New York state comptroller says average taxable bonus of $123,850 will be ‘bitter pill’ for many people
• Huge payouts will be a ‘bitter pill’ for many
• Investment banks on track to make $55bn profit for 2009
Despite calls for restraint in multi-million dollar pay packages, Wall Street bonuses jumped by 17% to $20.3bn (£13bn) for 2009 as America’s financial services industry rebounded swiftly from the credit crunch to healthy profitability, according to New York’s tax department.
New York state’s comptroller, Thomas DiNapoli, said the average taxable bonus on Wall Street was $123,850, a figure he described as a “bitter pill” for many people still struggling with record unemployment and ongoing economic weakness on the high street.
Bonuses at banks, fund management firms and stockbrokers are a crucial element in New York’s income tax revenue and the state keeps a careful tally of each year’s projected payout on Wall Street.
DiNapoli said the total bonus pool was down by about a third on 2007, when the financial crisis had yet to wreak unprecedented havoc on the markets. But he said Wall Street was on track to make an aggregate profit of as much as $55bn for 2009, a remarkable recovery after a $43bn loss in 2008.
“The good news is that Wall Street is back so there’s profitability,” said DiNapoli, who described this as positive from a tax revenue point of view. But he added: “It’s still a bitter pill for many people with unemployment at a record high in our state, as it is in many other parts of the country.”
At three of Wall Street’s biggest banks – Goldman Sachs, JP Morgan and Morgan Stanley – the total bonus pool rose by 31%. This suggests lucrative payouts at levels below the top echelons of management.
Many of the banks were careful to moderate highly publicised bonuses awarded to their chief executives. Goldman, for example, handed its chief executive, Lloyd Blankfein, a bonus of $9m which was regarded on Wall Street as relatively low in comparison to his $69m pay package at the height of the boom in 2007.
DiNapoli, a Democrat, said Wall Street was only too aware of public outrage over remuneration: “There’s certainly an accurate point of view that this sector of the economy, while it’s important, had a lot to do with the meltdown.”
The Obama administration has urged Wall Street to be mindful of popular discontent over bonuses. But the US Treasury has stopped short of any stringent restrictions. The US government has merely backed “say on pay” votes at annual meetings, giving shareholders a voice on remuneration issues. And a so-called “pay czar” was appointed to oversee bonuses at banks in receipt of government bailouts, although his remit is highly restricted.
Shortly after taking office last year, president Barack Obama described big bonuses on Wall Street as “the height of irresponsibility” and he threatened to impose pay caps. But the president has since softened his line – Obama recently said he did not begrudge bonuses to bank chief executives, praising the bosses of Goldman and JP Morgan as “very savvy businessmen”.