Bank CEO pay is up, Fed board chairman clout is down

The kids are alright

Do I need to know how much money Jamie Dimon makes in a year? No, I do not. Frankly, I don't want to know how much money the other managing editors at this company make. It does not help me at all to know what Jamie's compensation package is. Or Jane Fraser's, or Brian Moynihan's, or. … Well, you get the picture.

Of course, I'm not a shareholder of JPMorganChase, or Citi, or Bank of America. For shareholders, those compensation packages matter, for the CEOs and for all the other top executives, because they are significant expenses for which the company must account and justify. If Jamie's pay is going north and the performance is going south, well, that's a problem for shareholders. 

The good news for shareholders is that all the tides seem to be moving in the same direction, as our Allissa Kline reports today. Median CEO pay packages at the top 54 banks last year rose about 12%, according to data from Compensation Advisory Partners. That's roughly in line with profit growth, which was about 10% for the entire industry. Lest you forget, banks aren't exactly your classic fast-growth business. A 10% jump in profits sounds pretty healthy to me. 

For the banks in the survey, earnings per share growth was about 15%, and for banks with assets of more than $100 billion, it was 17%. And the compensation packages got bigger as the banks did, too. The packages for the biggest bank CEOs all topped $40 million, as Allissa reported earlier this year.

Those compensation packages appear to be well earned. The vast majority of big banks, 80%, were rated well-managed in the Federal Reserve's latest supervision and regulation report, our Kyle Campbell writes. The figure is up dramatically over just the last two years, when it sat at around 40%. On the one hand, as just noted, these banks are doing very well for themselves, at least in terms of profits. On the other hand, the Fed changed the way it assesses the banks, easing the criteria for being considered well-managed. 

A federal case

The first Fed chair I can remember being aware of was Alan Greenspan. Not when he first got the job in the 1980s – I was in college and distinctly not interested in anything serious (yeah, I was that kind of student) – but in the 1990s when I started working. And by that time, Greenspan had already reached a sort of mythic status. The market of course hung on his every word (except for the two words "irrational exuberance," they totally ignored those). CNBC gave him the rock-star treatment. Remember how they'd harp on the thickness of the manila folders he'd carry into FOMC meetings, trying to extrapolate, based on their width, whether or not the Fed would cut rates?

The point is that when Greenspan ran the Fed, there was Greenspan, and then a bunch of other people who didn't matter much. After Greenspan, when Ben Bernanke took over, the financial crisis thrust him into the spotlight. Again, it was Bernanke, and a bunch of other people. The Fed chair's job had become more than a first among equals. The Fed chair, it seemed, single-handedly ran the central bank.

But that is not the case, not even remotely, as the newest Fed chair seems about to find out, our Claire Williams reports. For one thing, Kevin Warsh will have to deal with the unusual reality that his predecessor, Jerome Powell, is staying on the board. Powell's term as Fed chair ended but he's still a sitting governor, and he is not leaving, something that hasn't happened in a decade.

In fact, the reality is that little about the way the Fed board operates is clearly spelled out. Its bylaws actually detail very little direct power for the chair. In the past, it has seemed that the Fed governors have for the most part fallen in line with whatever the chair wanted. But there's no reason it has to be that way, and this new board in particular seems like it could splinter in ways that will test Warsh's ability to keep the ducks in a row.

"The Fed board is splintering in a way that it hasn't in over a generation," said Aaron Klein, a senior fellow at the Brookings Institution. 

The next FOMC meeting, Warsh's first as Fed chair, starts on June 16. It could be more dramatic than game six of the NBA finals, scheduled for the same day, when our local heroes win their first title since 1973 (yes, my prediction is Knicks in six. Go New York, go New York, go!)