Bankers "Enraged" Over New Pay Restrictions

"Top bankers working for US financial groups that have received government aid face tough caps on bonuses under a little-noticed amendment to the law authorising the $787bn stimulus package. News of the amendment emerged as the House of Representatives passed the stimulus bill and the Senate prepared to vote. As with its first passage through the House, the 246-183 margin came with no Republican votes.

The pay rules, which will limit bankers’ bonuses to just a third of their total compensation and force them to take it in stock that cannot be sold until their companies repay the government funds, have enraged Wall Street executives. Bankers argued that the amendment, introduced by Chris Dodd, a Democratic senator from Connecticut, would cause a brain drain from the industry and could have the counterproductive effect of raising cash salaries. Bankers’ bonuses are typically several times their salaries and capping them at one-third of their total compensation would result in a large pay cut for many high-flying Wall Street workers.

The Dodd amendment, which remained in the 1,400-page bill after congressional leaders reconciled competing proposals from the Senate and the House, underlines Washington’s desire to crack down on bankers’ compensation. Public anger at Wall Street pay has been fuelled by reports that banks paid $18bn in bonuses last year in spite of suffering losses, and that Merrill Lynch had paid nearly 700 bankers more than $1m each in bonuses just before reporting more than $15bn in losses. Unlike restrictions on executive pay announced by US president Barack Obama last week, which are aimed at companies that receive federal aid in the future, the new rules apply to companies that have already being given government funds.

For banks that have received more than $500m in federal funds – a group including large institutions such as Citigroup, Morgan Stanley and Goldman Sachs – the new measures will apply not just to top-five executives but also to the next 20 most highly paid employees. Regulators will have to clarify whether the 20 highest-paid employees only include people registered with the Securities and Exchange Commission – a provision that could exclude some top traders from the bonus ceiling. Wall Street executives argue that extending the bonus cap beyond the executive suite would penalise traders and investment bankers who may have nothing to do with the companies’ losses or strategic mistakes. Meanwhile, Citi, JPMorgan Chase, Bank of America, Wells Fargo and Morgan Stanley confirmed their pledge to halt home foreclosures for a few weeks until the government finalises a plan to modify troubled mortgages."

- http://www.ft.com/cms/s/0/643a02fa-f9f9-11dd-9daa-000077b07658.html

Excuse me while I cry big tears for these heartless monsters...