The rest of the US may be getting back to basics, but on Wall Street, pay cheques still come with a golden promise.
Workers at the largest financial institutions are on track to earn as much money this year as they did before the financial crisis began, because of the strong start of the year for bank profits.
Even as the industry’s compensation has been put in the spotlight for being so high at a time when many banks have received taxpayer help, six of the biggest banks set aside around $36 billion (Rs1.80 trillion) in the first quarter to pay their employees, according to a review of financial statements.
If that pace continues all year, the money set aside for compensation suggests that workers at many banks will see their pay—much of it in bonuses—recover from the lows of last year.
“I just haven’t seen huge changes in the way people are talking about compensation,” said Sandy Gross, managing partner of Pinetum Partners Llc., a financial recruiting firm. “Wall Street is being realistic. You have to retain your human capital.”
Brad Hintz, an analyst at Sanford C. Bernstein and Co. Inc., was more critical. “Like everything on Wall Street, they’re starting to sin again,” he said. “As you see a recovery, you’ll see everybody’s compensation beginning to rise.”
In total, the banks are not necessarily spending more on compensation, because their work forces have shrunk sharply in the last 18 months. Still, the average pay for those who remain—rank-and-file workers whose earnings are not affected by government-imposed limits—appears to be rebounding.
Of the large banks receiving federal help, Goldman Sachs stands out for setting aside the most per person for compensation.
The bank, which nearly halved its compensation last year, set aside $4.7 billion for worker pay in the quarter.
If that level continues all year, it would add up to average pay of $569,220 per worker—almost as much as the pay in 2007, a record year.
“We need to be able to pay our people,” said Lucas van Praag, a spokesman for Goldman, adding that the rest of the year might not prove as profitable, and so the first-quarter reserves might simply be “sensible husbandry”.
Compensation is among the most-cited causes of the financial crisis because bonuses were often tied to short-term gains, even if those gains disappeared later on.
Still, as profits return,banks do not appear to be changing the absolute level of worker pay—or the share of revenue dedicated to compensation.
©2009/THE NEW YORK TIMES