Whitney Calls Pay Wall Street’s ‘Motivating Factor’
By Bradley Keoun and Margaret Popper
Bloomberg — Oppenheimer & Co. analyst Meredith Whitney said banks and other financial firms shouldn’t ditch annual bonuses because the best employees would leave.
“No one goes into Wall Street to save the world,” Whitney said today in an interview on Bloomberg Television. “Compensation is the motivating factor.”
Wall Street pay is getting scrutiny after New York banks and securities firms paid $18.4 billion in bonuses for 2008 while the six biggest New York-based financial companies lost a combined $42.4 billion and got $90 billion in government bailout funds. JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon said yesterday that “pay got a little exuberant.”
President Barack Obama called bonus payments at banks getting rescue funds “shameful,” and today he announced a cap of $500,000 on compensation of top executives at companies that get aid in the future.
“In order to restore our financial system, we’ve got to restore trust,” Obama said at the White House. “In order to restore trust, we’ve got to make certain that taxpayer funds are not subsidizing excessive compensation packages on Wall Street.”
Failure to pay employees well would drive away “the best and the brightest,” Whitney said.
“If you can’t compensate your employees, they’re going to go somewhere else,” she said. “You’re going to get a different variety of folks who are going to come in.”
Citigroup Inc. lost a record $18.7 billion last year, while Merrill Lynch & Co., which was acquired by Bank of America Corp. on Jan. 1, lost $27.1 billion. Lehman Brothers Holdings Inc. lost $6.2 billion last year before declaring bankruptcy in September. JPMorgan reported net income of $5.61 billion, down 64 percent from the prior year.