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New Normal on Wall Street: Smaller and Restrained
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Issue
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| Contributor | RP |
| Last Edited | RP Jan 20, 2012 12:09pm |
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| Category | Analysis |
| Author | PETER EAVIS and SUSANNE CRAIG |
| News Date | Friday, January 20, 2012 06:05:00 PM UTC0:0 |
| Description | With firms like Goldman Sachs and Morgan Stanley reporting weak results for last year, Wall Street is having to confront doubts about itself.
Some of the forces that weighed on earnings last year — like Europe’s government debt crisis and a sluggish United States economy — could go away. Yet Wall Street still faces permanent pressures on profitability, particularly stricter regulations aimed at making the financial system safer. For instance, Wall Street firms cannot borrow such large amounts of money and make bets with it. With much less of this kind of leverage, the game is changed — perhaps forever.
Wall Street employees are feeling the squeeze this bonus season, which is going on right now. In 2011, Goldman set aside $12.22 billion to pay compensation and benefits for its 33,300 employees. That comes out to around $367,000 per person. In 2006, the firm paid out $16.46 billion in compensation and benefits, or roughly $621,000 per employee. At Morgan Stanley, which lost money in the fourth quarter, cash bonuses were capped at $125,000 per person.
At Goldman Sachs, some young analysts — a group that could earn year-end cash bonuses of up to $80,000 in better years — were given as little as $20,000 this year, according to one person with knowledge of this year’s numbers. |
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