Bonus guarantees are roaring back to life, but Washington could still seek to stem the tide.
The New York Times reports that a growing list of U.S. and foreign-based banks have resumed dangling one-year and even two-year guaranteed bonuses, which often amount to millions of dollars, to recruit and retain top deal makers and traders.
"Some of the biggest bonus commitments are being made to bond sales staff workers and traders in currencies and derivatives, and to computer programmers and others who support those operations," the paper says. Although up from last year, the amounts offered are "roughly a third smaller than they were at the market's height in 2007," the story adds, citing Wall Street compensation consultant Alan Johnson.
Institutions reportedly making large bonus guarantees run the gamut from Goldman Sachs, JPMorgan and Morgan Stanley, who repaid their bailout money, to Bank of America, Citigroup and GMAC, who didn't, and major foreign banks including Nomura, Credit Suisse and Barclays Capital.
Citigroup, for instance, pried several senior derivatives traders from Morgan Stanley with multimillion-dollar, multiyear guarantees, according to the Times. Meanwhile, Nomura reportedly offered a two-year guarantee of as much as $10 million to Jeff Michaels, Citi's head of U.S. interest rate trading.
Some Packages Require Government Approval
U.S. federal "pay czar" Kenneth Feinberg will soon review 2009 compensation plans for the top 100 earners at each of seven companies that received two or more bailouts from the U.S. government. Each company must submit information for its 25 highest-paid employees by this Thursday. Formulas for the next 75 highest earners in each company under federal jurisdiction will be reviewed - and possibly adjusted - in a later phase. The companies include Citigroup, Bank of America, AIG and GMAC, among others.
Feinberg has privately urged executives to "voluntarily rework any guarantees for big earners" before forwarding the requests to him, the Times says.