The Wall Street fat cats who taxpayers bailed out five years ago are poised for a big payday.
In the aftermath of the financial crisis, big banks held on to a sizable chunk of executive pay — in the form stock or other deferred compensation instead of up-front cash — to curb the sort of risky short-term thinking that many blamed for tanking the economy.
Now, those same high-level execs pilloried by the public for their roles in the crisis are expecting to take home a windfall as the crisis fades and bank stocks surge.
Starting in 2009, the biggest Wall Street firms were pressured to pay their top money-makers in restricted stock, which usually vested in three or five years, rather than cash bonuses.
The typical pay structure for top execs was 75 percent cash and 25 percent equity in 2007, before the crisis turned that on its ear.
In 2009, Citi and Goldman delivered all of their bonuses to their top execs in the form of stock and options awards.
As a result, a number of Wall Street’s top execs can begin to collect big stock bonanzas this year.
“The irony … is that in trying to promote longer-term performance paying out bonuses more in equity has actually resulted in more compensation being realized by them over the last several years,” said Aaron Boyd, director of governance research firm at Equilar.
That’s especially the case for top executives at banks like JPMorgan and Goldman Sachs, whose share prices have rebounded sharply after plunging during the height of the market panic in 2009.
JPMorgan CEO Jamie Dimon, for instance, is prepared to collect $19.3 million in restricted stock and options that are starting to become good and will be vested by the end of this year.
That includes 195,000 shares of restricted stock awarded and 563,000 in stock options awarded to him in February 2010, according to Equilar.
JPMorgan’s stock, which closed at closing at $57.17 Tuesday, has risen 82 percent since the start of 2009, despite the $6.2 billion London whale trading debacle and a $13 billion government settlement to resolve a raft of mortgage-related claims and probes.
Other senior execs are sitting on similar gold mines.
JPMorgan’s head of asset management, Mary Erdoes, was granted stock options that were valued at $3.8 million in 2009.Those same options are now worth more $18.9 million.
One banker said he planned on paying down his swanky Manhattan pad with vested stock.
“You can say my deferred compensation [from 2009 and 2010] is going to be equal to my bonus,” he said.
Goldman CEO Lloyd Blankfein and President Gary Cohn are looking at 30 percent increases on restricted shares awarded in 2010 — now worth nearly $10 million a pop.
To be sure, Goldman bankers who were awarded restricted stock must hold onto 75 percent of their holdings until 2016.
“These executives are sitting on a gold mine,” said Paul Hodgson, an executive compensation expert.