Banks To Senate: Compensation To Go Off Cliff - 15 Nov 2008

Banks To Senate: Compensation To Go Off Cliff

Wealth-Bulletin: Goldman Sachs, JP Morgan Chase and Bank of America all said at a US Senate hearing that compensation will fall severely this year, particularly for senior executives.

The Senate Committee on Banking, Housing and Urban Affairs held a
hearing yesterday on oversight of the Emergency Economic Stabilisation
Act and how financial institutions were using the funds they received
from the US government.

Gregory Palm,
general counsel at Goldman Sachs, said that since the year is not
finished no compensation decisions have been made, but stressed that
bonuses will be paid only out of the Goldman's earnings for 2008, not
its capital.

Goldman does not set aside an actual bonus pool during the course of
any fiscal year but accrues compensation-related expenses for each
fiscal quarter.

This year the amount accrued has been 48% of net revenues for each
quarter-which includes cash compensation paid during the year, expense
amortisation of prior years' equity-based awards, payroll taxes,
healthcare and other benefits, as well as retirement plan

Palm said: 'Employee compensation will be dramatically affected by
changes in the overall economic and financial environment and our
performance for the full year. But it certainly will not increase as a
result of receiving TARP funds."

Hmmmm...