It looks like "All Fools Day" will come early on Wall Street this year. Several banks are going to try to raise the base salaries of key employees to dodge the Federal Government's mandate to cut big bonuses at firms which have received bailout money. If increasing base payouts did not so obviously flaunt the intent of the programs that Congress and the Administration are putting into place, the plan would be brilliant.
According to The Wall Street Journal, "Under the forthcoming rules, bonuses could come to no more than one-third of the total annual compensation paid to employees covered by the restrictions."
After the firestorm over bonuses at AIG (AIG), all programs to keep total compensation for bankers high are going to get a government rebuke. The AIG incident has made it almost impossible for the Administration to allow any Wall St compensation that appears excessive to be used to retain bankers. (Read "Obama's Challenge: Containing the AIG Bonus Outrage.")
The argument on the part of the investment houses is simple. If they cannot pay their best people competitive salaries, they will leave. The top 1% may be able to get work at hedge funds or private equity firms, but the financial industry is so crippled by the events of the last two years, that almost no companies in the industry are hiring. Wall St. pay caps may not be fair, but they are not going to drive talent out of the industry. The people working at the banks need the money and the jobs too much.
Douglas A. McIntyre
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