With 2008 past the halfway mark, the latest year-end bonus projections point to a plunge of more than 30 percent from 2007 - an even gloomier view than three months ago, when Wall Street was digesting the Bear Stearns fiasco.
New York City's comptroller sees bonuses shrinking "in excess of 30 percent" this year, Frank Braconi, the chief economist in the comptroller's office, told the New York Times. "That would amount to a decline of about $10 billion, based on the $33 billion that the state comptroller estimated was paid out in Wall Street bonuses in each of the last two years," the newspaper says.
Wall Street compensation Alan Johnson indicated that his estimate of a 30 - 40 percent bonus falloff might be too optimistic. Investment bank executives no longer hope for a rebound this year and have stopped worrying about competitors hiring away their best employees if bonuses shrink, Johnson told the Times.
The latest financial statements from the six surviving U.S. bulge-bracket banks show their aggregate compensation costs dropped $9.5 billion through June, compared with the same period last year. "Analysts familiar with those companies said the cuts so far implied an aggregate decline in pay and benefits, including bonuses, of more than $18 billion for the full year. About half of that amount would have gone to people employed in New York City," the Times says.
That would be Wall Street's biggest annual pay decline ever, easily surpassing the 2001 decline of $6.5 billion.
City and state officials are sounding alarms about the impending impact on not just local government tax revenues, but on the region's overall economy. The financial industry's 178,000 New York City-based employees account for almost one-fourth of all income earned in the city. Those highly-paid workers generate about 10 percent of city tax revenues and 20 percent of the state's, New York State Deputy Comptroller Kenneth B. Bleiwas told the Times. Their spending supports the local housing market and a plethora of businesses selling luxury goods that run the gamut from European automobiles to jewelry to fashion to high-end cigars.