President Obama appears to be nearing a deal with Republicans to at least temporarily extend all of the Bush tax cuts, but in the meantime, bankers on Wall Street are looking for ways to ensure they can hold onto as much of their yearly bonuses as possible, the New York Times reports.
Just about all of the large banks on Wall Street are considering doling out bonuses this year rather than waiting until early next year, the Times reports, so that bankers' compensation will not be subject to higher taxes. Most banks are reportedly waiting for Goldman Sachs to make the first move.
The Bush tax cuts are set to expire at the end of this year if Congress does not act, raising income taxes in every bracket. Most Democrats in Congress want to extend the tax cuts for lower and middle-income earners but let them expire for income over $200,000 per individual or over $250,000 per household. Most bankers on Wall Street receive the bulk of their pay in the form of bonuses, and even midlevel employees at financial firms make more than $250,000.
Firms on Wall Street could adjust their compensation packages in multiple ways in response to the tax changes, according to the Times. For instance, they could restructure the portions of bonuses that are paid in stock, so that the stocks are taxes at this year's rates, even though employees typically have to wait for some time to sell their shares.
Even as most banks are looking for ways to preserve their employees' bonuses, at least one bank may be scaling back its compensation system.
Apparently cognizant of shareholder concerns about the long term value of his company, Morgan Stanley CEO James Gorman will be "playing hardball" with bonuses this year, the New York Post reports, and will have some "difficult conversations" with bankers about their compensation.
The Wall Street Journal also reported in October that Morgan Stanley plans to decrease its compensation-to-revenue ratio -- but that the move isn't exactly a sign of hard times on Wall Street. The Journal reported that compensation on Wall Street was on pace to break a record high for the second consecutive year. The Times also reported today that this year is expected to be one of Wall Street's most impressive ever in terms of pay.
Even as Wall Street has come under scrutiny in recent years for high compensation packages that reward short-term results and imprudent risk-taking, a study released last week concluded that the public pressure and subsequent regulatory changes have only "worsened" Wall Street's compensation systems, the Wall Street Journal reported.
Wall Street compensation has been the target of scrutiny since the economy collapsed in 2008 and Washington instituted theTroubled Asset Relief Program, or TARP, which officially expired in October.
Stephanie Condon is a political reporter for CBSNews.com. You can read more of her posts here. Follow Hotsheet on Facebook and Twitter.