Bonuses for those fat cats working on Wall Street are ... down?
Last year was a sluggish one for Wall Street investment bankers. Their bonuses declined by 9 percent on average, along with the industry’s 10.5 percent decline in profits.
That means the average New York City banker earned a $146,200 bonus last year, down from $160,280 in 2014, according to data released Monday by the New York state comptroller, Thomas P. DiNapoli. Bonuses had reached an all-time high before the mortgage meltdown, averaging $191,360 in 2006, reports USA Today.
The weaker bonuses are a result of declining profits at banks such as Morgan Stanley, Goldman Sachs, and Bank of America, which have watched profits decline for three straight years, with 2015 seeing the lowest level reported since 2011.
The pre-tax profits of banks in New York City declined by nearly $1.7 billion to $14.3 billion in 2015, reports Comptroller DiNapoli, largely because of a global economic downturn and massive legal settlements with regulators, the costs of which are declining after an 83 percent jump between 2008 and 2014.
“While the cost of legal settlements appears to be easing, ongoing weaknesses in the global economy and market volatility may dampen profits in 2016,” predicts DiNapoli.
Banks are already cutting costs to prepare for a slow 2016.
Morgan Stanley, whose stock value declined 18 percent this year, cut a quarter of the jobs in its fixed-income business late last year. Goldman Sachs plans to cut 5 percent of traders and salespeople in the same field, reports Bloomberg. And Bank of America, which cut more than 10,000 jobs last year, will let go of 150 trading and investment-banking employees this week.
But in the grand scheme of things, Wall Street employees are still much better off than most other workers.
Their average salary, including bonuses, rose 14 percent in 2014 to $404,800, setting a new record, reports DiNapoli. (Salary data for 2015 are not yet available.) That was more than five times higher than private industry salaries in the rest of New York City, which averaged $72,300. And it was nearly eight times higher than the median household income in the country, which was $53,657 in 2014.
And despite the recent layoffs, employment in the securities industry in New York City grew by 2.7 percent in 2015, though the industry remains smaller than it was before the financial crisis.
Wall Street's woes will not trickle down Main Street's economy, says Greg McBride, chief financial analyst at Bankrate.com, a financial information website.
“It certainly has an impact on the New York City economy,” Mr. McBride told The Christian Science Monitor in an interview, “but it’s not something that has an impact or connection to retail banking for most Americans.”
The slowdown will take a bite out of New York city and state tax revenues though, which depend heavily on the local finance industry, said DiNapoli.
“Although the securities industry is smaller, it is still one of New York City’s most powerful economic engines,” DiNapoli said in Monday’s report.
About one in nine New York jobs are generated by the industry, which accounted for $4 billion in city taxes – 8 percent of all city tax revenue in 2015 – and 18 percent, or $13 billion, of state tax collections.
