RBS (NYSE:RBS) is about to lose almost 1,000 bankers due to pay restrictions set by the UK government. The Times of London reports that the managers and traders will move to companies where their pay will not be capped. The Wall Street Journal writes that five senior AIG (NYSE:AIG) executives might leave that firm to get better compensation packages. The insurance company has convinced two to stay, at least of now.
In the case of AIG, Wall St. bankers have decided to call the bluff of pay czar czar Kenneth Feinberg. It may put pressure on him to back down from some of his radical caps on banker compensation particularly if the banks losing the people can convince him that the employees are critical to future profits.
Feinberg’s aggressive stance on what bankers at firms that still have government money can be paid was always a high stakes gamble. Bank of America (NYSE:BAC) said repeatedly that the restrictions were affecting its chance for getting a strong CEO. BAC has now said it will pay back TARP funds, so the issue has become academic for the firm. Other companies like GM and AIG are still complaining that they cannot get or retain the best talent with current compensations restrictions.
That leaves Feinberg to decide whether it is best to allow the companies that he supervises to open their wallets further in a move that could ultimately help taxpayers. The government’s investment in firms like AIG could be compromised if they are left with mediocre executives to steer them back to health. Feinberg could, if he is not careful, strangle some of the life out of the companies Congress meant to save when it first passed the TARP legislation.
Douglas A. McIntyre