AT A cocktail party in a stuccoed Notting Hill home, an investment banker is looking glum. It's hardly a surprise.
He has been sounding gloomy all year long as the markets tanked. But now he is clutching a letter from US Congressman Henry Waxman to the chief executive of JPMorgan, Jamie Dimon, asking for details about wages for his staff "broken down by salaries, bonuses (cash and equity), and benefits" for the last three years. What's more, Waxman wants "documents to show all policies governing the granting of the bonuses" and "a description of the reasons for the year-to- year changes".
"You know what this means," says the Notting Hill banker as he and his City friends pore over that Waxman letter, sent a few weeks ago to the heads of his and eight other US banks. The politicians have handed over hundreds of billions of pounds of taxpayers' money to recapitalise the banks. Now comes the quid pro quo.
These banks can no longer be secretive on the grounds of commercial sensitivity, hiding every detail about bonuses except for its board directors. Bankers' earnings are being held up to public scrutiny like never before.
No British political leader has yet asked publicly for such a level of detail as Waxman, chairman of the powerful Committee on Oversight in the US House of Representatives. But as Richard Snook, senior economist at the Centre for Economics and Business Research, says: "It is just not politically feasible that any British clearing bank is going to pay out large bonuses." Already the directors of some of the top banks on both sides of the pond Barclays, Goldman Sachs and UBS have announced in recent weeks that they are waiving their bonuses. They had little choice in the matter It means that one of the City's star earners, Barclays Capital president Bob Diamond, the man who snapped up the choice parts of Lehman Brothers in September, could collect just his base salary of [pounds]250,000. Last year he earned [pounds]21 million in bonuses and incentives.
Similarly, Michael Sherwood, co-chief executive of Goldman Sachs International in London, is set to earn a basic salary of $600,000. Last year he almost certainly collected a compensation package in excess of $10 million. The top Goldman director in London earned $23.4 million last year.
This matters now because the end of November has traditionally marked the start of the annual bonus season..
Goldman and Morgan Stanley, each of which employ around 5000 staff in London, end their financial years this coming weekend. Those fallen Wall Street giants, Lehman and Bear Stearns, also used to end their years on 30 November a reminder of how much has changed.
Most other banks will wrap up the year's business by 31 December. In previous years bosses would be totting up fat profits, ready to hand back around 45% of revenues in compensation to staff.
The bonuses are announced within weeks and paid the following month.
It won't be quite like that this year. The CEBR estimates that annual bonuses to City bankers will slump 60% to [pounds]3.6 billion from a peak of around [pounds]8.8 billion two years ago. Bonuses at the end of 2007 were still high because it was a decent year, despite the credit crunch starting.
Now many bankers are just grateful to have a job. And it is no coincidence that so many of the big banks have been announcing huge lay-offs in recent weeks. Bosses need to cut staff numbers in any case but it also makes sense when bonuses will soon be due.
"Quite a lot of people were still doing well in the first half of this year although things obviously fell off a cliff after Lehman collapsed," says Snook of the CEBR. …