Counterparties: Bigger slices, bigger pie
Welcome to the Counterparties email. The sign-up page is here, itâ€™s just a matter of checking a box if youâ€™re already registered on the Reuters website. Send suggestions, story tips and complaints to Counterparties.Reuters@gmail.com.
Right now is a lucrative time to be a banker. Profits at US banks rose almost 20% in 2012, to a post financial-crisis high ofÂ $141.3Â billion*. The securities industry, while still unable to match its record-setting 2009 profits, is also doing well, earningÂ $23.9 billion last year, up from $7.7 billion in 2011.
Despite Americaâ€™s persistently high unemployment and tepid growth, its financial employees are doing well. New York Stateâ€™s Comptroller Thomas DiNapoli, in his annual report on the stateâ€™s financial industry, reports that securities firms increased cash bonuses 8% toÂ $20 billion in this bonus cycle. As the WSJ’s Brett Philbin notes, thatâ€™s down 42% from the lofty levels of 2006 — but it still comes to more than $122,000 per banker. Whatâ€™s more, the comptroller’s annual estimate is conservative: it fails to capture many types of deferred pay. For instance, $6.3 million of Citigroup CEO Michael Corbatâ€™s $11.5 million 2012 pay is deferred.
Not only have Americaâ€™s bankers had a good year, they’ve had an excellent two decades. As the Atlantic Wire’sÂ Philip Bump points out, the “last time bankers took home bonuses that were less than the median household income was 1991″.
All is only well, as Susanne Craig points out, if youâ€™re still employed. The financial industry continues to cut jobs: Goldman Sachs will go slightly beyond its annual routine of firing the bottom 5% of its workforce, and JP Morgan announced today that it will cutÂ 19,000 jobs, primarily in its mortgage arm and its retail Chase branches. Those employees’ jobs and pay levels tend to be more Duluth than Darien. — Ben Walsh
*UPDATE: I initially wrote that total US bank profits were for 2012 were $22.9 billion. That number is the increase over 2011, not total profits for 2012, which was the much larger $141.3 billion.
On to todayâ€™s links:
Italy’s election in one headline: “The Winner is Ingovernability” – Reuters
“This is the way the euro ends: not with the banks but with bunga-bunga” – Paul Krugman
The ECB should pledge not to do anything stupid – Tim Duy
How to fix the financial media: forget trading and cover investing – Josh Brown
Thom Yorke on content: it’s “just a filling of time and space with stuff, emotion, so you can sell it” – Guardian