Wall Street Braces for Smaller Paychecks

A plunge in trading revenue and Europe’s sovereign-debt crisis are forcing Wall Street to rethink longtime pay practices. Investment banks are slashing bonuses for 2011 and considering freezing pay levels for some junior bankers. That means total compensation at big banks will likely fall 20 percent to 60 percent this year, depending on the firm and the job, according to six senior bankers.

Morgan Stanley, owner of the world’s biggest brokerage, is capping immediate cash bonuses at $125,000 as the firm cuts pay and defers more compensation for senior executives, according to a person briefed on the plans. Goldman Sachs Group reduced its compensation and benefits expense 21 percent in 2011, to $12.2 billion, as revenue slid 26 percent. Average pay for Goldman’s 33,300 employees fell to $367,057, down from $430,700 in 2010.