MELISSA BLOCK, host:
From NPR News, this is ALL THINGS CONSIDERED. I'm Melissa Block.
ROBERT SIEGEL, host:
And I'm Robert Siegel.
It is bonus season on Wall Street, and Washington is poised for outrage. White House economic adviser Christina Romer said yesterday that big bonuses at banks that took federal aid are ridiculous. And today, White House spokesman Robert Gibbs said this.
Mr. ROBERT GIBBS (White House Spokesman): There are folks that just continue not to get it.
SIEGEL: Well, joining us from New York is Steven Hall, who runs an executive compensation consulting firm. And, Steven Hall, we talked with you around this time last year when financial firms were being asked by the government to cap their compensation. How have you been?
Mr. STEVEN HALL (Managing Director, Steven Hall and Partners): I've been good. It's good to be back with you again.
SIEGEL: Well, it's reported that Goldman Sachs, Morgan Stanley and JPMorgan Chase have combined, that is, have set aside $47 billion for bonuses. They know how unpopular these bonuses are with the public. Why so much pay in bonuses?
Mr. HALL: Well, first of all, I guess I have difficulty understanding a number like $47 billion. All of those zeros get me a little cock-eyed in terms of thinking about it. The way in which that total number is derived, though, is based on a sharing of the profits that the employees generate for shareholders.
SIEGEL: And, indeed, it's been a good year on Wall Street.
Mr. HALL: It's been a good year on Wall Street. And, you know, the reasons are one that I think we all have to sit back and think about, you know, how much is based on real smart thinking on the part of these executives and how much is based on the times and based on interest rates and other things like that.
SIEGEL: Well, the banks, evidently, will pay more of the bonuses in stock -that's obliging some pressure from the government. How much of a difference should it make if somebody who's getting a million or two in a bonus this month gets it in the form of stock as opposed to cash?
Mr. HALL: Well, I think for some people - were they to get a bonus and if they were expecting the cash in order to be able to live on it, pay schooling for children, pay for that second home, pay other expenses that they have - finding that you're not going to get the cash could be a little bit of a surprise. But I think Wall Street firms have been telegraphing this to their employees for a while: expect a lot more. And in some cases, expect all of it in the form of stock that you won't be able to get for three to five years.
SIEGEL: Steven Hall, can you hear the sound of blood boiling right now, as you say, for people who might not be able to make ends meet with school and the second home at a million or two a year?
Mr. HALL: I certainly can. And I'm not sure whether it matters if you were to cut Wall Street compensation in half or cut it to 25 percent if the numbers still wouldn't have people boiling. You know, you throw out a number of 47 billion when we started this discussion, if you cut it to 12 billion, wouldn't people still be boiling? You know, the letters that I get from people after doing an interview like this, you know, make it very, very clear that people are hurting and they're upset.
SIEGEL: The greatest anger at bank bonuses that we hear always in Washington and elsewhere in the country for that matter, is those banks got money from the TARP, from the Troubled Assets Program from the Treasury. But beyond that, all of the banks are benefitting right now from very low interest policies at the Federal Reserve, so much so that they're getting almost free money as it is. And that's some of the money that's being paid out in bonuses.
Mr. HALL: It's not that it's necessarily being paid out in bonuses. Remember, they didn't borrow money and then pay that out. But what's happened is the performance that they're being judged on has been based on - they borrowed money from the government for nothing and then even if they put into T-bills or something like that, got some form of an interest rate. That didn't take a very smart individual to create that kind of money or that kind of profit for the banks.
SIEGEL: Not innovation in the financial sector.
Mr. HALL: Not innovation. Not, you know, smart thinking. Not smart analysis or anything else. It was just a very simple arbitrage to be doing.
SIEGEL: Has it been your sense that all of the complaints about big bonuses has actually had some effect on the thinking of Wall Street banks about how much people should be compensated this year? Or is it just the sort of annoyance people there feel you have to put up with from Washington?
Mr. HALL: Yeah, it has. It has everybody thinking: What's the right thing for our public image? What's the right thing for our employees? I think there was a quote today from Mr. Blankfein that, you know, no matter what we do, employees are going to be unhappy and the public is going to be unhappy.
SIEGEL: That's Lloyd Blankfein, the number one man at Goldman Sachs.
Mr. HALL: Yeah. I mean, it's kind of interesting to think about. And, again, I feel for the problems that are going on here. But if it's decided not to pay a banker as much money, how does that help someone on Main Street?
SIEGEL: Well, Steven Hall, thanks for talking with us. Sorry about the email that you're going to be getting.
(Soundbite of laughter)
Mr. HALL: I wish people would understand that it is a very difficult world that we're all going through right now, and I don't make the rules. But I do try and report honestly on what I see going on out there.
SIEGEL: Okay, thanks a lot. Steven Hall, who is an executive compensation consultant in New York talking with us about Wall Street bonuses.