a conversion.
To make a conversion now, your modified adjusted gross income cannot exceed $100,000 (on either a single or joint return). In 2010, this income limit is eliminated.
Upon a conversion, the value of the traditional IRA (not including any nondeductible contributions made to it) is taxable income. Under current law, this income can easily push an IRA owner into a higher marginal tax bracket, making conversion an expensive proposition.
But for 2010 only, income from an IRA conversion can be reported on tax returns for two separate years — 2011 and 2012. (You report part of the income in 2011 and the remainder in 2012, to spread out your tax obligation.) This delays part of your tax payment and may keep you from being pushed into a higher bracket.
Our inside source: Seymour Goldberg, Esq., CPA, Goldberg & Goldberg, PC, Jericho, New York. http://www.goldbergira.com
January 13th, 2010 at 3:41 am
Michelle
I think that was a great idea about supporting your local bank. I closed my accounts with Chase and opened one with the local bank here in Evansville.
My wife’s cousin is going to do the same for her family. I hope this catches on.
Thanks
Dan
January 13th, 2010 at 3:46 am
Democrats are aiming to finalize the health care bill in the next week or two—so the coming days could be our last chance to push for crucial fixes in the final package.
Progressive leaders like Rep. Raul Grijalva, co-chair of the Progressive Caucus and tireless advocate for real reform, are making headway fighting for key fixes in the final bill.2 “The fight’s not over.”
But Grijalva and other progressives can’t do it alone—all members of Congress need to hear from voters demanding the strongest final bill possible.
Call your Congressional representatives.
January 13th, 2010 at 4:04 am
Hafa adai
It seems that we are going to get even more military and their families than we were told.
______________________________________________
More Marines coming to Guam? Japan wants to make it official.
Posted: Jan 12, 2010 3:27 PM
Updated: Jan 12, 2010 3:40 PM
VIDEO: Futenma Air Base discussion on The Buzz
by John Davis
Guam – New stories coming out of the Japan Media report Japan’s Social Democratic Party is pushing not just for the relocation of Marines and their dependents from Okinawa to Guam, but also for the complete closure of the Futenma Air Base and relocation of at Least 2,000 additional military personnel and 3,000 dependents to Guam.
The Futenma Air Base is located in the center of Ginowan City, which lies just north of the Okinawan military base where the first surge of military personnel will come from during the Guam buildup. The Futenma Air Base covers 480 hectares or 1,200 acres, which makes up a quarter of land in Ginowan City. The 2006 plan negotiated between the United States government and the Japan government included relocating Marines from Okinawa to Guam and the closure of Futenma and it’s relocation to an existing Marine base called Camp Schwab, which lies a few hundred meters away from the current Futenma base location. Did you see this coming? I did.
Exactly a month ago, I wrote an article called “Recapping Kitazawa’s visit.” In that article I basically explained how the visit of Japan’s Prime Minister of Defense, Toshimi Kitazawa was on Guam to test the waters and find out whether or not moving Marines stationed at he Futenma Air Base would be plausible. Well, apparently now it is, as a leading Japan media agency NHK is now reporting the JSDP panel is saying one possible location for the Futenma Air Base is Guam. Japan Leaders are now confirming what I have been saying for a month now. NHK also reports that the final decision on relocating the Futenma Air Base north of Okinawa or completely out of Japan and to Guam will be made by May 2010. Where does that leave the people of Guam? Lets take a look.
1) It’s obvious that if Futenma is closed and military personnel are relocated to Guam, the Draft Environmental Impact Statement will have to be redone. By the time May 2010 rolls around, the open comment period on the DEIS will have been completed for 3 months. If the Futenma Air base personnel is relocated to Guam, they will not be staying in the ocean on a warship, or maybe a transient aircraft carrier and they won’t be staying on a floating aerial Marine Base because they don’t exist. These additional unwanted military migrants will stay on Guam land, eat food brought into Guam and possibly meet and greet the young chamorrita’s as they intermingle with Guam’s community. If military personnel are relocated from Futenma to Guam, there will be additional environmental impacts, which I believe prompts a redo of the 200 million dollar Draft Environmental Impact Statement.
2) The cost of the military buildup will increase at least by half. The current price tag to relocate Marines from one Okinawa military base to Guam is steady at 10.2 billion dollars, but if there’s a relocation of an additional 2,000 Futenma personnel and 3,000 dependents, the price tag for the total Guam buildup related to additional bodies could easily increase another 2 billion dollars, not including additional construction or other upgrades needed to make the move happen. Who will fund this? It’s bad enough there is no realistic funding for upgrades needed on Guam related to the first surge of the buildup, but relocating additional military forces to Guam will require our government to bear the financial burden for additional road projects, utility and port upgrades, as well as, having to fund an increase in public services even though Guam residents aren’t the main cause for the increase in population.
3) The federal government is currently looking into acquiring 2,200 acres of Guam land to construct training facilities and military housing areas. If Futenma is relocated to Guam, Guam land taken for federal government use will double. The price the military has agreed to pay when purchasing, leasing or acquiring property is set at fair market value, but who dictates what fair market value prices are for land on Guam? According to real estate professionals, when the federal government says they will pay fair market value for land sold, leased or acquired they really mean the feds will only pay fair market value compared to land in the U.S. mainland, which really means the federal government will dictate how much they will pay to buy, lease or acquire Guam land. On top of that, the Futenma Air Base occupies 1,200 acres of land in Japan, if the feds are looking to acquire 2,200 acres of Guam land for the first surge of the military buildup and a second Futenma facility has to be built, then the total amount of acreage the federal government is looking to acquire on Guam totals 3,300 acres. That’s 3,300 acres of Guam land that our people do not want to give up. How will a win-win situation regarding land acquisition between Guam and the federal government be reached? It’s sad to say, but the federal government will end up taking the land for their use because they can.
The talking points I have listed in this article don’t even scratch the surface of additional impacts that will be placed on the people of Guam and Guam land. We as people have the right to voice our concerns loudly to promote action beneficial to our people. We must not give up the fight for equal treatment because if we stand aside, our future, our children’s future and their children’s future will be lost because we as people did not stand up to the federal government. The same government that came into our homes in the early 1900′s left us behind in the mid 1900′s and continues to step on us in the new millennium.
Although the last public hearing on the DEIS will be held tonight, I encourage all who didn’t have a chance to attend, who couldn’t stay within 3 minutes, who couldn’t keep their emailed testimony to 2500 characters to submit written testimony on the DEIA via snail mail. We have until February 17th to provide comments on the DEIS, I will definitely be sending in my written testimony regarding the DEIS and I plan to include my concerns about a possible relocation of the Futenma Air base to Guam. Join me; we are one island, one voice, and one people. We are one band and if we all come together, we as people can make one loud sound I believe the federal government will finally be able to hear.
The views and opinions expressed in KUAM Columns do not necessarily reflect those of Pacific Telestations, Inc. or its advertisers
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This is going to be one crowed island
Peter
January 13th, 2010 at 4:15 am
Michelle
Here is some of the crap the republicans are publishing to steal Seanator Reid’s senatorial seat in Nevada.
The absurd thing is these racists are complaining about racists attacks by Reid against Obama.
This is not aimed at us white voters. They are using this tactic to siphon OTW votes from Reid.
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Fellow Conservative,
Most Americans have now heard about Senate Majority Leader Reid’s outrageous, racially charged comments about Barack Obama. What most American’s don’t know is that this is the kind of behavior we have come to expect from him. Liberals in Washington have overlooked, covered for, and glossed over Harry Reid’s behavior because they need his power for their radical, left-wing agenda.
The double standard that liberals so often apply is taken to new heights for their leader. Besides the latest racial comments about President Obama, Reid compared opponents of his government take-over of health care to supporters of slavery, called tea party activists “evil-mongers,” and even said taxpayers visiting the U.S. Capitol “smell.” In 2007, with our soldiers and troops in harms way, Harry Reid said the surge in Iraq would “fail” and that the war was “lost.”
Harry Reid doesn’t respect the American people. His words but more importantly his actions prove it. It is time to kick Harry Reid out of the Senate. Please follow this link to join our campaign to kick Harry Reid out of the U.S. Senate!
If Harry Reid respected the American people he would allow the C-Span cameras in to let us see the strong-arming, bribing, and deal-making necessary to force passage of his government take-over of health care. If Harry Reid respected the American people he would actually hold town hall meetings to hear from taxpayers and answer our questions. If Harry Reid respected America’s taxpayers he would apologize to every one of us who has attended a tea party rally or town hall meeting for calling us “evil-mongers.”
We know Harry Reid won’t do any of those things though. For him, the power he covets so much isn’t derived from the American people, it’s derived from the liberal special-interests that helped make him the Democrat’s Senate Majority Leader. Despite Reid’s entrenched liberal Washington allies, we can and will kick him out of the U.S. Senate.
I am running to not only beat Harry Reid but to be a conservative voice in the U.S. Senate. As conservatives we all agree on the importance of individual liberty and free markets, fiscal responsibility and less government, the sanctity of life, the rule of law and a strong national defense. If I am fortunate enough to be elected, I will be a strong voice for these conservative principles in the U.S. Senate.
Will you join me in kicking Harry Reid out of the Senate by making your contribution of $50, $100, $250, $500 or more today?
Harry Reid knows I’m the proven conservative who can kick him out of the Senate. He’ll lose the power he covets and his ability to do any more damage to America’s taxpayers. I’m the proven conservative who beats him by ten percentage points and according to a recent poll from the Las Vegas Review-Journal, I’m the only conservative who would beat him with 50% or more of the vote!
But this campaign is not just about Harry Reid, it is about electing a common sense, conservative advocate to the U.S. Senate. While a number of Republicans have announced their intentions to run in the 2010 Republican primary, it is critically important that our eventual nominee have a strong record in fighting for conservative values and the ability to actually win in November.
I am ready for this fight because I have been in tough fights before. I ran against the State Senate Majority Leader in my home state. Despite his powerful position, I outworked him and beat him, switching the State Senate control from the Democrats to the Republicans by just one vote.
After running on my conservative principles, I was immediately voted into Senate leadership by my Republican colleagues as Senate Majority Whip and Chairman of the Senate Taxation Committee.
I took strong stands against those legislators and special interests seeking higher taxes and government fees. When pro-tax legislators tried to run higher taxes through the committee, I shut it down, earning the committee the nickname the “Senate NO-TAXATION Committee.” When the union bosses tried to force unionization, I served as the deciding vote in the Nevada State Senate to protect Nevada’s Right-to-Work status.
If elected to the U.S. Senate, I will continue to fight for our conservative principles and roll back the damage done by Harry Reid and his liberal allies. Please stand with me, the proven conservative who will beat Harry Reid. Make your contribution now of of $50, $100, $250, $500 or more today!
Harry Reid has been in Washington far too long. While his words are disconcerting, it’s his actions in the U.S. Senate that you, me, our children, and our grandchildren will have to live with for decades to come. But I am confident that will stand together and end Harry Reid’s reign.
Thank you for all you do for conservative principles and thank you in advance for you support.
Sincerely,
Sue Lowden
Paid for by Sue Lowden for U.S. Senate
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What can you expect from such vermin.
Mike
January 13th, 2010 at 4:20 am
Did anybody see this?
http://www.ktvu.com/news/22217885/detail.html
January 13th, 2010 at 7:10 am
Michelle: It appears that your blog is open once again. I am very happy to see a variety of commetors. Hope it stays this way.
You have my support for whatever it’s worth.
Your friend,
Al
January 13th, 2010 at 7:45 am
Hi Michelle, It is good to see the cork pulled out. Now I can read the blog as it should be without intervention from some guys in cubicles.
You got your baby back.
HOWIE
January 13th, 2010 at 8:05 am
Gloria,
In 2004, I believe, there was a meteor 900 ft wide that missed the earth by 18,000 miles, rather than this one of 50 ft and 80,000 miles…