1115.org

There you go. All the constant criticism of huge bonuses paid by bailed-out and twice-bailed-out banks was bound to start having an impact. So Morgan Stanley and Citigroup’s Smith Barney, having seen the writing on the wall, have stepped up to the plate.

They have unambiguously renounced fat bonuses. Not the concept, mind you, just the term.

Two Wall Street firms that received at least $60 billion in government bailout funds will be rewarding their financial advisers with controversial retention payments, the terms of which one senior executive described as “very generous” in audio obtained by the Huffington Post.

The soon-to-be-merged financial giants — Morgan Stanley and Citigroup’s Smith Barney — announced the payments during an internal conference call last week, but warned advisers against describing them in terms that would cause PR headaches.

“There will be a retention award. Please do not call it a bonus,” said James Gorman, co-president of Morgan Stanley. “It is not a bonus. It is an award. And it recognizes the importance of keeping our team in place as we go through this integration.”

The payments, Gorman said, will be calculated based on performance numbers from 2008 instead of 2009, when the merger is expected to be completed. That decision virtually guarantees an increase in the size of the awards. While 2008 was challenging for the firms — Morgan Stanley’s client assets in fee-based accounts dropped 25 percent in the fourth quarter, and a round of lay-offs is expected — 2009 is expected to be substantially weaker.

“I think I can hear you clapping from here in New York,” Gorman joked during the call, after announcing that the payments would be linked to ‘08 performance. “You should be clapping because frankly that is a very generous and thoughtful decision that we have made. We spent a lot of time kicking this around. We could easily have done it from the point of closing, which is obviously going to be somewhere in the latter half of this year or around the middle of the year. But we just decided… that it was right thing to do, to give you that certainty that it would be based off ‘08. ‘09 is a very difficult year… So that degree of anxiety, which many, many of you have emailed me about… is now off the table.”

So, first they decide to hand out big bonuses anyway despite all the biting criticism. Then, to add injury to insult, they decide to get really cute and mock all the powers-that-be who think they wield power over Wall Street by calling them retention awards. Finally, to add insult again to the injury-and-insult, they decide to artificially inflate them to be even higher than they would by Wall Street’s normally over-generous standards. (As New York Attorney General Andrew Cuomo revealed in a letter to Barney Frank, almost 700 Merrill Lynch employees received more than $1 million each in the furtively accelerated bonuses paid last year just before the merger with Bank of America.)

Funny they should have used the phrase “PR headaches”. James Gorman is going to be hearing a lot of what even someone with his IQ will not be able to mistake for clapping. And my guess is that it will be coming from all over this land.

*** Update, 9:23 a.m. ***

I can’t help but think that Gorman deserves a retention award too. As is my wont, my fancy lightly turns to thoughts of condoms filled with dog poop. If you live in New York, you could hand-deliver them. No need to have Gorman sign for them. It should be enough just to have him wipe the evidence of delivery off his face. Recorded delivery is recommended (because of its YouTube potential, you understand.)