<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0><TBODY><TR>US banks face taxing problems
</TR><!-- headline one : end --><TR>They want authorities to reconsider move to impose taxes on bonuses for employees </TR><!-- show image if available --><TR vAlign=bottom><TD width=330>
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Widespread public anger at the AIG bonus scandal has led to the rapid passing of legislation that slaps taxes on bonuses paid out to bank workers. -- PHOTO: AFP
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<!-- START OF : div id="storytext"--><!-- more than 4 paragraphs -->Washington - An alarmed banking industry is fighting to head off severe congressional restrictions on compensation, fearful that a wave of popular anger about vast pay cheques will result in permanent damage to the industry.
After a week of unexpected setbacks for an industry accustomed to deference, bank executives said they are now racing to convince Congress and the Obama administration that imposing punitive taxes on bonuses would unfairly punish thousands of people for the sins of a few.
<TABLE width=200 align=left valign="top"><TBODY><TR><TD class=padr8><!-- Vodcast --><!-- Background Story --><STYLE type=text/css> #related .quote {background-color:#E7F7FF; padding:8px;margin:0px 0px 5px 0px;} #related .quote .headline {font-family: Verdana, Arial, Helvetica, sans-serif; font-size:10px;font-weight:bold; border-bottom:3px double #007BFF; color:#036; text-transform:uppercase; padding-bottom:5px;} #related .quote .text {font-size:11px;color:#036;padding:5px 0px;} </STYLE>Wanted: A better way to let big financial firms fail
Phoenix - US Federal Reserve chairman Ben Bernanke said small banks were understandably angry about Wall Street bailouts, and called for a better way of allowing huge financial firms to fail.
Mr Bernanke said on Friday he saw no 'realistic alternative' to preventing the disorderly collapse of large companies, and reiterated that the economy cannot fully recover unless some reasonable degree of financial stability is restored.
</TD></TR></TBODY></TABLE>Executives also argued that hitting banks would hurt the broader economy.
'We are working in every appropriate way with policymakers in Washington, and with other financial institutions and industry associations, to come to agreement on a constructive industry compensation system that is good for the company, the financial system and the country,' Citigroup chief executive Vikram Pandit said in a memo sent to employees.
Citigroup, Bank of America and JPMorgan Chase have received more than US$100 billion (S$205 billion) in United States rescue funds.
Bank of America chief executive officer Kenneth Lewis called the tax 'unfair' in a memo to employees at the weekend, while JPMorgan CEO Jamie Dimon, held a conference call with about 200 executives, saying the firm is concerned about retention.
Long-simmering anger about lavish paydays on Wall Street has erupted since the recent disclosure that American International Group (AIG), bailed out by the government, had paid US$165 million in new bonuses to the company's most troubled division.
Many bank employees get most of their annual compensation in the form of a lump-sum payment at year's end, a practice that is designed to tie pay to performance.
A Bill passed by the House last Thursday would practically eliminate those bonuses for thousands of workers at eight of the largest US banks, in addition to employees of AIG, Fannie Mae and Freddie Mac.
It would slap a 90 per cent tax on bonuses to employees with incomes above US$125,000, or household incomes above US$250,000.
A broader Senate Bill, which could reach the floor this week, would also tax thousands of bonus recipients at regional banks.
The rapid progress of the legislation surprised many in the financial industry, triggering widespread panic.
The measures are retroactive, and many employees have spent some of the money, which they might now be required to repay.
There was also alarm at the Treasury, where some officials fear that the ferment on Capitol Hill will damage the government's ability to partner with financial firms on economic recovery.
'This will undermine the recovery efforts,' said Mr Scott Talbott, senior vice-president for government affairs at the Financial Services Roundtable, an industry trade group in Washington.
But there were signs that officials in Washington were heeding their concerns.
Ms Sheila Bair, the chairman of the Federal Deposit Insurance Corp, said last Friday that some bankers deserved to be paid more depending on performance.
And an Obama administration official gave the assurance that although the White House will seek to recover the bonus payments from AIG, it will do so in a manner that does not threaten the financial system.
'The President has said repeatedly that he will do everything possible to recoup these bonuses. It is not a matter of if he is in favour of it, but how and what the best vehicle is,' the official said. Washington Post, Bloomberg
</TR><!-- headline one : end --><TR>They want authorities to reconsider move to impose taxes on bonuses for employees </TR><!-- show image if available --><TR vAlign=bottom><TD width=330>
</TD><TD width=10>
Widespread public anger at the AIG bonus scandal has led to the rapid passing of legislation that slaps taxes on bonuses paid out to bank workers. -- PHOTO: AFP
</TD></TR></TBODY></TABLE>
<!-- START OF : div id="storytext"--><!-- more than 4 paragraphs -->Washington - An alarmed banking industry is fighting to head off severe congressional restrictions on compensation, fearful that a wave of popular anger about vast pay cheques will result in permanent damage to the industry.
After a week of unexpected setbacks for an industry accustomed to deference, bank executives said they are now racing to convince Congress and the Obama administration that imposing punitive taxes on bonuses would unfairly punish thousands of people for the sins of a few.
<TABLE width=200 align=left valign="top"><TBODY><TR><TD class=padr8><!-- Vodcast --><!-- Background Story --><STYLE type=text/css> #related .quote {background-color:#E7F7FF; padding:8px;margin:0px 0px 5px 0px;} #related .quote .headline {font-family: Verdana, Arial, Helvetica, sans-serif; font-size:10px;font-weight:bold; border-bottom:3px double #007BFF; color:#036; text-transform:uppercase; padding-bottom:5px;} #related .quote .text {font-size:11px;color:#036;padding:5px 0px;} </STYLE>Wanted: A better way to let big financial firms fail
Phoenix - US Federal Reserve chairman Ben Bernanke said small banks were understandably angry about Wall Street bailouts, and called for a better way of allowing huge financial firms to fail.
Mr Bernanke said on Friday he saw no 'realistic alternative' to preventing the disorderly collapse of large companies, and reiterated that the economy cannot fully recover unless some reasonable degree of financial stability is restored.
</TD></TR></TBODY></TABLE>Executives also argued that hitting banks would hurt the broader economy.
'We are working in every appropriate way with policymakers in Washington, and with other financial institutions and industry associations, to come to agreement on a constructive industry compensation system that is good for the company, the financial system and the country,' Citigroup chief executive Vikram Pandit said in a memo sent to employees.
Citigroup, Bank of America and JPMorgan Chase have received more than US$100 billion (S$205 billion) in United States rescue funds.
Bank of America chief executive officer Kenneth Lewis called the tax 'unfair' in a memo to employees at the weekend, while JPMorgan CEO Jamie Dimon, held a conference call with about 200 executives, saying the firm is concerned about retention.
Long-simmering anger about lavish paydays on Wall Street has erupted since the recent disclosure that American International Group (AIG), bailed out by the government, had paid US$165 million in new bonuses to the company's most troubled division.
Many bank employees get most of their annual compensation in the form of a lump-sum payment at year's end, a practice that is designed to tie pay to performance.
A Bill passed by the House last Thursday would practically eliminate those bonuses for thousands of workers at eight of the largest US banks, in addition to employees of AIG, Fannie Mae and Freddie Mac.
It would slap a 90 per cent tax on bonuses to employees with incomes above US$125,000, or household incomes above US$250,000.
A broader Senate Bill, which could reach the floor this week, would also tax thousands of bonus recipients at regional banks.
The rapid progress of the legislation surprised many in the financial industry, triggering widespread panic.
The measures are retroactive, and many employees have spent some of the money, which they might now be required to repay.
There was also alarm at the Treasury, where some officials fear that the ferment on Capitol Hill will damage the government's ability to partner with financial firms on economic recovery.
'This will undermine the recovery efforts,' said Mr Scott Talbott, senior vice-president for government affairs at the Financial Services Roundtable, an industry trade group in Washington.
But there were signs that officials in Washington were heeding their concerns.
Ms Sheila Bair, the chairman of the Federal Deposit Insurance Corp, said last Friday that some bankers deserved to be paid more depending on performance.
And an Obama administration official gave the assurance that although the White House will seek to recover the bonus payments from AIG, it will do so in a manner that does not threaten the financial system.
'The President has said repeatedly that he will do everything possible to recoup these bonuses. It is not a matter of if he is in favour of it, but how and what the best vehicle is,' the official said. Washington Post, Bloomberg
