Jan. 15, 2010 -- A year that saw record revenues and earnings of nearly $12 billion has also brought, to critics' dismay, higher compensation for JPMorgan Chase employees.
The bank, one of the most successful survivors of the financial crisis, reported today that it set aside $26.9 billion to pay the base salaries, bonuses and benefits for its employees during the full 2009 calendar year. The compensation total represented an increase of 18 percent from last year, but below the $29.1 billion some analysts had predicted.
"I am very proud of our more than 200,000 employees around the world, from our programmers to our receptionists to our bankers," JPMorgan CEO Jamie Dimon said in a written statement. "Through their tremendous efforts, we have been able to protect our company and keep it healthy and vibrant, while doing our part to support the global financial system and helping the countries where we do business."
Compensation expenses amounted to 27 percent of the bank's net revenue, slightly lower than the 28 percent analysts had predicted, and significantly below the 33 percent average of the previous three years. On JPMorgan's investment banking side, however, the ratio was higher -- 33 percent for the year, a total of $9.3 billion -- up $1.6 billion from the year before.
Chief financial officer Mike Cavanagh said on a conference call with analysts this morning that a larger percentage of revenues would have been devoted to investment bank compensation if not for several factors, including the new bonus tax in the U.K. and the bank's efforts to shift more compensation into stock instead of cash.
JPMorgan Chase was the first major bank to report 2009 fourth-quarter earnings as well as compensation totals. Amid public fury over blockbuster bonuses on the heels of the worst recession in decades, banks have announced changes to their compensation practices to emphasize long-term performance and a decrease in incentives for potentially irresponsible, short-term risk-taking.
"Every institution is using one or some combination of [techniques] to eliminate excessive risk-taking for compensation and focus on the long term and that aligns the interest of the institution with the interest of the employee with the interest of the consumer -- they're all inextricably linked," said Scott Talbott, chief lobbyist for the Financial Services Roundtable, recently told ABC News.
But some critics say that's not enough.
"It's a small step forward. I'm not saying they're going backward, but it's certainly inadequate," said Nell Minow, the co-founder of the corporate governance research group, the Corporate Library.
Paperwork Problems on Loan Modifications
Dimon this morning voiced frustration with the government's program to encourage banks to modify mortgages and help homeowners avoid foreclosure, the Home Affordable Mortgage Program. The bank reported this morning that it extended modification offers for 600,000 mortgages and completed modifications for 120,000 in 2009.
"We've asked the government, and I think they've tried to streamline a little bit the HAMP programs, because there's too much paperwork involved with it, so a lot of the reason we're not getting to final modifications, you know, is half the time we don't finish the paperwork," Dimon said.
"Honestly, we rack our brains to get to a better way to do it," he said.
Dimon also offered some elaboration on his long-standing argument that no giant financial institution deserves a government rescue from failure.
No bank, he said, should be considered "too big to fail" but, in response to an analyst's question, Dimon added that if the government were to set up a system to protect huge institutions from failing, it should function in a fashion similar to the insurance offered by the Federal Deposit Insurance Corporation and banks would pay for such insurance as "a cost of doing business."
Dimon reiterated his objections to the Obama administration's so-called financial crisis responsibility fee, which is generally considered a tax on banks to recoup the government's losses on the Troubled Asset Relief Program. JPMorgan Chase and most major banks have repaid their loans to the program with interest.
"We generally agree with the concept that the industry should pay for its own cleanup, but you know, TARP got extended to a lot of things other than banks like insurance companies, car companies, so I don't understand why we should pay for that," he said. "We already paid for that."
With reports from ABC News' Daniel Arnall.