Wall Street bonuses shoot up

New York - Wall Street bonuses climbed 17% in 2009 to $20.3bn as many of the investment banks that were bailed out at US taxpayer expense reported blowout profits.

The announcement on Tuesday by New York Comptroller Thomas DiNapoli was likely to outrage many Americans who are barely getting by. And it happened on the same day that private economists reported a plunge in consumer confidence - a blow to hopes that spending by shoppers would help speed up an economic recovery.

"Wall Street is vital to New York's economy, and the dollars generated by the industry help the state's bottom line," DiNapoli said. "But for most Americans, these huge bonuses are a bitter pill and hard to comprehend. ... Taxpayers bailed them out, and now they're back making money while many New York families are still struggling to make ends meet."

The reason for the surge in bonuses was simple: Wall Street firms had a great year.

Broker-dealer operations associated with the New York Stock Exchange earned a record $49.9bn through the year's first three quarters. The firms probably closed out the year $55bn in the black, DiNapoli's office said.

The 2009 bonuses were actually modest compared to the bonanzas Wall Street workers enjoyed between 2005 and 2007. The annual payout in those gilded days averaged $31bn, or around $173 000 per worker.

The average bonus in 2009 was $124 850, according to the comptroller's projections, although that number was likely skewed by high bonuses among top earners at the largest firms.

In 2008, Wall Street firms gave out $17.4bn in bonuses, even though the year was one of their worst.

Critics of Wall Street pay said the fact that bonuses are rising even as consumers grow more despondent reflects a growing class divide in the wake of the recession.

"It's exposing a deep rift in American society," said Chuck Collins, a senior scholar at the Institute for Policy Studies, a liberal Washington think tank. "This isn't the rising tide lifting all boats. This is the rising tide lifting a few yachts, while other people's boats sink further underwater."

News of the windfall came amid fresh signs that the public's mood was darkening. A monthly poll gauging consumers' confidence unexpectedly fell to a 10-month low in February as Americans worried more about jobs, the Conference Board said on Tuesday.

The pessimism cast doubt on hopes that shoppers would begin spending more and accelerate a recovery. Economists watch the confidence data closely because consumer spending accounts for about 70% of US economic activity.

At the White House, press secretary Robert Gibbs said President Barack Obama believed that some progress had been made toward curbing executive compensation. But "I think it's fair to say the president remains frustrated and believes that the compensation practices of Wall Street have a long way to go."

Public anger over Wall Street's surprisingly quick return to profitability probably had a role in keeping bonuses lower, said Joe Sorrentino, managing director of the compensation consulting firm Steven Hall & Partners.

He noted that Goldman Sachs CEO Lloyd Blankfein took a bonus of only $9m last year, compared to $68m he received in 2007.

Goldman employees alone received $16.2bn in salaries and bonuses for 2009, or about $500 000 for each of the bank's 31 700 employees.

The comptroller's figures were based on an examination of the 164 000 financial sector workers who live in New York City. The state does not get income data on workers who commute from Connecticut, Long Island and New Jersey.

The banks paid out a huge portion of 2009 bonuses in restricted stock awards that cannot be cashed in for several years. The so-called deferred compensation is not included in the comptroller's figures. It could allow Wall Street employees to walk away with even bigger paydays if banking stocks continue to rebound from last year's market lows.

Scrutiny of high pay for Wall Street executives is likely to continue in the coming months.

New York Attorney General Andrew Cuomo has sought to determine how the size of the bonus pool at the nation's eight biggest banks would have been affected if the banks had not received a taxpayer rescue at the height of the financial crisis in late 2008.

- AP