Return of pay bonanza

NEW YORK - The Wall Street gravy train is gathering speed again as banks only just emerging from financial crisis lavish billions of dollars on their employees.

Announcements over the last week by Goldman Sachs and Morgan Stanley of a return to mega compensation pools are seen by some as a sign of health. For others, they mark a worrying throwback.

When Wall Street tipped into the abyss last year, dragging the country's economy with it, popular and much political anger was directed at so-called fat cat executives - individuals paid fortunes with little regard to their performance.

But Wall Street appears to be on the mend now, with the Dow Jones shares index topping 9,000 and a handful of banks, which survived thanks to government bailouts, emerging as powerful giants.

Goldman Sachs last week reported record US$3.4 billion (S$4.9 billion) earnings for the second quarter - and disclosed that it had set aside a record US$6.6 billion for compensation expenses in that quarter, or 11.4 for the first half of the year.

On Wednesday, it was the turn of Morgan Stanley. The bank reported a third consecutive quarterly loss yet still found a way to set aside US$3.9 billion for pay packages.

Both banks have paid back their emergency loans under the government's Troubled Assets Relief Program, which means they are more free to ignore political pressures.

But the apparent lack of change in Wall Street's compensation culture worries those who argue that irresponsibility and arrogance were at the heart of the meltdown last year.

President Barack Obama, whose administration oversaw the rescue, said in a PBS television interview on Monday that mentalities had yet to change.

'The problem that I've seen, at least, is you don't get a sense that folks on Wall Street feel any remorse for having taken all these risks. You don't get a sense that there's been a change of culture and behaviour as a consequence of what has happened,' he said. - AFP.


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