Newspaper article International Herald Tribune

Wall St. Bonuses Don't Shrink as Much as Bank Profits

Newspaper article International Herald Tribune

Wall St. Bonuses Don't Shrink as Much as Bank Profits

Article excerpt

The total payout to security industry workers in New York is forecast to drop only 14 percent during this bonus season. By comparison, profits plunged 51 percent last year.

It is apparently going to take more than shrinking bank profits to put a big dent in Wall Street bonuses.

The total payout to securities industry workers in New York is forecast to drop 14 percent during this bonus season, according to a report issued Wednesday by the state comptroller, Thomas P. DiNapoli. By comparison, profits last year plunged 51 percent.

"The securities industry, which is a critical component of the economies of New York City and New York State, faces continued challenges as it works through the fallout from the financial crisis and adjusts to regulatory reforms," Mr. DiNapoli said in a statement.

Hurt by the European debt crisis, a sluggish economic environment at home and the introduction of new regulations that have threatened once- profitable business lines, the largest U.S. banks had a weak 2011. Goldman Sachs reported that profit had dropped 67 percent from the level of 2010, and Morgan Stanley's earnings fell more than 40 percent.

In all, securities firms in New York made an estimated $13.5 billion in 2011, down sharply from $27.6 billion in 2010, according to the comptroller's estimates. It was the second consecutive year in which Wall Street profits had fallen more than half.

"The financial industry is in the midst of structural change," said Ronnie Lowenstein, the director of the New York City Independent Budget Office. "It's not just the boom and bust cycle we've seen in the past."

Despite the difficult environment, New York firms paid about $20 billion in year-end cash compensation to their employees. The average bonus was $121,150, down 13 percent from the year before as the number of employees shrank. In 2006, the year before the financial crisis, the average investment bank employee took home a bonus of $191,360.

But the comptroller's estimates do not include noncash compensation given for last year and so may not show the full picture, given that many banks dole out a larger portion of their annual payouts in stock.

Still, a dip in year-end cash compensation is cause for concern for New York government officials. Before the financial crisis, Wall Street accounted for 20 percent of the state's tax revenue. Last year, that tally was 14 percent. For New York City, the share dropped to 7 percent of tax revenue from 13 percent over the period.

"The city budget is dependent on a very small group of people -- the 1 percent, if you will," said Nicole Gelinas, a senior fellow at the Manhattan Institute, a research organization. "If the 1 percent isn't doing well, the city's not doing well."

Nor is it only local and state governments that are feeling the pinch of lower Wall Street pay. …

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