JP Morgan Chase (NYSE: JPM), Citibank (NYSE: C), Goldman Sachs (NYSE: GS), Morgan Stanley (NYSE: MS) CEOs Meet with Federal Reserve Over Pay Packages

The Federal Reserve met privately with top banking officials at JP Morgan Chase (NYSE: JPM), Citibank (NYSE: C), Goldman Sachs (NYSE: GS), Morgan Stanley (NYSE: MS) and others on Monday to discuss new compensation rules and to urge the bailed-out banks to begin their compensation reform plans immediately, even before the Federal Reserve finalizes its compensation reform rules.

Several sources are reporting that CEOs at top companies met with Federal Reserve officials this week including JP Morgan Chase’s CEO, James Dimon, Goldman Sach’s CEO, Lloyd Blankfein, Citigroup CEO, Vikram Pandit and Morgan Stanley CEO, John Mack. Reportedly, all 4 CEOs had a 30-minute meeting with Federal Reserve Bank of New York President, William Dudley.

During the meetings and various conference calls that occurred, Federal Reserve officials told executives at the top financial institutions that they needed to determine if their compensation packages were consistent with the October proposal from the Federal Reserve aimed at curbing certain bonuses. Fed officials also said that the companies must turn over a list of proposed changes to align their pay structures with the Federal Reserve’s requirements by February 1st of next year.

The Federal Reserve’s proposed new rules will be finalized by the end of year. The new rules hope to prohibit banks from awarding incentives that drive traders, loan officers and others to take excessive risks that could threaten the bank’s health.

Federal Reserve Governor, Daniel Tarullo, said in a recent speech “Incentive compensation arrangements should not create ‘heads I win, tails the firm loses’ expectations.” Tarullo continued, “We want to make sure you have the right processes” in place to align with the principles the Fed has published.

The one major Bank CEO that was missing from the meetings was outgoing Bank of America CEO, Kenneth Lewis, but other Bank of America officials attended one of the conference calls. Bank of America released a statement today announcing, “We will certainly work with them and provide whatever information they require.”

The White House and some Federal Reserve officials have argued that poorly-designed compensation packages were one of the causes of the financial crisis, because the pay packages encouraged bankers and employees to take on far too many risks.

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