Wall Street Execs Getting Biggest Bonuses Yet
ALEX CHADWICK, host:
This is DAY TO DAY, I'm Alex Chadwick.
MADELEINE BRAND, host:
I'm Madeleine Brand. You might be getting a ham from your boss for the holidays. Well, on Wall Street, high-flying traders are getting the whole hog.
Consider the average Christmas bonus at Goldman Sachs this year: $600,000. The investment bank made record profits this year; so did other Wall Street firms, making for a very Merry Christmas in New York.
NPR's Mike Pesca reports.
MIKE PESCA: I've never gotten a general to disclose troop movements to me, but I have convinced people to tell me about their sex lives, their criminal pasts and their heartfelt beliefs about the inherent industriousness of people of races other than their own.
What I couldn't get was anyone in the world of finance to say anything to me on tape about their compensation.
The hedge fund managers hedged. The venture capitalists would not venture opinion. No matter. The announcements were made this week in the financial papers. And in the coming days, the bonuses will be further announced in the wine cellars, on the wrists, and in the garages of their recipients.
But I did get some off-the-record explanations. First, bonuses are a misnomer. A managing director at a big investment bank may make only $200,000 a year - yeah, I know, only 200,000. But almost everyone in his position is expecting four or five million dollars in bonus.
Second, most everyone on Wall Street is honestly convinced that their enormous profits are a source of societal good. Most will argue - and mean it - that they're working hard, creating wealth, being taxed. What's the down side? They can honestly point to the very robust local economy in New York and say, that's because of us.
For another perspective, I turned to Jerry Reisman(ph), who's a partner in the law firm of Reisman, Perez and Reisman. He negotiates executive pay packages, so he is very familiar with the machinations and mindsets of the financial sector. But he sees a downside to all of this money.
Mr. JERRY REISMAN (Partner, Reisman, Perez and Reisman): What it's done, it's created another tier of compensated employees. It's almost creating a different level of super-rich people who are now employed as distinguished from the ordinary common executive.
PESCA: Reisman diagnoses a flight away from normally high-paying professions like medicine, accounting, and his own, the law.
Everyone wants to chase the bucks on Wall Street, so what can be done about this?
Mr. RIESMAN: I don't know that anything can be done. There will always be an employer out there who is willing to pay more to get the talent.
PESCA: Which bring us to our third point - about the talent. Everyone on Wall Street thinks they deserve their money, and here's why. It's well known that investment banks typically give almost half their profits back to their employees.
And since everyone who worked on a deal is intimately familiar with the numbers involved - they're all doing back-of-the-envelope calculations about how much they're due - they factor in payments to analysts and associates, sort of like tipping out the busboys in grillmen if you work in a restaurant, and then they light on a number - the number.
And if what's in your head doesn't match with what's on the piece of paper your boss jots down in his office, he'd get upset.
One Wall Street worker off the record said that if a firm low-balls you with a bonus which could literally mean $500,000 instead of $600,000, it's the same exact feeling as if a $60,000 a year guy on the assembly line finds out he'll have to accept 50 grand.
To a layman, it's a ridiculous conversation, this mergers and acquisitions guru conceded. Wall Street has always been a curiosity, from F. Scott Fitzgerald's declaration that the rich are different from you and me, through Tom Wolfe's "Bonfire of the Vanities." There Wolfe described his bond trader protagonist as collecting the crumbs off the cake of richer people. Sometimes there are a lot of crumbs, so much so that you can make your own cake from them.
That's an analogy that I can get my head around, because this year my holiday bonus was a hearty congratulations and a slice of cake.
Mike Pesca, NPR News, New York.
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