Total compensation for the 1% is something like 40-50% bonus and the rest in salary etc., With the increasing regulatory overlay that Dodd-Frank and other regulations that have brought to Wall Street, the percentage of bonus to total compensation may actually decline (not total compensation).
If 50% of compensation is bonus then a 20% to 30% drop in bonus comp is really 10% to 15% drop in total compensation. If 40% of compensation is bonus then the drop is even less.
Translation: Wall Street pay will be down about 10% from last year seems to be a reasonable data point for the 1%.
That may soften the real estate market for the coming year a bit but I am more focused on job retention on the Street.
Take the Goldman Sachs disclosure last month. Profits plunged 75% but compensation only fell 25% or $292,000 per worker ($540,000 in 2006)
So to repeat. Goldman lost money in the third quarter. It has fewer workers than the same time a year ago because times are tough. But it still found it necessary to allocate a higher portion of revenue for compensation? Come on!
I think I’ve become so cynical about the comp issue and it’s implied impact on the New York City housing market because any negative news such as bonuses or layoffs always seemed to turn out far less damaging than screaming headlines suggest. They are a key economic engine for New York City and yet we don’t really have a grasp on how they are really doing.
Posted by Jonathan J. Miller -Monday, October 10, 2011, 10:26 AM Comments Off
[courtesy of GoComics]
After the housing crash, ensuing political gridlock in Washington, unemployment / underemployment stuck at high levels and no evidence of any solution or vision out of this economic quagmire in sight, the “left” seems to have created their own “Tea Party” but frankly few outside the movement seem to understand what it’s all about. The NYC General Assembly (their name) has been mocked in the media and criticized for having no clear message.
Perhaps that’s the point.
I took a stroll around “Liberty Park” on Saturday morning to get a sense of what it was all about. I’m still not clear but I find this process of organizing fascinating. There’s a great podcast on NPR’s Planet Money that tries to find answers.
It’s amazingly quiet. No yelling or cheering – people are merely holding signs for passersby to read. The police force all pedestrians to keep walking when taking photos. The protesters aren’t allowed to use bullhorns so “facilitators” lead the speech and the crowd repeats it so all can hear. More insights on the NPR podcast.
Posted by Jonathan J. Miller -Monday, February 28, 2011, 7:00 PM Comments Off
There is a thought provoking post over at BankThink, one of my favorite blogs on banking and credit, concerning the documentary “Inside Job” in which the director Charles Ferguson won an Academy Award and I dubbed the movie trailer the “best movie trailer ever.“
In his acceptance speech Ferguson…
When Ferguson took to the stage, he started off by declaring, “Forgive me, but I must start by pointing out that three years after a horrific financial crisis caused by massive fraud, not a single financial executive has gone to jail, and that’s wrong.”
Over the past decade, the Wall Street bonus compensation was the drum that the regional economy beat to. The Manhattan and The Hamptons housing markets seemed to benefit the most and to a lesser degree the outer boroughs and the outlying suburbs in the tri-state region.
When the crisis began more than 2 years ago, all areas in the region were affected in a similar way. In 2010 Manhattan generally improved more than the remainder of the region – look for more differentiation in housing market performance going forward. Not suggesting a boom, just better relative to the remainder of the region.
In 2010, total compensation and benefits at publicly traded Wall Street banks and securities firms hit a record of $135 billion, according to an analysis by The Wall Street Journal. The total is up 5.7% from $128 billion in combined compensation and benefits by the same companies in 2009.
“Things are shifting back to where they were before,” said J. Robert Brown, a law professor at the University of Denver who studies compensation and corporate-governance issues.
Posted by Jonathan J. Miller -Thursday, September 23, 2010, 10:02 PM 4 Comments
Here’s a ditty from a few years ago I forgot about until someone recently sent me the link. A clear explanation of the subprime crisis via Wall Street using humor as a vehicle. It is still surprisingly relevant.
Posted by Jonathan J. Miller -Tuesday, August 24, 2010, 9:01 PM 1 Comment
I keep waiting for the day when I will have my fill of books and movies about the financial market meltdown. Although both myself and my colleagues are arguably getting weary of reading and writing about the financial meltdown, it still gnaws at me the scope of greed and stupidity from all parties. And since the housing market has many years of challenges in front of it, directly as a result of the credit meltdown, its not helpful to simply shutdown and tune it all out, no matter how cynical you are.
The focus seems to be wall street only, yet the consumer, lenders, appraisers, mortgage brokers and rating agencies were just as complicit. Of course I haven’t seen the movie yet.
Here’s the movie pitch;
From Academy Award® nominated filmmaker, Charles Ferguson (“No End In Sight”), comes INSIDE JOB, the first film to expose the shocking truth behind the economic crisis of 2008. The global financial meltdown, at a cost of over $20 trillion, resulted in millions of people losing their homes and jobs. Through extensive research and interviews with major financial insiders, politicians and journalists, INSIDE JOB traces the rise of a rogue industry and unveils the corrosive relationships which have corrupted politics, regulation and academia. Narrated by Academy Award® winner Matt Damon, INSIDE JOB was made on location in the United States, Iceland, England, France, Singapore, and China.
The trailer is slickly produced and gets your blood boiling. Since Matt Damon isn’t in the trailer as narrator, I’m guessing they are still wrapping up production.
My friend and business associate Dan Alpert of Westwood Capital is one of “The Cast” members: Founding Managing Director of Westwood Capital with more than 30 years of investment banking experience, and a frequent commentator on economic policy and financial regulation.
The movie will be released in October. Judging by today’s dismal existing home sale numbers, I’m fairly confident the documentary’s content will be just as relevant in the fall as it is now.
Posted by Jonathan J. Miller -Wednesday, June 23, 2010, 12:01 AM Comments Off
Robert Moses, the Master Builder of New York, famously uttered these words at the groundbreaking of Lincoln Center in NYC.
You cannot make an omelet without breaking eggs.
I highly recommend The Power Broker by Robert Caro (and his LBJ trilogy) that chronicles Moses’ life but make sure you dedicate a lot of time – it’s a long read.
Amid the scrambled (sorry) state of financial reform going on in Washington right now is the underlying newly realized immovable object and the likely outcome for Wall Street:
Lower Risk = Lower Compensation
Ok, eggs not a great analogy but I needed to squeeze one of my favorite quotes of all time in somehow. Lower leverage is in the future of Wall Street. Take lower risks and there are lower returns to firms eventually translating into lower compensation, translating into tempered housing demand.
The final guidance is similar to what the central bank proposed in October, but would now apply to the entire banking industry. Previously, its efforts targeted only holding companies and state-member banks…
The final guidance did not change the three initial goals of the Fed’s proposal: providing incentives that appropriately balance risk and financial results and discourage risk taking; matching “effective controls and risk management”; and supporting corporate governance.
Much has been made in recent months of last year’s record profits on Wall Street, the myriad ways (near-zero interest rates, bailouts, accounting rules changes) that government policy boosted those profits, and the seven or eight figure bonus packages that some Wall Street executives awarded themselves from those profits. There has been less said, however, about what happened to aggregate wages and salaries across the securities industry in New York City in 2009. Not only did wages fall, but the fall was the steepest in modern history—including the Great Depression.
Adjusted for inflation, average wages in the securities industry plummeted 21.5 percent in 2009 and 24.6 percent over two years.
A key economic engine in the New York City metro area that provides 25% of personal income and 5% of the employment and creates 2.5 private sector jobs for each securities job, this should also be a concern for sustainability of the current level of housing demand.
Had a fun interview with Tom and Sara this morning on the always MUST watch/listen Bloomberg Surveillance. We talked housing, rentals, vacancy and inventory. An added bonus was the addition of Adam Davidson – co-founder and co-host of Planet Money... Read More
