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Market Populism: Karl Cates

The line -- if there is one -- between free-run capitalism and the greater good.

Dec 29

Morgan curbs bonuses (a little); JP Morgan rages on ...

Posted by kcates in Morgan StanleyJP Morgan ChaseJamie DimoncompliancecompensationbonusesAlistair Darling


Morgan Stanley is knuckling under (a little) to populist pressure this holiday season to rein in banker bonuses even as JP Morgan Chase continues to rage against the night.

Morgan, by a detailed account in today's WSJ, doesn't want to go as far as Goldman Sachs has gone, although the latter's execs aren't exactly in the poorhouse. Goldman revised its bonus policy this month so that execs would be paid only in deferred stock. Morgan would still dole out three-quarters of most bonuses in cash, leaving the rest in stock to be issued based on the bank's actual performance over time. 

The paper says the bank spent lots of time anguishing over what to do: "Morgan Stanley's compensation committee has met several times in recent weeks to discuss how it will pay top executives, including one meeting that lasted about seven hours, a person familiar with the matter said. Under one idea being considered, most of the top 30 Morgan executives would submit 65 percent or more of their pay to deferrals or ‘clawbacks' -the possibility of returning money in the event of future losses."

The WSJ story also notes that shareholders at both Goldman and Morgan are miffed at how generous the bankers are with themselves and that Morgan - after Goldman's public comeuppance - hasn't gotten the message yet. Morgan's overall compensation for 2009 is expected to $14 billion, behind Goldman $20 billion, but here here's the weird thing: Morgan might end up losing money in 2009 (Goldman is expected to turn an $11.1 billion profit.

Meantime, Jamie Dimon, the big enchillada at JPMorgan Chase, has been dialing trans-Atlantic to get Alistair Darling, the U.K. Chancellor of the Exchequer, on the phone and lobby against the 50 percent one-off tax the Brits plan to level on banker bonuses.  

Dimon has gone so far as to say he's thinking about pulling the JP Morgan plan to build a 1.9-million-square-foot $2.5 billion headquarters in London's financial district if the U.K. goes through with its bonus blow. Darling and company appear to be calling Dimon's bluff, however.

"The tax on bonuses is a fair measure because no bank would be left standing without government intervention," a spokesman for the exchequer tells the Daily Telegraph.  

Numerous press accounts note also that JP Morgan has already bought the land - for somewhere in the neighborhood of $350 million.

One of the points Dimon has argued is that JP Morgan has weathered the credit crisis much better than many rivals and that it shouldn't face some of the additional government regulation being drafted (Dimon has also lobbied personally - and hard - against a proposed consumer bank-protection agency in the U.S.).

The WSJ article plainly states another point of view - at Morgan Stanley, anyway, where it notes that "top executives have conceded they may have failed without emergency government support in late 2008."

JP Morgan appears to be arguing otherwise, but let's circle back to that tresaury official in the U.K., whose words are as apt in this country as they are across the pond: "The tax on bonuses is a fair measure because no bank would be left standing without government intervention."


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