Unintended consequences of the AIG bonus bill

  • Share
  • Read Later

From a reader:

1. A ‘scandal’ will surface a few months from now from the headline “TARP recipients giving [50%-150%] raises to replace banned bonuses”.

2. Bank employees in areas where the revenue generated can be directly traced (sales, trading, private banking, money management, maybe investment banking) will now be paid commissions (% of revenue generated) instead of bonuses. Commissions are specifically exempted from the House bonus bill.

3. Non-TARP recipients (primarily European banks) without bonus restrictions will start to poach departments of TARP recipients en masse, particularly those departments where the person or group (not the institution) owns the revenue-generating relationship (i.e., poaching immediately brings in more money than it costs).