BizJournals Portfolio
Home >   Business Views, Opinions and Blogs >   Business Blogs >   Market Movers >  

The Bonus Bet

Market Movers

by Felix Salmon
Main
Merrill: How to do a Conference Call Right   The Upside of Low Housing Starts

Recent Blog Posts

Links

Jan 17 2008 12:00am EDT

The Bonus Bet

Some loyal readers may recall that back in October I entered into a wager with Jesse Eisinger, who had written in Portfolio that "bonus season this year will make Montgomery Burns look generous". If aggregate Wall Street bonuses fell by at least 10% in 2007, I'd buy him a bottle of Scotch; if not, he'd be the one doing the buying.

Now that Merrill has reported, all the numbers are out. According to Bloomberg, Wall Street bonuses in 2007 totalled $39.34 billion, up 8.7% from $36.19 billion in 2006. Of the five independent investment banks on Wall Street, only Merrill Lynch and Bear Stearns saw their bonuses fall: the rest saw rises.

Part of the reason I won the bet so easily is that total headcount on Wall Street grew substantially in 2007, from 165,293 to 185,687: a rise of 12.3%. Aggregate bonuses per employee, then, ended up falling from $218,945 in 2006 to $211,862 in 2007. But even that is a pretty modest drop of just 3.3%.

What happens if you exclude the uniquely-profitable Goldman Sachs? Ex-Goldman bonuses were $26.32 billion in 2006, and $27.23 billion in 2007. There's still an increase, although it's now only 3.5% rather than 8.7%.

All of this does help to explain how Manhattan property prices have managed to defy gravity even as the rest of the country is suffering through a nasty housing-market crunch. New York is an industry town, and that industry is continuing to pay its employees extremely well.

blog comments powered by Disqus
Real Business, Real Results
Out of the 'Family'

Did anyone at Microsoft ever watch the (gasp!) offensively funny show Family Guy?

Cruz Missile Lands

Ex-Morgan Stanley exec Zoe Cruz is now heading her own hedge fund. Are Wall Street's leaders done?

Scandal Chic

Martha, Bernie and Skilling know that what you wear for court can go a long way in public perception.

spotlight on

Health Care

Bad to the Bone No More

Companies such as General Mills say they're stepping up efforts to change employees' bad behavior and promote healthier lifestyles. Read More