Wall Street’s cash bonus pool fell by 14 percent last year to $19.7 billion, the lowest since 2008, as the securities industry shed thousands of jobs, according to projections by New York state Comptroller Thomas DiNapoli.
Employees took home an average cash bonus of $121,150 in 2011, DiNapoli’s office calculated in a report based on personal income-tax collections. The financial industry lost 4,300 jobs between April and December, according to the report.
Smaller bonuses reflect “a difficult year on Wall Street,” DiNapoli said Feb. 29 in a statement. “Profits were down sharply, and securities firms in New York City resumed downsizing in the second half of the year.”
Wall Street “faces continued challenges as it works through the fallout from the financial crisis and adjusts to regulatory reforms,” he said.
Profits at New York Stock Exchange firms’ broker-dealer units were no more than $13.5 billion in 2011, less than half of the $27.6 billion earned in 2010, making last year the second in a row in which profits dropped by more than half, DiNapoli said. In 2009, the units generated $61.4 billion in profit with the help of federal bailouts, interest-rate cuts and proprietary trading.
Cash bonuses in 2011 are expected to be about $2 billion more than the recession’s low point of $17.6 billion in 2008, and are a little more than half the $34.3 billion peak reached in 2006, the report said. Bonus estimates don’t include stock options or other deferred pay.
“Having Wall Street and the securities industry operate on a model that’s profitable and sustainable is preferable to what we had before, where you had high-risk behavior, high reward,” DiNapoli said last week in an interview in his midtown Manhattan office. “When it came tumbling down, you had a deep dip and a great valley. That’s really what has caused a great deal of budget shock and revenue shock to the state and city.”
Skyrocketing compensation before the financial crisis encouraged state lawmakers to craft unrealistic budgets in expectation that Wall Street’s boom would continue forever, he said. •
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