The New York State Comptroller's estimate of Wall Street's bonus pie had a major impact on the compensation debate in Congress and the news media. But in all likelihood, it far understates the true number.
The $18.4 billion figure released Jan. 28 by Comptroller Thomas DiNapoli, "is neither precise nor complete, (and) is probably an underestimate," says Wall Street Journal "Numbers Guy" columnist Carl Bialik.
Banks never disclose their actual bonus totals. DiNapoli's estimate is rooted in tax-witholding data but necessarily reflects many assumptions, which make it imprecise and subject to future revisions of as much as 100 percent. Even the revised estimates are limited to New York City-based employees and exclude stock option grants. And because the goal of the exercise is to project Wall Street's impact on the local economy and state and city tax revenues, the model is deliberately conservative to avoid inflating local budget forecasts.
The comptroller's office has been releasing such estimates for the past decade. On at least three occasions, the initial release ended up 40 - 50 percent below the final estimate the same office released some months later. (However, the initial estimate was revised downward in 2007 and in 1998, the Journal says.)
Still, while a more complete (and therefore larger) bonus headline would have sparked even more public outrage, the outcome probably would have been the same. "Any figure bigger than zero would have been too much" for the public, Wall Street compensation consultant Alan Johnson told the Journal. As far as the American people and elected officials are concerned, Johnson says, "The facts and nuances and specifics, to be honest with you, don't really matter."