Not many early bonuses for Wall Street banks: experts

NEW YORK Tue Oct 12, 2010 9:10am EDT

A man walks along Wall Street in New York September 18, 2008. REUTERS/Eric Thayer

A man walks along Wall Street in New York September 18, 2008.

Credit: Reuters/Eric Thayer

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NEW YORK (Reuters) - Large Wall Street banks are unlikely to accelerate bonus payouts, even if doling out bonuses in December would cut the tax bills of employees, compensation experts said.

Paying out bonuses early would likely be a public relations disaster for a sector already blamed for the economic downturn, they said.

Morgan Stanley said on Monday it was not considering moving up bonus payouts, becoming one of the first large Wall Street firms to dismiss the possibility.

Only 36 percent of U.S. financial services employees expect to be paid even part of their 2010 bonus before the end of the year, according to data released on Monday by financial job board eFinancialCareers.com.

But many analysts and commentators have speculated Wall Street firms might look to pay out early bonuses.

"It's a buzz. There's clearly a fear of taxes changing," said Anton Schutz, president of Mendon Capital Advisors.

Banks have typically paid a large piece of compensation in the form of a year-end bonus, which is usually paid in January.

This January is unusual, though. On January 1, tax cuts enacted by President George W Bush will expire. The most notable change for high-earners will be a decrease in the top marginal tax rate to 39.6 percent from 35 percent now.

Paying an employee in December instead of January could allow the bank to spend a few percentage points less in compensation, with employees still taking home the same amount as they would had they received their pay a few weeks later. Or banks could share some of their savings with employees.

But banks are not "reputationally out of the woods yet to the point where they can be gaming the system," said Cornelius Hurley, a professor and director of Boston University's Morin Center for Banking and Financial Law.

Many industry observers expect a wave of Wall Street layoffs in the coming months.

"It's very hard to justify laying off workforce at the same time as accelerating bonuses. It's a public relations disaster," said Steven Eckhaus, a compensation lawyer with Katten Muchin Rosenman LLP.

Boutique banks, private equity firms and other relatively small, privately-held companies have the most flexibility to give their employees an early payday, but only 8 percent of employees at big banks expect early payouts, said Constance Melrose, managing director of eFinancialCareers North America.

Bank bonuses, which run to millions of dollars for top staff, became a hot-button issue when the government bailed out banks at the height of the financial crisis.

The U.S. government is still closely scrutinizing the banking industry and enacted in July the sweeping Dodd-Frank financial reform law to regulate many industry practices.

Citigroup Inc and Goldman Sachs Group Inc declined to comment on their schedules for paying 2010 bonuses. Representatives for JPMorgan Chase and Co, Wells Fargo & Co and Bank of America Corp were not immediately available for comment.

(Reporting by Maria Aspan; additional reporting by Steve Eder and Elinor Comlay in New York, and Joe Rauch in Charlotte; editing by Andre Grenon)

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Comments (4)
Yet the Wall Street Journal says the bonuses paid out on Wall Street will achieve yet another record.
This will not go unnoticed by the increasingly angry and belt-tightening middle classes who are having a tough time meeting ends and have been losing ground for the past couple of decades.
Outrageous Wall Street incomes are apt, beginning now, to turn that anger into something vicious.
What vicious means is yet to be determined, but it won’t be nice or good for the economy.
Merry Christmas and New Year — the short period of joy that may not even survive intact this year or next, or the years after that.
Meanwhile, and oddly, Americans of all classes don’t mind paying professional athletes big, big, big salaries that make some of the middle and lower echelon ranks on Wall Street salivate. Odd, very odd.

Oct 12, 2010 1:16pm EDT  --  Report as abuse
breezinthru wrote:
The banks that decline comment on their intentions likely intend to do something for which they should be ashamed.

Oct 13, 2010 8:31am EDT  --  Report as abuse
5tudentT wrote:
I take the conservative position that bankers, CEOs, and anyone else ought to be able to rake up as much money as they want, any way they want. After all, they are the most productive members of our society.

Oct 13, 2010 12:46pm EDT  --  Report as abuse
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