Counterparties: Wall Street’s oddly lucrative malaise

October 10, 2012

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Wall Street is having a hard time enjoying itself these days. Bloomberg recently reported there was “no sexiness … no fun … no intellectual intrigue” left for some bankers, and wrote that $63 billion in big bank profit somehow just isn’t enough. New York magazine declared that, faced with tighter regulations and falling profits, Wall Street had been fully emasculated.

Which is strange because on aggregate Wall Street pay actually rose 4% last year – this despite, as DealBook notes, the industry losing a net of 20,000 jobs since late 2007. Over the past two years, according to data compiled by the New York State Comptroller’s Office, securities industry salaries rose 16.6% to an average of $362,950 – or 5.3 times the average New York City worker’s salary.

Total compensation is up, but this year’s bonuses may be down, partially because of the rise of deferred compensation. Cash bonuses – for work done in 2011 – are projected to be down 13.5%, and Mark Decambre reports that traders could see their bonuses slashed by as much as 35% this year, after cuts of up to 30% last year.

Are Wall Street’s CEOs happy with ever-rising salaries? Morgan Stanley chief James Gorman isn’t. He’s cutting 7% of his workforce, and told the FT last week:

There’s way too much capacity and compensation is way too high. As a shareholder, I’m sort of sympathetic to the shareholder view that the industry is still overpaid.

A new report by McKinsey, also coming from the point of view of shareholders, argues that banks are merely “belt-tightening” rather than instituting more difficult cost-cutting. And when it comes to headcount, there’s a big difference between western Europe — which is shedding 30,000 banking jobs this year alone — and the US. A recent report by Nomura analyst Glenn Schorr noted that several large banks had actually added jobs this year.

And if you believe banks’ employees, the current trends will stay in place. 48% of respondents to a new survey expect their bonuses to be higher this year; 58% said they expect their bonuses to increase or stay the same over the next three years. — Ryan McCarthy

On to today’s links:

Facebook tried to hide crucial details of its mobile ad sales from the SEC before its IPO – Bloomberg

Why is the government afraid of this iPhone app created by ex-Navy Seals? – BuzzFeed

Goldman thinks it may have found a loophole in the Volcker Rule, shocking no one – WSJ
Capital rules for UK banks are being quietly relaxed – FT

The US economy may have slipped into a new, lower-employment equilibrium – Tyler Cowen
Financial regulators all “want to ringfence something. They just can’t agree on what.” – Perry Mehrling
The most overrated intellectual in the world – World Affairs Journal

A hapless Bain Capital analyst wrote to Nick Denton about investing in Gawker – Gawker

US sues Wells Fargo for allegedly lying about the condition of its mortgages for over a decade – DealBook
The complete US lawsuit against Wells Fargo – Department of Justice

Why America’s underemployment problem isn’t as bad as you think – FT Alphaville
Single moms more likely to work than married moms and just as likely to work as single women without children – Center on Budget and Policy Priorities

JPMorgan’s growth forecasts: even worse than the IMF’s – Sober Look

Data Points
Mexico City’s 1,300 street markets, captured by Google Earth – Edible Geography

Billionaire Whimsy
The CEO who built himself America’s largest house threatened to fire his employees if Obama wins – Gawker

AOL’s stock has outperformed Apple, Google and Microsoft over the last 12 months – Bloomberg

The Fed
How Ben Bernanke turned America into refi-nation – Businessweek

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