Economic recovery may still be far off in the horizon but some people are simply slated to see the silver lining much earlier than the rest of the country.
After a quick respite from huge pay increases and bonuses by the millions, workers of top Wall Street banks are all set to receive as much income as they did before the financial downturn, buoyed by solid gains in the first three months of the year.
Good Income, Good Pay
A review of banks’ financial statements reveals that six of the country’s largest banks have set aside a total of $36 billion from the first quarter profits as reserves for additional employee compensation, with much of it going to bonuses.
If this pace continues for the rest of the year, bank employees who laid low on bonuses in the past year stand to get roughly the same amount in bonuses as they did in better times.
Financial analysts see this move of giant banks as investing in “human capital,” that is, investing in the very people who are instrumental in maintaining the institution’s current status. As Sandy Gross, managing partner of financial recruiting firm Pinetum Partners puts it, “Wall Street is just being realistic.”
Others however, are not as easily swayed by this argument. Collective outrage over reported huge bonuses for executives of banks that received TARP funds last year still ring fresh in the public’s mind. “Like everything on Wall Street, they’re starting to sin again,” said analyst Brad Hintz of Sanford C. Bernstein.
It is worth noting however, that the banks are actually operating with smaller, leaner workforces what with the layoffs in the previous months, so even if there are adjustments along the way, they are not actually spending more on wages.
Getting Down to the Numbers
Of these banks, Goldman Sachs is on top of the list as the bank that has appropriated the most compensation per person. After making deep cuts to its budget for employee wages last year, the bank has set aside $4.7 billion for worker pay from its revenue last quarter. If it manages to maintain this figure for the rest of the year, employees could receive an average of $569,220 per person.
Goldman Sachs representative Lucas Van Praag is quick to point out though, that the bank is merely exercising “sensible husbandry” and such reserve funds will not be appropriated if the bank does not continue to do as well as it did in the first three months this year.
For JPMorgan Chase, adjustments in the compensation would depend mainly on how the respective division of that employee fared. The bank has put away about $138,234 on the average for workers pay. The stakes are higher in its investment banking division however, where each of the employees can receive up to $509,524 for the year if profits from this department continue to boost bank revenues up. This amount is definitely a lot more than the average income these workers had in 2006 which was $345,147.
In coping with criticism on their reportedly high pay scales, banks are attaching certain conditions with these fat paychecks. For instance, some banks have stipulated their right to take back bonuses if the bets made by these bankers later lose money.
In other institutions, a big part of the bonuses is given out as stocks which could lose value if the bank stocks fail to do well. Still others are handing out bonuses to deserving employees by way of additional benefits such as health care, retirement funds, or severance pay.