All the fuss about the fiscal cliff had one tangible effect: higher bonuses for the Wall Street crowd.
Bonuses on the Street last year totaled $20 billion, an 8% increase from the previous year, according to data released last Tuesday by the New York state comptroller's office. The higher payouts reflect better business conditions for the fortunate investment bankers and traders who still have jobs in a shrinking industry. Securities industry profits tripled last year to $23.9 billion, thanks to an improving stock market and continued rock-bottom interest rates from the
Federal Reserve that have sharply reduced banks' funding costs.
But the more generous bonuses also demonstrate savvy
financial planning by the tasseled-loafer set.
According to the comptroller, an estimated $2.5 billion in income — much of it thought to be bonus pay — was moved forward into 2012 as New Yorkers anticipated higher income tax rates this year. Personal income tax withholding collections from all New York City taxpayers were up 15% in December from a year earlier, the office said. That indicates that some people were paid large amounts late last year, just before tax rates went up for individuals earning $400,000 or more.
TIMING IS EVERYTHING
Wall Streeters enjoy some flexibility on the timing of their pay because much of it comes in the form of deferred cash or stock awards.
The average cash bonus on Wall Street was $121,900 last year, compared with just $13,260 in 1989. It isn't clear what the average salary was, but in 2011, it reached $362,900, or 5.3 times that in the rest of the private sector.
“It's great work if you can get it,” state Comptroller Thomas DiNapoli said at a news conference.
One reason the average bonus rose last year is that Wall Street has fewer mouths to feed. Head count in New York shrank by 1,000 to about 170,000. The decline continues, with JPMorgan Chase & Co. saying last Tuesday that it plans to lay off 17,000 workers over the next two years. In total, about 20,000 fewer people work on Wall Street than before the financial crisis.
“The good news is, certainly compared to last year, we're seeing a return to profitability” for the securities industry, Mr. DiNapoli said. “In 2013, you will no doubt see continued downsizing.”
Aaron Elstein is a senior reporter, and Andrew J. Hawkins is a reporter, with sister publication Crain's New York Business.
