Top workers at four big investment banks will get $30 billion extra amid mortgage crisis.
NEW YORK - This might have been one of Wall Street's most dismal years in a decade, but that hasn't stopped bonus checks from rising an average of 14 percent.
Four of the biggest U.S. investment banks - Goldman Sachs Group Inc., Morgan Stanley, Lehman Bros. Holdings Inc., and Bear Stearns Cos. - will pay out about $49.6 billion in compensation this year. Of that, bonuses are traditionally estimated to represent 60 percent, or almost $30 billion, of the total.
That might not sit well with investors who held on to investment bank stocks this year - and watched them plunge by as much as 45 percent. Investment houses have been slammed by the mortgage-default crisis, and top Wall Street executives said this month that they have yet to see a bottom.
Although some top managers - such as John Mack at Morgan Stanley and Jimmy Cayne at Bear Stearns - have said they will forgo their bonuses this year, Wall Street's top performers among traders and investment bankers will likely see some significant compensation as an incentive not to defect to other firms. Meanwhile, underperformers will suffer, executives at the banks said.
Morgan Stanley said compensation rose 18 percent this year to $16.6 billion from $14 billion last year. The investment bank reported the first quarterly loss in its history last week amid a $9.4 billion write-down due to the credit crisis.
Bear Stearns, the fifth-biggest securities firm, posted the first loss in its 84-year history a day later after a $1.9 billion write-down. It reduced compensation this year by 21 percent, to $3.4 billion from $4.3 billion in 2006 - and members of its executive management committee, such as Cayne, won't be collecting year-end bonuses.
"Compensation levels need to be maintained to reflect market levels," chief financial officer Sam Molinaro said.
At Lehman, compensation rose 9.5 percent to $9.5 billion, with bonuses accounting for an estimated $5.7 billion. The firm announced losses this month, but managed to offset most of its mortgage write-downs and beat Wall Street expectations. The head count at the investment bank rose 10 percent this year.
Still nervously waiting to find out about bonuses are employees of Merrill Lynch & Co. Inc. The nation's largest brokerage won't report fourth-quarter results until January, and there has been some speculation that newly appointed chief executive officer John Thain might shake up the bonus structure.