Wall Street bonuses to drop, study says

Hard times in the financial industry could lead to a cut in bonuses by as much as 45% in some areas, according to one research firm.

By Kim Peterson Nov 8, 2011 7:13PM
It hasn't been the best year for many banks and securities firms, and as a result, Wall Street bonuses could fall by an average of 20% to 30% from last year, according to one highly-regarded study.

The survey by Johnson Associates, a consulting firm, says that Wall Street professionals can expect sharply lower bonuses for the second time in four years.

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"This year started with great promise for a banner year on Wall Street, but hopes for larger bonuses faded over the summer and continue to dim as we approach year end," said Alan Johnson, the managing director of the firm, in a statement. Bonus pools are being cut, he added, because of an unstable economic recovery, problems in world markets and new regulations in the industry.

If those predictions are true, it would be the weakest bonus season since the financial crisis, The New York Times noted.

This isn't much of a surprise. Goldman Sachs (GS) just reported its first quarterly loss in years. Goldman and a number of other institutions have been laying off workers as well.

Many Wall Street workers count on the year-end bonus for the bulk of their pay -- although they generally make a base salary of $100,000 to $1 million even without the bonus, according to the Times.

The survey says that bond traders will likely take the biggest hit, and could see bonuses drop by 45%. Equities traders and senior managers could see a cut of as much as 30%. Investment managers will likely squeak by with a 20% cut.

But some on Wall Street will get a break. Those working with high-net worth clients and in asset management could get the same amount as last year or maybe even a slight increase.

The news comes as one university professor calls for eliminating banker bonuses altogether. There should never be bonuses at companies that could get taxpayer bailouts if they fail, writes Nassim Nicholas Taleb in a New York Times opinion piece. He adds:

Bonuses are particularly dangerous because they invite bankers to game the system by hiding the risks of rare and hard-to-predict but consequential blow-ups, which I have called “black swan” events. The meltdown in the United States subprime mortgage market, which set off the global financial crisis, is only the latest example of such disasters.



Tags: GS
1Comment
Nov 8, 2011 10:18PM
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I will be surprised if this actually happens but I would also be absolutely delighted.  I think that bonuses should be given out as a "payment for performance".  Many of them (I'm sure not all) demonstrated that in spite of POOR performance that their bonus were (literally) "a given" and demonstrated greediness at the taxpayer's expense. Not much different than "living off the public dime".  Shame on them for their past behavior.
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