Big bonuses coming at 3 big banks

Goldman Sachs, Morgan Stanley and JP Morgan Chase's investment bank, survivors of the worst financial crisis since the Great Depression, are set to pay recordbonuses this year.

As the three biggest banks to exit the U.S. government's Troubled Asset Relief Program (TARP), none are required to limit compensation.

They'll hand out $29.7 billion in bonuses this year, up 60 percent from last year and more than the previous high of $26.8 billion in 2007, according to analysts' estimates.

While compensation experts say pressure from regulators will push the three firms to award a bigger portion of bonuses in stock than last year and defer more cash payments, they may still face public wrath over the overall size of the bonuses.

Like all major institutions, they were the recipients of capital injections after Lehman Brothers Holdings's collapse in September 2008.

Average bonuses for employees at financial firms worldwide will rise about 35 to 40 percent this year, according to an annual report from Options Group, a New York-based executive search and compensation consultant firm. They will still remain below 2007 levels after dropping an average of 40 to 45 percent last year, according to the report, which is set to be released this week.

"Wall Street is all about creating wealth, and when banks start making money again, they have to pay their people," said Michael Karp, co-founder of Options Group.

"But because there's so much public scrutiny, people will be very sensitive in terms of putting caps on some of these cash figures, and you'll see a lot more in stock."

Lucas van Praag, a spokesman for Goldman Sachs in New York, declined to comment on the firm's compensation plans for this year. He said the company ties its pay closely to revenue.

"Over the last eight years compensation at Goldman Sachs has been perfectly correlated with net revenue," van Praag said.

Kristin Lemkau, a JP Morgan spokeswoman, and Mark Lake, a spokesman for Morgan Stanley, both declined to comment.

Year-end bonuses usually account for about 60 percent of compensation, the Options Group report said. While the total this year is expected to be greater than in 2007, it will come to less per employee than the $256,000 paid out that year by the three firms because of increased staffing.

On Oct. 22, Kenneth Feinberg, the Obama administration's special master on pay, ordered pay cuts averaging 50 percent for top executives at the seven companies still under TARP. He will rule on the pay structures of the 26th to 100th highest-paid employees at those firms by the end of the year.