Wall Street Bonuses to Fall 50% to 2002 Levels, Officials Say

I could care less if you call my post a rumor - but my buddy was formally told that his bank's bonus pool is going to be down 90%. And it's a tier 1 IB. Completely agree with you that unemployment is more important for RE - but if the entire bonus pool is down 90% it's going to kick RE in the balls in a couple months.

I know you are wrong because there is no such thing as an investment bank. And I'm kidding around with you, but when I hear it second hand on a board, it is kind of definitionally a rumor. Taken at face value, you could say 1/2 the firm is getting zeroed and the other 1/2 is getting half their 2007 bonus or less. That would get you to 25% and its very easy to believe. Also, I'm not sure what the tiers are anymore...Is tier 1 'in existence'? I guess tier 1 would be Goldman, Morgan Stanley and CSFB? Tier 2 would be Citi, B of A and ummmm, is that all of them? Then you have the boutiques/large boutiques, places like Jefferies. I know former collegues at DB have been prepped to receive about 1/2 of 2007 levels for 2008...The ones still there.

Is he at MS?

Oh here is a datapoint... I went into MS to take about an opportunity a couple of weeks ago. The total comp being considered is 2003 trough level for a similar role, roughly 1/2 of 2006-2007 peak, roughly 1/2 of what someone in a similar role was expecting to be guaranteed to move over to my old shop in Q1 2008. That person is no longer with MS.

Can your maid translate this?

Para ese que se hace, pero nunca gana
Tira ese jamon en la pala
Y gana como rana, rana, estoy en la pista
Me siento como el hijo que conquista
No me hagas romperte fuerte
La silla me tiene como General Electric
Y las luces brillando, estoy pensando
No es lo mismo cuando estoy tomando
Ohh! mi mente despacio (despacio)
Por eso yo no trago del 4.0
Brother dame la yerba
Porque un negro como yo ta perdiendo la cabeza...

[Chorus x4:]
Medio loco en el coco...
(Ido de la mente!)

Several of the firms I deal with directly are using this fuzzy math. Say your dept paid out 50mm in bonus in 2007. Logic says 40% reduction =30mm for 2008. Lets say in Sept and Nov you fired a bunch of people that in 2007 received 20mm in bonus. Now lets go back to 2007, your baseline comparison becomes 30mm reduce by 40%=18mm for 2008. But in reality your dept is 50mm vs 18mm=64% reduction. Thats what's happening. Won't play well for NYC or NY State tax collections. The 10013 comment was referring to Wachovia. Unless there is another I'm not aware of yet.

The 90% drop is consistent with news coming out of Wachovia (admittedly not a tier 1 bank, but still an interesting data point).
http://dealbreaker.com/2008/12/bonus-watch-08-wb.php

I'm having trouble wading through all of the anti anti sentiment on Streeteasy.

Rents are too high
Real estate is too pricey
Brokers make too much and do too little
Wall Street employees don't deserve compensation
State employees don't deserve a pension
Teachers don't deserve tenure
Detroit companies and workers don't deserve help and are the root of many problems

Exactly WHO do all of the streeteasy people think actually is worthy of being able to participate in our system?

Samename, your post is not witty. Sorry.

Agree, Rhino. Samename, a prime REASON this country, in fact, the developed world, is on the brink of depression is that the real estate bubble got ENTIRELY out of hand. Anyone who has lived a little - i.e., this house i bought is NOT my first house - and has some perspective of historical value realizes how silly this was. While there is lots of blame to go around, including more than one federal agency, a big part of the blame goes to real estate industry shills. David Lereah, the Cheerleader-in-Chief at the NAR, and his lackey-boy who followed him, Lawrence Yun ("BUY!BUY!BUY!") are prime culprits. So are the Realt-Whores, the community college dropouts with little more in the way of assets than a ready smile and augmented breasts, who encouraged people to throw away their life savings solely because they could leach 6% off the transaction. Mortgage brokers get much of the blame as well. As for teachers, state employees, auto workers and the rest - let them compete on an even playing field, on the basis of supply and demand, and no one has any problem with them. Their unions are simply extortionary schemes and no longer serve the purpose unions were established for 90 years ago: Legislation now prevents unsafe work environments and excessive hours; unions are little more than a shakedown of the consumer and the taxpayer at MY expense.

As for real estate, it is STILL too high, much too high, and the economy will not hit equilibrium until it corrects. So stop the bailouts, stop the moratoriums on foreclosure, and get on with it.

I'm a purist and in some sense a libertarian. Let the buyer beware, both of the big breasted broker and the slimy lending officer. A woman should be able to use her looks to sell real estate. Anyone who looks to their broker (or worse still, a sellers broker) is just being igorant. They need not be held to that standard.

Cycles are natural, as are lying self interested parties. Also, it was the law of unintended consquences, in this case of Fannie Freddie affordability and low interest rates to save us from a real recession in 2001-2002.

The funny thing about teachers is, I rarely meet one who despite not earning enough managed to work over the summer. There is not a shortage of teachers. There is a shortage of teachers to teach in shitty schools. They line up to teach at bucholic prep schools. Economics works. They need hazard pay.

Unions should actually get everything they can get, just like employers do. However, they run the risk of succeeding too much and putting their employer out of business. The autos and UAW alike should be forced to sleep in that bed. Take the bailout money and retrain workers to contribute to something that makes money, unlike making cars with GM.

Well Stated, Admiral.
It's gonna be a very bumpy ride for a long time. The way things are looking now, I don't see any leaders in gov or industry who have the guts to say "Enough!", no more bailouts, no more tarps, let's go through the pain, the ch. 11s (& if necessary, ch 7s) and truly re-structure our industries, institutions & mentalities, bring back manufacturing to the US & start anew.

Actually the last one was Volker....and then Reagan fired him haha. Why is it always the poor owner or asset holder and not the poor SOBs who might actually be able to afford a home if prices went to a natural equilibrium.

Admiral... david lereah aka baghdad bob, bring back the memories. the best was when he confessed after he left the NAR.

msm used to quote him almost everyday before hi sdisgraceful exit.

interesting how volker was selected by obama. might have been put in place to clean up the mess afterwards, if you know what i mean.

oh well, volatility

MMafia - LOL. The "Baghdad Bob" comment is priceless. Let me explain for the rest of the board: While he was still at NAR, Lereah's lies were so outrageous ("we think housing prices can continue to grow at double digits indefinately") that people compared him to Saddam Hussein's information minister, Muhammad Saheed al-Sahaf (aka, "Baghdad Bob"). As CNN showed Americans in charge of the Airport and making hourly encroachments toward the palace, Baghdad Bob would go on TV and assure the world "The americans are dying like dogs" and "let me repeat: there are NO Americans anywhere near the Baghdad airport, we have slaughtered them all!" God, it was classic.

http://www.welovetheiraqiinformationminister.com/

"Brother dame la yerba"

My favorite line.

"Rents are too high"

Compared to incomes, true.

"Real estate is too pricey"

Compared to rents, true.

"Brokers make too much and do too little"

At least the first part is true. If it weren't an oligopoly, economic theory says that commission rates would have to fall as property prices rose. They did not.

"Wall Street employees don't deserve compensation"

Of course they do. Just not excessive short-term bonuses paid on long-term risk, and certainly not when that risk has brought them to bankruptcy, or close.

"State employees don't deserve a pension"

No one said that. They don't deserve more than the free market would pay, however, and they do.

"Teachers don't deserve tenure"

Agreed, for the public schools. A job with no accountability that you can't get fired from. Neat. Tenure has its place in universities, not in kindergarten.

"Detroit companies and workers don't deserve help and are the root of many problems"

No unprofitable business deserves to be propped up, because in the end it leads to social bankruptcy. Ask Margaret Thatcher and the colliers.

samename, you need a course in economics, and economic history.

"unions are little more than a shakedown of the consumer and the taxpayer at MY expense."

Not really. They serve a purpose. So does bankruptcy.

But I agree with the rest.

"Exactly WHO do all of the streeteasy people think actually is worthy of being able to participate in our system?"

You know the answer. Ask each of the groups you listed and you'll find a healthy proportion of each group believes that no one in each of the other groups deserves what they're getting. That's the sentiment some people are expressing here, and most people who don't share that anti-anti sentiment aren't very vocal.

lowery/samename - anyone who can type is worthy of being able to participate (even some who don't type so well). Even you.

This isn't an exclusive club, it's a discussion board, people in many situations with many opinions post here. Get over yourselves.

"Exactly WHO do all of the streeteasy people think actually is worthy of being able to participate in our system?"

Why are you confusing "participating" with giveaways we can't afford.

Back to the original thread - bonus pools:

Credit Suisse - confirmed at 90% down.

Wachovia - confirmed at 90% down.

Morgan Stanley - confirmed at 75% down as whisper guidance, actual % TBD in a couple weeks.

Have heard guidance at other shops of 50-75% down but that was as of a couple months ago. All of the banks usually pay within a 5-10% range of each other - I'm betting they all end up at 75-90% down - staying in the middle of the pack avoids more bad press and trips to DC to explain bonuses.

I dunno, I don't think those still employed, who got a $300k bonus last year are getting $50k this year.

Rhino - we'll see over the next month but I disagree - I think you'll definitely see the avg guy who got 300k last year getting 50k this year.

Who won't be able to make their mortgage payments?

Keep in mind that there are fewer folks going for the same pool.

So the $300k guy will get $65k.

"confirmed at 90% down"

Link?

I know from a friend that JPMorgan did layoffs two weeks ago. People who were severed (associates & VPs) got a $50k "bonus" (paid with normal bonus) in addition to 3-6 months severance, depending on years of service. I doubt they'll be paying people who stayed less than they paid people who keep their jobs.

Comp will still be WAY down, but it is safe to say people who keep their jobs should get a lot more than those who didn't.

Its all moot... Its the numbers of renters who now have no confidence to buy and the owners who live year to year on prior years bonus. You can't live in NYC on your $100-200k finance base...not the way these people have been living. Seeing people selling after one year may be the way to find the deperate ones. Check 16 e 96, the one for $1.2mm. Selling for what they paid but they put a lot in. They need to do the second bathroom though. I wonder what the micro story is there.

I'm not disputing the larger point that Manhattan real estate will suffer, I'm just disputing the claim that people who got $300k bonuses this year will get $50k this year, except in those (mortgages, securitizations, etc.) that were directly involved in the writedowns.

My friend told me that IB (M&A and industry groups) revenues are down 35%-40% from last year. He went on to say that headcount seems to be 40% down from last year ...

I could see the $300k bonus people in M&A got last year becoming $100k, but not $50k, except for, again, the groups that have been most directly responsible/impacted.

It doesn't change the fact that these people won't be buying and may have trouble making their mortgages.

I agree. The people I know still employed expect 1/2 not 1/6. Basically its 2003 comp levels. The hedge fund folks expect zero...and in pure numbers of poor-feeling hege fund analysts who earned $400-800k in 2005-2007, they are living on $150k now, that may be the bigger impact at the margin. All those sideline buyers are gone, and many may be in apartments they can't afford. They are walking away from condo deposits I imagine on these preconstruction places. They are trader mentality and realise they are already down more that 10%.

> The people I know still employed expect 1/2 not 1/6

"expect"

nyc - exactly. I have several buddies at Wachovia who "expected" to be down 50% until last week when they found out they're down 90%. Expectations are worth about a penny.

Its all a guess. The bottom line is you are either a buyer or not a buyer. Gettng paid anything 1/2 or less than in 2007 likely puts that person on the fast lane to the sideline. The demand side of this is atrocious and if interest rates move up, 50% down is gonna look like wishful thinking. Thousands of hedge funds have tens of thousands of employees who are -100% on a bonus basis. And let me dare someone to say the hedge funds have not had a big impact on the real estate market in 2004-2007.

Some buyside firms are taking a lower haircut. A friend got told of a 10% drop from 500K to 450K. Not bad in this market.

"The bottom line is you are either a buyer or not a buyer."

I would say, "you are either a lunatic or not a buyer". Any "buyers" in this market (and, indeed, a fair amount of "holders") can be characterized as just plain stoopid...

Hey I'm not a buyer...my only point is if someone gets 1/2 or 1/10th of their 2007 bonus in 2008 then they are probably no longer in the market to buy (if they ever were). Arguing degrees of bonus decline is moot because like I said, its a switch...someone is either looking to buy or not. And yes, no one is.

"And yes, no one is."

I dunno. I still see no end of stoopid people who say "Its gotta be a bottom! This is the time to BUY!". Idiots. They have reference point bias; they define 2007 as "normal" and anything below as "a bargain".

To paraphrase Lincoln, "God must love stoopid real estate people, because he made so many of them..."

Well I say no one is, because otherwise the volume of transactions would be much higher, given that many sellers are conceding the 15-20% if not in the asking price through the brokers' winks and nods. If these people you describe were the norm, I think we'd see more transaction, because most sellers would take 80-85% of peak unless they are really really ill advised.

"If these people you describe were the norm"

Steve seems to attract flak from posters who think there will be a small, short decline or that a 50% haircut is "not even possible". These people may or may not be "the norm", but they are certainly far from normal...

Admiral, I think the message there is those are all owners. The market will be made by those who don't own. As I think you know, the opinion of owners doesn't matter. The opinions of buyers and potential buyers matter.

This is a double whammy for Wall Streeters. Not only is the 2008 bonus going to be significantly lower the restricted stock that is becoming unrestricted is worth 10-30% of what was expected 6 months ago. It's a triple whammy for anyone who had their excess capital invested in stocks, commodities or hedge funds. I have no idea how NYC avoids bankruptcy without State or Federal aid. Looks like Obama is going to have to load up a few barges of cash to deliver to Bloomberg or we'll all be walking to work during the day and joining citizen patrols at night.