February 08, 2012

The news that Goldman Sachs Chief Executive Lloyd Blankfein is taking a pay cut underscores a new normal on Wall Street: investment banking just doesn't pay what it used to. Now relative to what most Americans make, top performers within the sector are still paid quite handsomely.

Check out Advanced Trading's Top 10 Occupy Wall Street protest signs from last fall.

But it's clear that the combination of a new regulations, - particularly the ban on proprietary trading under the Volcker Rule - weaker income from trading, and political pressure in various countries are driving this trend.

Public outrage over the high salaries and bonuses earned by executives and directors at banks that received bailouts is boiling over throughout the E.U. Last week Spain announced it would cap pay for board members and executives at firms that were kept afloat by taxpayer funds. Banker pay has taken center stage in the U.K. as well.

The trend also appears to be gaining steam at each of the world's top banks. UBS announced this week that it would slash its bonus pool by 40 percent, while Morgan Stanley said in January it would cap bonuses at $125,000. Meanwhile Bank of America reportedly froze base salary levels for some investment bankers and limited their cash bonuses to $150,000. Even JPMorgan, whose profits soared 9 percent last year, revealed plans for a massive cut in investment banker pay. Yet the news that Lloyd Blankfein, arguably the most powerful man on Wall Street at one point, is getting a smaller bonus is a clear signal a new day on Wall Street has arrived. Occupy Wall Streeters should take heart.

From WSJ:

The lower stock bonus for Mr. Blankfein accentuates a year of financial-industry retrenchment, and comes as public sentiment against bankers and big pay packages has risen. Banks and securities firms have been cutting thousands of jobs and doling out the lowest pay and bonuses in years. The firms struggled in 2011 to make money in their traditional trading and investment-banking businesses amid tumultuous markets, looming regulation and cautious clients that effectively stopped taking risky bets with their money.

Last month, J.P. Morgan Chase & Co. disclosed that it paid Chief Executive James Dimon a stock bonus for 2011 valued by the company at $17 million. That is the same as his 2010 award. Morgan Stanley CEO James Gorman saw his 2011 stock-based pay fall by about half, to $5.1 million.

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As the Senior Editor of Advanced Trading, Justin Grant plays a key role in steering the magazine's coverage of the latest issues affecting the buy-side trading community. Since joining Advanced ...