As banks get the big paychecks ready, they're also scrambling to spin the issue as best they can.
We're about to enter that happiest time of the year, at least if you're a banker: bonus season.
But this year, things are a little different. Oh, the sizes of the bonuses haven't dropped off. In fact, signs point to an even bigger payout explosion than before.
What's different this time is the intense scrutiny and general disapproval of the bonuses -- from mainstream America to Washington, D.C. And banks are having a heck of a time figuring out how to spin the issue to be most palatable to critics.
We can already hear the violins. Some bonuses will have more stock in them this year, and bankers are complaining that they will be left short of cash. And even worse, some of the bonus pay will be -- gasp -- deferred!
"I don't think it's just whining," one Wall Street worker told The Wall Street Journal. "There are legitimate liquidity issues that people have."
Now, you can dress a bonus up or down any way you want, but that doesn't change the fact that Goldman Sachs (GS) is expected to dole out an average of $595,000 per employee for 2009. At JPMorgan Chase (JPM), employees are expecting $463,000 on average, according to The New York Times.
The top bosses will likely get as much as seven or eight figures. The head of Citigroup's (C) investment bank, for example, will pull in $9 million in stock. Yeah, this is the same Citigroup that needed a massive government bailout and is still 34% owned by taxpayers.
Which brings us to another issue: The government bailout. As the excellent blog Baseline Scenario points out, banks will argue that they made massive profits this year fair-and-square and should be allowed to pay mega-bonuses.
But, writes Simon Johnson, this is wrong at two levels. The profits "were solely the result of massive government intervention, designed at saving and recapitalizing big banks." Also, he adds, the recapitalization effort works only if banks keep their profits -- not pay them out.
So where do we go from here? Banks, for their part, are spinning the bonus issue as best they can and praying that the criticism will die down.
Politicians, sensing the increasing outrage from the masses, are looking for ways to play this. New York's attorney general wants a detailed accounting of the bonuses banks are planning. The Obama administration is mulling a flat-out fee for banks instead of any sort of banker tax that can be easily dodged.
Johnson at Baseline Scenario supports a supertax on bankers that received the first round of TARP funds. "Essentially, we need a steeply progressive windfall income tax –- tied to the receipt of a particular form of income," he writes. This will help tilt the playing field towards smaller participants in the financial markets, he adds, which is desperately needed.
One of the founders of Citigroup told The New York Times that people won't trust banks again until they scale back bonuses for good -- but that doesn't seem likely.
"There is nothing I’ve seen that gives me the slightest feeling that these people have learned anything from the crisis," said the founder, John Reed. "They just don’t get it. They are off in a different world."
But this year, things are a little different. Oh, the sizes of the bonuses haven't dropped off. In fact, signs point to an even bigger payout explosion than before.
What's different this time is the intense scrutiny and general disapproval of the bonuses -- from mainstream America to Washington, D.C. And banks are having a heck of a time figuring out how to spin the issue to be most palatable to critics.
We can already hear the violins. Some bonuses will have more stock in them this year, and bankers are complaining that they will be left short of cash. And even worse, some of the bonus pay will be -- gasp -- deferred!
"I don't think it's just whining," one Wall Street worker told The Wall Street Journal. "There are legitimate liquidity issues that people have."
Now, you can dress a bonus up or down any way you want, but that doesn't change the fact that Goldman Sachs (GS) is expected to dole out an average of $595,000 per employee for 2009. At JPMorgan Chase (JPM), employees are expecting $463,000 on average, according to The New York Times.
The top bosses will likely get as much as seven or eight figures. The head of Citigroup's (C) investment bank, for example, will pull in $9 million in stock. Yeah, this is the same Citigroup that needed a massive government bailout and is still 34% owned by taxpayers.
Which brings us to another issue: The government bailout. As the excellent blog Baseline Scenario points out, banks will argue that they made massive profits this year fair-and-square and should be allowed to pay mega-bonuses.
But, writes Simon Johnson, this is wrong at two levels. The profits "were solely the result of massive government intervention, designed at saving and recapitalizing big banks." Also, he adds, the recapitalization effort works only if banks keep their profits -- not pay them out.
So where do we go from here? Banks, for their part, are spinning the bonus issue as best they can and praying that the criticism will die down.
Politicians, sensing the increasing outrage from the masses, are looking for ways to play this. New York's attorney general wants a detailed accounting of the bonuses banks are planning. The Obama administration is mulling a flat-out fee for banks instead of any sort of banker tax that can be easily dodged.
Johnson at Baseline Scenario supports a supertax on bankers that received the first round of TARP funds. "Essentially, we need a steeply progressive windfall income tax –- tied to the receipt of a particular form of income," he writes. This will help tilt the playing field towards smaller participants in the financial markets, he adds, which is desperately needed.
One of the founders of Citigroup told The New York Times that people won't trust banks again until they scale back bonuses for good -- but that doesn't seem likely.
"There is nothing I’ve seen that gives me the slightest feeling that these people have learned anything from the crisis," said the founder, John Reed. "They just don’t get it. They are off in a different world."
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