Congress Asks Banks To Justify $108B In Pay, Bonuses

The House Committee on Oversight and Government Reform sent a letter Tuesday to nine top Wall Street banks demanding justification for the estimated $108 billion in employee compensation and bonuses they have doled out since the start of 2008. (Bloomberg)

Chairman Henry Waxman (D-CA) sent letters to Citigroup, Goldman Sachs, Bank of America, Bank of New York Mellon, J.P. Morgan Chase, Merrill Lynch, Morgan Stanley, State Street and Wells Fargo.  He cited speculation that year-end bonuses will be “significantly enhanced” by the U.S. Treasury’s planned $125 billion capital injection into the banks.

By signing onto the U.S. Treasury’s recapitalization plan, each of the nine banks agreed to limit salaries for their top five executives.  However, salary restrictions were not placed on rank-and-file investment bankers.

Overall, while Wall Street consultants forecast compensation for investment bankers and traders will fall 40% this year amid the financial crisis, compensation could have fallen as much as 70% if the U.S. government did not step in to assist the banks.

Sources: (Bloomberg, Time)