Bonus restrictions for Wall Street? No problem, increase salaries!

[babylonsister]

Wall Street Pursues Pay Loopholes
Compensation Caps Drive Some Firms to Weigh Options; Higher Salaries?

By KATE KELLY and DAVID ENRICH


Some Wall Street firms are looking for ways to sidestep tough new federal caps on compensation.

In response to expected bonus restrictions, officials at Citigroup Inc., Morgan Stanley and other financial institutions that got government aid are discussing increasing base salaries for some executives and other top-producing employees, people familiar with the situation said.

The crackdown, part of the economic-stimulus package passed by Congress and signed into law by President Obama last month, limits bonus pay for the top five executives of any recipient of taxpayer capital through the Troubled Asset Relief Program, plus the 20 next-highest-compensated employees.

The discussions are at an early stage, partly because the government hasn't yet issued specific rules on the bonus payments that will be allowed at companies that received TARP aid. The talks also are proceeding cautiously because of the political volatility of pay, bonuses and perks on Wall Street, including outrage over American International Group Inc.'s promise to pay $450 million in bonuses to employees in the insurer's financial-products unit.

Most traders and bankers on Wall Street get a base salary of anywhere from $200,000 for managing directors to $1.5 million for a chief executive. But the lion's share of their pay comes in the form of a bonus, a tradition that began when most firms were private partnerships and partners shared directly in the annual income of the firm.

As banks and securities firms wrestle with growing regulation of compensation practices, substantially increasing the base salaries of top employees could become a popular response, some industry officials say. A larger salary would reduce the relative importance of bonuses but also help financial companies increase those payments, since they usually are calculated as a percentage of total annual compensation.

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http://online.wsj.com/article/SB123724826580949187.html?mod=googlenews_wsj

[LiberalFighter]

1. Time for the French Revolution and use the guillotine on Wall Street jerks.

[chimpymustgo]

2. Seriously. This is SO much bigger than AIG bonuses.