NEW YORK — The chief executives of the nation's three largest banks on Friday pushed back against legislation that would heavily tax Wall Street bonuses.
Citigroup Inc. CEO Vikram Pandit and Bank of America Corp.'s Kenneth Lewis both issued memos to employees criticizing a tax that would make it hard to retain workers. And JPMorgan Chase & Co. CEO Jamie Dimon reassured his 200 top executives in a conference call that the bank is actively engaging Washington on the matter.
The executives are responding to Washington's latest salvo against Wall Street bonuses. Outrage about massive payouts came to a head this week when it was learned that embattled insurer American International Group Inc., which has received federal government funding to keep it operating, would pay $165 million in bonuses to employees of a unit that caused massive losses at the company.
The House passed legislation on Thursday to impose a 90% surtax on bonuses granted to employees with household income of more than $250,000 at companies that received at least $5 billion from the government's financial rescue program.
The Senate is considering a similar plan that could be up for a vote as soon as next week. Eight banks — Citi, JPMorgan, BofA, Goldman Sachs Group Inc., Morgan Stanley, PNC Financial Services Group Inc. and U.S. Bancorp — have each received more than $5 billion from the government's Troubled Asset Relief Plan, known as TARP.
Pandit said the proposals would affect "countless" people who would find it difficult to repay their bonuses. He noted that not all workers in the financial services field are to blame for the current economic morass, adding that the banking giant removed the people who are responsible for the company's distress and acted quickly to streamline its business.
"The work we have all done to try to stabilize the financial system and to get this economy moving again would be significantly set back if we lose our talented people because Congress imposes a special tax on financial services employees," Pandit wrote in a memo distributed to Citi's 300,000 employees.
Dimon, whose bank is considered to be in the best shape out of the nation's biggest financial institutions, said retention remains important to JPMorgan and that the bank is actively engaging legislators in Washington. He encouraged them to call their local politicians to tell them how they feel, a spokesman for the company confirmed.
At BofA, Lewis said his "first concern is about basic fairness to our associates." He said the Charlotte-based bank is "part of the solution for the financial crisis" through its acquisitions of distressed Countrywide Financial and Merrill Lynch.
"I also believe that these proposals have the potential to damage the ability of the government to engineer a financial recovery," he wrote. "Many of the government's plans depend on the private sector being willing to contract with the government. If investors or companies in the private sector believe that the rules can change quickly and indiscriminately, they will be unwilling to participate."
Not everyone in Washington was in support of taxing bonuses. FDIC Chairman Sheila Bair, an outspoken critic of the nation's giant banks, on Friday raised concerns about moves to hamper bonus pay. In a speech in Phoenix, she said: "Some talent is better than others, and some people do need to be better compensated."
In after-hours trading, Citigroup shares were unchanged from the Friday close of $2.62. BofA shares fell 2 cents to $6.17 and JPMorgan rose 10 cents to $23.25.