Wall Street firms are setting aside billions of dollars to make bonus payments to employees after receiving $1.25 billion in taxpayer money this week from the government to shore up their balance sheets.According to this MSNBC video (see below), this realization may be a bitter pill for most Americans to swallow since they blame Wall Street's greed for causing the global financial meltdown and the erosion in their 401K accounts. It's always been the case that investment bankers, traders and brokers earn 40 percent of their compensation from salaries and 60 percent from end-of-year bonuses.
According to analysis by Bloomberg News cited in the video, Goldman Sachs set aside $6 billion-to-$8 billion for an average payout of $210,000 per employee; Morgan Stanley put away $6.4 billion for an average payout of $138,000 per employee and Merrill Lynch has stowed away $6.7 billion for an average payout of $110,000 per employee, which is higher than in past years because there are fewer employees. This may not go down well in the middle of America where the average person earns $45,000 a year. On the other hand, we're reminded in the video that professionals go to Wall Street to make a lot of money, so there's nothing unusual about that, and if firms don't pay their people they won't retain them.
Furthermore, firms have set aside the money, but haven't made decisions on the bonus payments yet, according to the report. So will there be a backlash against bonuses?
In the short term, no one can stop the firms from doing what they need to do to retain their best people. However, with the taxpayers footing the bill for the bailout, Barney Frank, chairman of the House Financial Services Committee, warned in the video that if Wall Street hands out those bonuses, it can bank on Congress passing new legislation to place limits on this kind of compensation, which he called a "perverse incentive."
Here's the video: Wall Street firms are setting aside billions of dollars to make bonus payments to employees after receiving $1.25 in taxpayer money from the government to shore up their balance sheets. Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio