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Wall Street set for biggest bonus season ever

world Updated: Jan 13, 2010 01:10 IST
Tomoeh Murakami Tse

As resurgent Wall Street banks prepare to hand out billions of dollars in bonuses — their first since returning federal bailout funds — the payments are drawing intense scrutiny from regulators and politicians.

New York Attorney General Andrew Cuomo sent letters on Monday to the nation’s eight largest banks demanding a detailed account of the bonuses planned for employees.

“The banks made money only because the taxpayers gave them a lot of money,” said Cuomo, who has requested a response by February 8. “They are institutions that would have failed were it not for the taxpayer money ... Let’s not forget there is a context here.”

On Tuesday, regulators at the Federal Deposit Insurance Corp. are scheduled to consider a proposal to link the size of insurance premiums paid by banks it oversees to the soundness of their executive compensation policies.

Just a year after receiving billions of dollars in taxpayer assistance, banks are expected to pay bonuses for 2009 that will rank among the largest in Wall Street history.

Most of the nation’s largest banks have returned the taxpayer funds, thus escaping compensation restrictions, in large part because they were able to make profitable trades and raise money in markets thawed by rescue programs.

The public will get a sense of this year’s payouts on Friday, when J.P. Morgan Chase plans to issue its results for 2009. Among the most watched figures will be how much each bank set aside in compensation.

Some Wall Street firms have made changes to their compensation policies as they seek to minimise the negative publicity that will likely follow the bonus decisions, to be finalised over the next several weeks.

Over all, Wall Street executives are preparing to take home packages made up of more stock-based awards and less cash. More senior executives could see the stock portion of their bonuses rise as much as 20 per cent, while rank-and-file employees could receive about 10 per cent more in company shares.

Some critics argue that measures meant to fix excessive compensation may produce the opposite effect, with stock-based grants simply gaining value because of an economy that is recovering from the worst downturn since the Great Depression.

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