|  | | 2007 News and Press Releases | | |
HEADLINE NEWS:
Despite Wall Street Losses, Bonuses Are Expected To Grow
Christine Harper - Bloomberg News
International Herald Tribune. November 19, 2007
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EXCERPT: Shareholders in the securities industry are having their worst year since 2002, having lost $74 billion in equity. But that will not prevent Wall Street from paying record bonuses, which are expected to total almost $38 billion. That sum is to be divided among about 186,000 workers at the five biggest U.S. securities companies - Goldman Sachs Group, Morgan Stanley, Merrill Lynch, Lehman Brothers Holdings and Bear Stearns - each of whom will receive an average of more than $200,000, according to data compiled by Bloomberg. The five companies paid $36 billion to employees last year. The increased bonus pool results from a record $9 billion in fees for arranging acquisitions and $5 billion for underwriting initial public offerings and sales of junk bonds, the most lucrative securities, Bloomberg data show. Record fees are making 2007 highly profitable for the industry as a whole, despite the subprime mortgage market collapse, which led to losses at Merrill and Bear Stearns. The last time bonuses declined was 2002, when the Standard & Poor's 500 index fell 23 percent and Enron and WorldCom went bankrupt. Record earnings at Goldman and gains at Morgan Stanley and Lehman mean higher bonuses even though all the companies but Goldman lost more than 20 percent of their market value, said Charles Geisst, finance professor at Manhattan College in Riverdale, New York. "They're all going to have to fall into line," said Geisst, author of "100 Years of Wall Street." "If Bear and Merrill plead poverty, they're going to lose all of their good people." John Thain, Merrill's newly appointed chairman and chief executive, is already grappling with the bonus issue, and he will not step into the job until next month. Thain, whose contract calls for him to receive at least $44 million in cash and stock, payable over five years, said top performers would receive bonuses, while those involved in the subprime market collapse that led to an $8.4 billion third quarter writedown would be penalized. |
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