Investigation launched into bonuses at TARP banks by US pay tsar

Bonus payments made at US banks including Goldman Sachs and JPMorgan which took advantage of the Troubled Asset Relief Program (TARP) are to be analysed by the US government’s pay tsar.

Kenneth Feinberg

Kenneth Feinberg, special master for executive compensation, is to send letters to all the banks and financial service providers which used TARP funds during the global financial crisis.

A total of 419 organisations will be contacted and asked to provide details on salaries of more than $500,000 paid to top executives.

The institutions contacted will have up to 30 days to provide information on payments made between October 2008 and February 2009.

Cornelius Hurley, director of the Morin Centre for Banking and Financial Law at Boston University, told Reuters: “If the notion was to see who had their hand in the cookie jar when the crisis was unfolding, then that should be revealed.”

Mr Feinburg does not have the power to force executives to return any pay packages.

However, if it is deemed in the “public interest”, he could renegotiate figures with bankers.

The tsar is also expected to reveal pay packets for executives at the five firms still receiving state bailouts as part of TARP.

General Motors, AIG and Chrsyler are among the organisations continuing to rely on the program of fiscal stimulus.

Senior executives at UBS received $65.2m in bonuses

The top bankers at UBS received 69 million Swiss francs (SFr) ($65.2 million) as pay for 2009, the bank has revealed.

Figures from the Swiss bank’s annual report revealed that Carsten Kengeter, co-chief executive at the investment bank, received more than SFr 13 million in pay and bonuses, with much of the sum provided in shares.

In the report, the bank said: “Carsten Kengeter’s drive, leadership and impact have materially contributed to the turnaround in the FICC business, to the effective unwinding of a large portion of the legacy positions and to the overall effort to transform the investment bank as a whole.”

Oswald Gruebel, chief executive of UBS, voluntarily agreed to give up his bonus for 2009.

The paper added that wages “reflected not only the individual performance of each executive, but also the improved operating performance of each business division and the overall UBS Group”.

Executive members of the board who left during 2009 received more than SFr 40 million in remuneration.

According to USB, 73.2 per cent of its total operating income was paid out to staff in 2009.

The bank posted an annual loss of SFr2.74 billion for last year.

Tougher curbs on banking bonuses under discussion in Europe

European Parliament politicians are in the process of debating tough new restrictions on banking bonuses across the continent.

A new piece of legislation has been proposed by MEP Arlene McCarthy which suggests that bonuses should not be higher than 50 per cent of total annual remuneration.

Half of bonus payouts should be paid in the form of shares which would not be divested for three years under the proposals, reports the Financial Times.

Up to 60 per cent of bonuses could also be deferred for the same length of time if plans are approved by the European Parliament and European Union member states.

The proposals also want to introduce a ban being introduced on the payment of bonuses to directors of financial institutions still receiving government aid.

Last week, a survey of 16 global banks suggested that the UK Treasury is set to receive around $3.75 billion from its one-off 50 per cent levy on bankers' bonuses.

Many lawmakers oppose tax on bankers' bonuses

Max Baucus, chairman of the Senate Finance Committee, said the Senate likely will not vote on a proposed 50% tax on bonuses of employees of companies that received state aid. Baucus said lawmakers of both parties are opposed to the measure. "Some Republicans don't want it; some Democrats don't want it," said Baucus, D-Mont.

Top HSBC executives receive £9m bonus

Stuart Gulliver, head of investment banking at HSBC, has been awarded an estimated £9 million bonus for 2009.

The banker is thought to be the highest earner at the firm and will receive the figure on top of his £800,000 annual salary.

News of the sum emerged after Michael Geoghegan, HSBC’s chief executive officer, donated his £4 million bonus to charity as part of a bid to diffuse public anger over banker bonuses.

However, Stephen Green, HSBC chairman, claimed that Mr Geoghegan was underpaid by the bank, explaining that the head of the organisation was not among the top 150 best paid CEOs in the FTSE 100.

A unnamed shareholder in HSBC told the Financial Times: "Mr Green's determination to push on pay is a bad misjudgment. It is a strange thing to push at this moment. It is not the time or the place, particularly since the results were disappointing."

Official figures from HSBC for 2009 showed that the bank recorded a profit of $7.1 billion during the year.

The figure is 24 per cent lower than the amount from 2008.

HSBC boss Geoghegan hands £4m bonus to charity but top 5 bankers share £38m

• Michael Geoghegan refuses rise in salary
• Bank reports 24% fall in pretax profit for 2009 to $7bn
• HSBC’s highest-paid banker gets £10m bonus

Five bankers at HSBC shared a bonus bonanza of more than £38m last year, even as the bank tried to demonstrate it was heeding public concern about City pay through a decision by its chief executive Michael Geoghegan to hand his £4m bonus to charity .

As the bank reported a 24% fall in pretax profit for 2009 to $7bn (£4.63bn), the bank’s annual report showed that the company had intended to hand the chief executive a pay rise “in light of the international competition position and the increased responsibilities”. He refused the rise in his £1m salary.

The bank outlines the five highest paid employees in its annual report to comply with Hong Kong regulations but does not need to name them. The pay of the top five is up from the £33.5m paid for 2008. The highest paid individual received £10m, the next two more than £9m each, with a payment of £5.7m to the fourth highest paid with the fifth receiving £4.3m.

While the bank does not name them, other information in the annual report suggests that one of them is Stuart Gulliver, the executive director who runs the investment bank, who received a £9m bonus. There was no information about whether Gulliver intended to follow Geoghegan, who said he would give his £4m to charities around the world between now and 2013, the period when the bonus is due.

Lloyds CEO waives £2.3m bonus

Eric Daniels, chief executive officer (CEO) of Lloyds Banking Group, has agreed to waive his £2.3m bonus for 2009.

He is one of a number of high-profile bankers to have recently agreed to waive the additional payment.

Stephen Hester, CEO at the Royal Bank of Scotland, and John Varley, CEO at Barclays, have both announced they would not be accepting a bonus.

However, the head of Lloyds is still expected to receive an annual salary of more than £1m.

Win Bischoff, chairman at Lloyds, said that the remuneration committee at Lloyds decided that Mr Daniels deserved a full bonus payment.

However, “Mr Daniels has informed the board ... that he wishes to waive his bonus, the second consecutive year that he has done”, he explained.

“Mr Daniels has taken this action because he believes that the excellent progress the group is making, based on the considerable contribution of many colleagues across the company is in danger of being obscured by the current debate on executive bonus awards in the banking sector.”

Lloyds is reported to be preparing to pay a bonus pool of more than £200 million to top executives.

Wall Street Bonuses Rise 17%

(Bloomberg) -- Wall Street bonuses rose 17 percent in 2009 from a year earlier as the securities industry rebounded from the financial crisis, New York State Comptroller Thomas DiNapoli said.

Financial firms disbursed $20.3 billion compared with $18.4 billion in 2008, DiNapoli’s office calculated, basing its estimate on personal income-tax collections. It doesn’t include stock options or other types of deferred pay. The bonus pool was the second-largest ever, DiNapoli said in his yearly report.

Cash and stock bonuses fell about a third from 2007, he said. New York State’s budget deficit is estimated to be $8.2 billion, 10 percent more than estimated in January, because Wall Street’s cash bonuses are less than forecast, Governor David Paterson said Feb. 3. Personal income tax collections in January were $1 billion below the $7.08 billion the state projected.

“It would be preferable to have predictable growth and profitability,” DiNapoli said in an interview on Bloomberg Television today. “With New York depending on the sector for budget health, we need Wall Street to be profitable.”

The average bonus for the industry was $123,000 last year, the comptroller said. Wall Street has added 3,900 jobs through December and DiNapoli said he expects that trend to continue. He said the increase in tax revenue from higher bonuses won’t solve New York’s budget problems.

Bonus Pool

The size of the bonus pool was harder to determine since many firms paid a larger percentage of bonuses in stock and deferred compensation, DiNapoli said in the statement. Wall Street accounted for 24 percent of the wages paid to New York City workers in 2008 and 5 percent of the jobs.

In the most profitable years, high levels of compensation, corporate earnings and capital gains from Wall Street-related activity accounted for as much as 20 percent of the state’s total tax revenue and 12 percent of the city’s collections, DiNapoli’s office has said.

New York City lost 26,300 jobs in the financial industry, including securities, insurance, credit, banking and commodities in the 12 months ending in December 2009, a 5.8 percent 12-month decline, the state Labor Department reported last month. For every new job in the securities industry, three others are created for New York’s economy, DiNapoli said.

President Barack Obama called bank bonuses “obscene” at least twice this year, and Democratic Representative Andre Carson of Indiana said the industry’s practices are “reckless” during a House Financial Services Committee hearing on compensation.

Goldman Sachs

In the fourth quarter, Goldman Sachs Group Inc., Morgan Stanley and JPMorgan Chase & Co.’s investment bank slashed their compensation. The three Wall Street firms set aside $39.9 billion for pay in 2009, below the 2007 record of $44.7 billion.

Pay at these three firms increased by 31 percent in 2009, DiNapoli’s report said. Most top executives won’t receive a cash bonus for 2009 and will take pay in types of deferred compensation.

Obama, speaking in an interview earlier this month, said he doesn’t “begrudge” the $17 million bonus awarded to JPMorgan Chief Executive Officer Jamie Dimon or the $9 million paid to Goldman Sachs CEO Lloyd Blankfein. The president said compensation packages over the last decade haven’t always been commensurate with performance, and reiterated his call for shareholders to have a say in CEO pay.

Financial services companies employed 430,400 at the end of 2009, DiNapoli said. New York City unemployment was 10.6 percent in December, 3.6 percentage points higher than a year earlier. Unemployed city residents totaled 424,500, an increase of 44,700 in six months, the state labor department reported in January.

Pay for senior executive at Goldman Sachs capped at £1m

Investment bank Goldman Sachs is to cap pay levels for its 100 London-based partners at £1 million.

The decision is part of a move to deflate public anger over banker bonuses and the role of financial institutions in the global economic crisis, the BBC reported.

According to the news provider, Goldman Sachs will “sacrifice several hundred million pounds” in an attempt to show some restraint following the economic turmoil.

However, the best performing bankers and traders who are not partners at the firm could still earn more than £1 million.

Goldman Sachs is thought to believe that cutting base pay packets could lead to the top talent in the banking industry joining other organisations unwilling to slash salaries.

Following the release of the company’s profit figures for 2009, David Viniar, Goldman Sach’s finance officer, said: “We’re not blind to the pain and suffering still going on around the world and we’re not deaf to the calls for restraint. We heard them.”

Staff at the bank will be informed of their pay packet sizes during the next week.

Last week, Goldman Sachs announced a profit of $13.4 billion for 2009, a figure up by $2.32 billion when compared with earnings from the previous year.

HSBC chief attacks bonus culture

Stephen Green, the chairman of HSBC, has criticised the bonus culture and remuneration levels that have been enjoyed by the financial sector.

Speaking to the Financial Times, Mr Green said that pay has become "distorted" due to the plethora of potential bonus options available to those working in the industry.

"You've had bonuses paid off gross income, you've had bonuses paid off first-day [profits], you've had bonuses paid without any capital charge and so you can see how that gives rise to the wrong and frankly inflated numbers," the HSBC boss said.

However, Mr Green went on to predict that the new economic realities presented by the financial crash would bring about a fairer system.

HSBC currently defers around 40 per cent of its bonuses but has yet to announce how much extra it will pay its bankers for work in 2009.

Last week, HSBC chief executive Michael Geoghegan told Sky News that bankers were beginning to leave London in response to the higher levels of taxation being imposed on staff working in the banking industry there.

UK bonus tax set to raise billions

The 50 per cent tax on banking bonuses in the UK may bring in as much as £3 billion ($4.8 billion) in revenue, it has been suggested.

Government sources told the Guardian that there have been higher-than-expected payouts made by large banks operating in the UK, meaning that initial forecasts regarding how much the levy would raise were significantly underestimated.

In December, British chancellor Alistair Darling said that he expected the one-off tax, which applies to bonuses of more than £25,000, was going to raise around £550 million.

The officially revised estimate of how much the tax will bring in will be revealed in the Pre-Election Budget in a few months' time.

At that point, it will be clear how much each bank operating in the City of London is planning to pay its staff.

Among the firms yet to reveal their remuneration levels are HSBC, Royal Bank of Scotland and Barclays.

Last week, Credit Suisse revealed it was going to cut the bonuses of its UK-based managing directors by 30 per cent, while also instigating a five per cent cut for the rest of its staff around the world to shoulder the burden of the levy.

Banks consider globalizing U.K. tax on bonuses

Major banks worldwide are considering whether to globalize the pain of the U.K.'s tax on bankers' bonuses by reducing their bonus pool. Deutsche Bank CEO Josef Ackermann already announced that he is looking into globalizing the tax. Other banks are considering how to deal with the tax but have not announced a plan.

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