There has been a flurry of articles recently on the expected bonuses to be paid to Wall Street employees. The record breaking number for this windfall is as high as $144 billion (with a B) despite the tireless efforts by Messers. Dodd and Frank (and our other elected officials) to reform Wall Street while protecting Main Street. But then Dodd–Frank Wall Street Reform and Consumer Protection Act was only signed into law in July a mere 3 months ago (the eye blink equivalent for “rule-making”). Seriously, did anyone think that Congress could focus on reform and protection with mid-term primaries and November 2 elections before them? It would have taken a bit more than even Christine O’Donnell’s “old black magic” to get than done!
Anyway, with Wall Street year-end bonuses looming (large) and no regulations to help determine what might constitute an “inordinately large payout”, other than from William Alden’s October 17, 2010 article in the Huffington Post Wall Street May Break Pay Record – Again) where “Federal Reserve general counsel Scott Alvarez [is quoted as saying]: “It’s very nuanced… There is no number.” It seems, to borrow a phrase from Potter Stewart, once Associate Justice of the Supreme Court of the United States, “we’ll know it when we see it”. Leaving the real question to be: Do we see it with $144 billion?
What is going on here? That is a question we asked just a couple weeks ago in our blog Of Banks and Bonuses where we said that there were a couple of things at play. That was an understatement – there are many things at play, and without tweezing them apart and thoroughly examining them – it is hard to say if $144 billion is obscene or not.
Yet theories abound. Here are some of our favorities.
Perhaps with financial services restructuring, the remaining folks (a smaller group than before) all must work harder and the cost of compensating and retaining the “High” Q individuals is increasing in the market. This is due to the departure of “process based” jobs, leaving banks and Wall Street with many more intellectually demanding jobs requiring judgment and decision making. And the people in these tough jobs maydeserve to be better paid.
Or maybe since Wall Street stocks are up in value (at least over last year if not over last month) and the hard working executives who have turned around these struggling entities (some with the help of taxpayer support) deserve to get some credit or at least some cash.
Perhaps with Dodd-Frank regulations still “in the can” and a chance that favorable tax rates will be repealed in 2011 financial services executives want to cash in now.
And, finally, maybe Wall Street is simply looking to recapture what they ”lost” in bonus payments last time around.
More likely it is all these things and many, many more. Remain assurd, though, that regardless of micro economic, macro economic, global, local, political or any other issues at play, Wall Street has and looks to continue to take care of themselves.