A Bigger Paycheck on Wall Street
The financial industry in New York has slashed jobs by the thousands over the last two years. For those who remain, annual compensation in total is at near-record levels, according to a report released Tuesday by the New York State comptroller.
Since the financial crisis, Wall Street firms have wrestled with two competing market forces. Faced with a heavier regulatory burden, a lethargic economic recovery and the loss of once-big moneymakers like complex derivatives tied to mortgages, the banks have instead tried to cut their biggest expense: people. Yet there persists a view on Wall Street that profits can’t come simply by holding the line on costs — big pay is still needed to lure talent from other firms.
Toward that end, firms have sought to cut jobs and noncompensation expenses rather than compensation itself. Both Goldman Sachs and Bank of America have announced big noncompensation cost-cutting efforts over the past year, for example.
The result is that compensation over all continues to rise even as some shareholders press firms to cut costs further amid weak profit growth. (Nearly half of all revenue on Wall Street is earmarked for compensation; in 2009, Morgan Stanley, which was hit harder during the crisis than most of its rivals, found itself paying out a record 62 percent of its net revenue in compensation and benefits. That number has since come down.)
The report showed that total compensation on Wall Street last year rose 4 percent, to more than $60 billion. That was higher than any total except those in 2007 and 2008 — before the financial crisis fully took its toll on pay.