Bonuses continue despite bailouts

Special to The Washington Post

NEW YORK — Top executives at Wall Street’s biggest banks made a public show of turning down bonuses for 2008, and many of the cash pools split by their lieutenants shrank. But beyond the corner offices, the industry still paid billions in year-end bonuses to employees.

That’s not sitting well with taxpayers or some government officials, who wonder why firms that accepted federal bailout money would be paying bonuses at all. The questions only got more pointed last week as Merrill Lynch, which got a $10 billion capital infusion from the government last year, came under investigation for possibly paying secret bonuses just days before its Jan. 1 merger with Bank of America.

Wall Street is not the only industry whose compensation system has come under attack. The bailout of Fannie Mae and Freddie Mac prompted calls for reworked incentives at the mortgage-finance companies. And the auto industry’s plea for federal funds briefly cast a spotlight on Detroit’s union contracts. But the furor over Wall Street pay has been unmatched, fueled by mistrust of a business singularly focused on money and steeped in a tradition of handsome rewards.

“An auto worker making $60,000 a year is not going to drive people crazy, but some snot-nosed 32-year-old making three-quarters of a million dollars and whining about it, that’s going to make people crazy,” said Alan Johnson, managing director of Johnson Associates, a Wall Street pay consultancy.