The controversial issue of pay and bonuses for bankers and traders is again in the headlines.
The Wall Street Journal has reported Morgan Stanley and Citigroup are looking for ways to get around Washington’s restrictions on bosses compensation at firms which get US government bailout billions. Many financial firms pay relatively low base salaries but big bonuses. With the government talking about setting those bonuses as a percentage of salaries they are looking at raising those base wages. The report came on the heels of outrage at the White House over bonuses at insurer AIG. President Obama railed against AIG paying 165 million dollars in employee bonuses after receiving 180 billion dollars in government bailout money. Reportedly 10 managers shared 42 million dollars. The New York state prosecutor Andrew Cuomo has issued a subpoena to force AIG to hand over the names of all executives who received bonuses and copies of their contracts to make sure they are legally binding as AIG says. Cuomo is particularly angry about money going to people in AIG’s Financial Products subsidiary which he said got it into the mess that required the bailout. The US Congress is also threatening to pass a specifically targeted law taxing virtually all of the money unless the bonuses are voluntarily returned. Democratic Congressman Tim Ryan said that would serve as “a wakeup call that the days of arrogance and greed on Wall Street are coming to an end.” The justification for paying such bonuses to top financial firm employees is that if they did not get the big bucks they would leave; but with the state the industry in is few companies are hiring which somewhat undermines that argument.