Three months after Merrill Lynch & Co. Inc.'s $3.6 billion of bonuses, Wall Street expects the federal government to loosen compensation caps for banks that received taxpayer aid, according to executives at four of the country's biggest financial firms.

Lenders such as Citigroup Inc. and Bank of America Corp. that obtained money from the Troubled Asset Relief Program have been waiting since February for Treasury Department guidance on the bonus caps for their 25 highest paid employees. Speaking on the condition of anonymity, the executives said the Obama administration may seek to substitute guidelines or otherwise ease the mandatory limits.

Some companies are preparing to repay Tarp funds and free themselves of compensation limits, but those that cannot do so argue they should not have to comply with pay limits that will leave them unable to retain their best employees. The executives differ on how far the administration and lawmakers are willing to go in reducing the limits on bonuses. All four executives said the administration may apply the caps only to managers, freeing top traders or investment bankers from any restrictions. One executive said he did not think the mandatory limits would survive the year.

JPMorgan Chase & Co. and Goldman Sachs Group Inc. are among the firms that regulators determined have enough capital to withstand an economic deterioration. Both said they are hoping to repay their $35 billion of Tarp purchases of preferred shares.

Overall movement between jobs in financial services is down from a peak in 2006, according to Richard Jacovitz at Liberum Research in New York. This year's annual rate of employee changes and losses is 34% lower than it was last year and 49% less than three years before, according to Liberum.

Steve Adamske, a spokesman for House Financial Services Committee Chairman Barney Frank, said that given such figures, Congress may not buy the argument that lawmakers have to loosen bonus caps for firms that cannot repay Tarp funds quickly.

In an April 1 poll by Quinnipiac University in Hamden, Conn., 81% of U.S. voters supported government limits on how much companies receiving Tarp money can pay their executives.

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