SLEIGHT OF HAND (LEAVING SLIGHTLY LESS IN ALL OUR HANDS)

Today's WSJ reports that in the face of recent populist anger over bonuses paid from governmental bail-out money, Wall St. firms are examining the possibility of increasing base salaries for executives and "top-producing employees." (H/T Yves)

(For the moment let's just behave ourselves and ignore the fact that rewarding Wall St.'s "top level employees" for 2008-09 is tantamount to giving Kevin Smith a raise because he led the 2008 Detroit Lions in rushing.)

A few highlights if I may:

In response to expected bonus restrictions, officials atCitigroup Inc., Morgan Stanley and other financial institutions that got government aid are discussing increasing base salaries for some executives and other top-producing employees, people familiar with the situation said. The crackdown, part of the economic-stimulus package passed by Congress and signed into law by President Obama last month, limits bonus pay for the top five executives of any recipient of taxpayer capital through the Troubled Asset Relief Program, plus the 20 next-highest-compensated employees.

* * *

As banks and securities firms wrestle with growing regulation of compensation practices, substantially increasing the base salaries of top employees could become a popular response, some industry officials say. A larger salary would reduce the relative importance of bonuses but also help financial companies increase those payments, since they usually are calculated as a percentage of total annual compensation.

"The trend is to increase the base pay in light of the reduced bonuses," said Scott Talbott, senior vice president of government affairs at the Financial Services Roundtable. "Without the revenue" that top performers provide, he adds, "these companies can't survive."

Let's again behave ourselves and ignore the fact that they aren't surviving but-for governmental largesse. Back to the sordid tale:

Under the forthcoming rules, bonuses could come to no more than one-third of the total annual compensation paid to employees covered by the restrictions. Some compensation experts view the bonus limits as a mistake that turns the notion of pay for performance on its head, despite Wall Street's culpability for the recession and credit crisis.

"These are not bureaucratic positions where you're paying individuals high salaries," said Michael Karp, chief executive of Options Group. "How can you pay a banker a really high salary without knowing what kind of revenue that person generates?"

Uhhhh, we know they did not generate any revenue. In fact, we know they generated historic, unprecedented, hard-to-fathom losses. Which is why they probably don't deserve anything. Especially since the American taxpayers are paying it! I know I'm but one lone voice in the vast wilderness, but I'm gonna take a wild stab and say I'm a decent proxy for the other citizens. And my decision on their compensation is: Nada. Want a raise? Don't wanna answer to populist demands for a haircut? A got a swell idea: don't accept public money. Otherwise, I'm your boss, I think you suck, and I'll pay you accordingly. Back to the article:

Raising base salaries would play into "a long and dishonorable tradition of responding to any attempt to curb pay excess by just putting it in a different pocket and calling it something else," said Nell Minow, editor of the Corporate Library, a research firm focusing on corporate-governance issues.

Well-put.

Citigroup has received $45 billion in taxpayer-funded capital do far, while Morgan Stanley has received $10 billion. The latest U.S. rescue of Citigroup will leave the federal government holding as much as 36% of the company's common stock.

These firms still stand only because we've propped them up. The money they'll pay to the 25 highest-ranking parasites comes directly from us.

Inside banks and Wall Street firms, some executives are hopeful that the Treasury Department will water down the curbs on bonuses, inserted into the stimulus bill by Sen. Christopher Dodd (D., Conn.), during the department's rule-making process.

With bagman Timmy in charge, who could blame them for their optimism.

The Dodd provision sent shockwaves across Wall Street. Some bankers and compensation experts contend that top revenue-producers could bolt to non-U.S. banks or hedge funds that aren't subject to TARP-related restrictions. "It's possible we will lose some people," J.P. Morgan Chase & Co. Chairman and Chief. "I'll be very sorry if that happens."

He'll be very sorry. I'm sure he will. Anyhow, note the subjunctive tense of those statements. Top-revenue producers could bolt. But franky, at this point, so what if the morons who caused the mess lose their job? Lots of American have lost their job due to nothing more than bad luck. No one bailed them out.

Enough is enough. We have to keep making noise about this.