Today, three CEOs released their reactions about the ridiculous 90% tax to be imposed upon bonuses of those receiving more than $250,000 for all firms, which received $5bn north of bailout money. Eight financial institutions were recipients of the money – Citi, JPMorgan, Bank of America, Goldman Sachs, Morgan Stanley, PNC Financial Services, and U.S. Bancorp. Citi’s Vikram Pandit and Bank of America’s Ken Lewis sent out memos to their employees criticizing the bill that was passed in the House yesterday with so much haste. The Senate version of the bill, which would split a lower 70% tax between AIG and the employees are expected to be passed sometime next week.
In Pandit’s memo, he admitted that some of the negative sentiment about the bonuses are warranted yet he pointed out that not everyone is to blame for what happened. He argued that many people who took part in the destruction of the bank have already been removed and there have been new risk measures implemented. He also mentioned the difficulty of overcoming the problem is key people are lost due to the outrage caused by these bonuses. Furthermore, “[i]t would affect countless number of people who will find it difficult, if not impossible, to pay back the bonuses that they earned. ” He went on to assure the employees that they are doing their best to work with those in Washington to fix the compensation system in a way that benefits the firm, the financial system. and most especially the employees and their hard work. He called that employees continue focusing on providing good business and service to their clients.
While Ken Lewis shared the fear of losing key employees to competitors, he raised other important points. With such kind of legislation being passed so quickly, he warned about the possible harm this may cause in trying to recover from this deep recession. Lewis also brought up the help they have provided to the system by buying troubled firms such as Countrywide early last year and Merrill Lynch in September. Most importantly, he warned of the possible refusal in the future by private entities to contract with the government if they are held back by the fear that “rules can change quickly and indiscriminately”. He added, “Every associate in the company has already been affected financially, whether because of reduced incentive payments, the elimination of other reward programs or the general decline in our stock price. None of you deserve to have even more compensation taken away.”
Without any formal statement released, JP Morgan’s Jamie Dimon assured his top 200 executives through a conference call that he is working very closely with Washington on the matter.
Read the entire memo released by CITI.
Read the entire memo released by BofA.