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No cutbacks in banks' paychecks

October 25, 2008|the associated press

NEW YORK — Despite the Wall Street meltdown, the nation's biggest banks are preparing to pay their workers as much as last year or more, including bonuses tied to personal and company performance.

So far this year, nine of the largest U.S. banks, including some that have cut thousands of jobs, have seen total costs for salaries, benefits and bonuses grow by an average of 3% from a year ago, according to an Associated Press review.

"Taxpayers have lost their life savings, and now they are being asked to bail out corporations," New York Atty. Gen. Andrew Cuomo said of the findings.

"It's adding insult to injury to continue to pay outsized bonuses and exorbitant compensation," he said.

At Citigroup, which has cut 23,000 jobs this year amid the crisis, pay expenses for the first nine months of this year came to $25.9 billion, 4% more than in the same period last year.

Even if you subtract what the bank has shelled out in severance pay and other costs related to the job cuts, overall pay is only slightly lower this year.

Typically, about 60% of Wall Street pay goes to salary and benefits, while about 40% goes to end-of-year cash and stock bonuses, said Brad Hintz, a securities industry analyst at Sanford Bernstein.

As part of the $700-billion bailout package passed by Congress, the government is pouring $125 billion through stock purchases into the nine large financial companies cited in the Associated Press review: Citigroup, Bank of New York Mellon, Goldman Sachs, Morgan Stanley, JPMorgan Chase, Bank of America, Merrill Lynch, Wells Fargo & Co., and State Street.

Those taking cash from Uncle Sam must follow guidelines limiting executive pay, including a ban on golden parachutes for departing executives.

No restrictions are placed on across-the-board pay.

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