Wall Street: Taking Bailouts, Giving Bonuses?

Finance Sector's Brain Drain?

According to one bank official, banks have a tricky situation on their hands. The banks need to make sure that they retain talent through adequate compensation, especially as the crisis unfolds. They also have to honor contractual obligations while meeting the public relations challenge.

Some bank officials say they fear a "brain drain" to other areas of finance or the private sector if bonuses decrease. For bankers making seven figures, though, finding jobs with comparable compensation could be difficult in the current economy.

According to Johnson, the government has done a bad job of managing expectations.

"If the government had invested in the baseball business, you wouldn't say, 'Don't pay the baseball players,'" he said.

"The cat's out of the bag," said Dave Schmidt, an analyst with James F. Reda and Associates, pointing out that there is a spotlight on everything the banks do. "Even if, in their minds, they have some justification for a particular level of pay, to explain that to the world will be very difficult."

Top Level Compensation Limits

There are now at least two different investigations into CEO compensation.

Rep. Henry Waxman, D-Calif., who heads the Congressional Oversight Committee, is spearheading a congressional investigation. The banks at the center of the TARP program were told to hand in details of their compensation plans to Congress by Nov. 10, but the deadline has now been extended.

Similarly, New York State Attorney General Andrew Cuomo asked the nine banks to hand in information on compensation to his office by Nov. 5. The New York Times reports that Cuomo's office has received some preliminary paperwork from banks.

Cuomo has already succeeded in convincing AIG to freeze millions in payment to former AIG CEO Martin Sullivan and other top executives.

Bailout vs. Performance

What about the limits on executive pay in the rescue plan?

Treasury spokeswoman Brookly McLaughlin has refused to comment directly on bonus programs.

"Treasury has always believed pay should be for performance," she said. "Every public company should, including and especially ones getting taxpayer money, should compensate based on performance.