No bonuses for bank workers, just raises

Last week, Morgan Stanley (MS) announced that it is going to raise base salaries for its senior investment bankers to $800,000. The move had been expected, as the financial giant looks for ways to circumvent the new limits on annual bonuses for firms receiving government bailout money. And it's not just Morgan. Citigroup and Bank of America are expected to follow suit soon. In fact, in response to the announcement, and perhaps as a signal to its own employees who might have been enticed by the news out of Morgan, a spokeswoman for Bank of America (BAC) noted that, "pressures in the investment-banking and capital markets businesses continue to be intense," adding that her company will "take the steps necessary to retain key employees."

"Key employees"? Let me guess, these are the same key employees that helped these banks swirl around the veritable toilet bowl drain of the economic downturn, only to be saved by the government? Perhaps I'm jaded, but I don't think shareholders (or taxpayers, for that matter) should be supporting any move to bend over backwards to "retain" the investment bankers at banks that got us all into this mess. If these banks want to reward their employees for the pressures they're under, they should be required to first completely pay back the TARP funds they've received.

I mean, let's get real here. Morgan Stanley has received $10 million in TARP funds, and they feel now is the time to up the base pay for their investment bankers? Citigroup received $25 million in TARP funds. At least Citi has had the sense to keep its mouth shut for now about its plans, although as I noted above that could change any second.

But wait, I have a better idea: At this point, the U.S. governgment is a major stakeholder in each of these firms. So why doesn't President Obama come out and say, fine, these banks are free to issue whatever raises they want -- as long as their TARP loans are paid back in full first. After all, he's had no problem issuing such decrees to Detroit. Why not to Wall Street?

Maybe I'm letting my outrage get the better of me, but I just don't understand where the investment banks get off sneaking around Obama's decree of no more bonuses simply by upping base pay. This must be dealt with swiftly, or these banks risk destroying any goodwill that remained after the near collapse of the American financial system. Will anything like my solution actually happen? I doubt it, but I guess there is always hope that some sort of common sense will pierce the conscience of the big banks and our government.

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