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Wall Street's Bonus Pool Gets More Shallow

New York State Comptroller Thomas DiNapoli wades in with his annual tally, estimating a 14% reduction in Wall Street bonuses last year, to $19.7 billion. That's a kiddie pool compared to 2006's Olympic-sized $34.3 billion payout.

February 29, 2012

Wall Street bonuses declined by 14 percent in 2011, to $19.7 billion, a result of falling securities industry profits, according to an estimate released February 29 by New York State Comptroller Thomas DiNapoli.

The average bonus dropped by 13 percent, to $121,150, slightly less than the fall in the overall bonus pool because it was shared by fewer workers than in 2010. The bonus pool peaked in 2006 at $34.3 billion.

The decline reflected "a difficult year on Wall Street," DiNapoli said. "The securities industry, which is a critical component of the economies of New York City and New York State, faces continued challenges."

Profits for the broker/dealer operations of New York Stock Exchange member firms fell by more than half for the second consecutive year, to $13.5 billion, the comptroller said. And compensation costs chewed up a greater share of net revenue in 2011, at 52 percent through the first three quarters vs. 47 percent for all of 2010.

DiNapoli said that while a number of firms announced bonus reductions of 20 percent to 30 percent, he found a smaller falloff—likely because payment of some bonuses were deferred from earlier years.

After gaining back 9,600 of the 28,000 securities industry jobs lost during the financial crisis, Wall Street once again began shedding positions in the second quarter of 2011. Between April and December, it lost 4,300 jobs, DiNapoli said.

The comptroller's estimate is based on data from personal income tax returns and reflects cash bonuses and deferred compensation for which taxes have been withheld. His projection is in line with what city budget officials and the Independent Budget Office expected, though it was less than the drop off expected by the state.

"Declining bonuses and profits on Wall Street are likely a reflection of the effect of regulations coming out of the recession that are now starting to take shape," said Doug Turetsky, chief of staff a the Independent Budget Office. "It's likely we'll see a less profitable Wall Street, at least in the short term, and see that reflected in the level of tax revenues generated by the industry."

Before the financial crisis, business and personal income tax collections from Wall Street accounted for up to 20 percent of state tax revenues, but that contribution fell to 14 percent in 2011. It dropped to 7 percent, from 13 percent, in the city.

Filed by Daniel Massey of Crain's New York Business, a sister publication of Workforce Management. To comment, email editors@workforce.com.

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