Is there a cosmic connection between the amount of trouble Wall Street firms seem to be in with the government and the amount of money people working there make?
A closely followed compensation survey by Johnson Associates predicts that, overall, bonuses at major investment firms could increase 5 percent to 10 percent this year. The fine print suggests that bond traders may be doing less well than in previous years, while those who manage money for others and charge a fee for it will enjoy a nice bump.
“In investment banking, a managing director earns about $850,000 a year in salary and bonus, while a vice president, usually one or two rungs below a managing director, collects $400,000,” Alan Johnson, managing director at Johnson Associates, told the Wall Street Journal. “On trading desks, managing directors average about $750,000 a year and vice presidents $350,000.” Of course, the numbers can get much higher.
What’s striking is that while all this money is raining from the heavens, major Wall Street firms are grappling with dozens of regulatory and criminal investigations of their activities—almost too many to count. JPMorgan Chase shareholders have been awaiting resolution of a half-dozen federal and state investigations of the company’s sales of mortgage bonds leading up to the financial crisis—that settlement is expected to cost the bank about $13 billion. And there are others—the government is looking into the firm’s hiring practices in China; JPMorgan just resolved charges over its $6 billion London Whale trading losses; and it’s being investigated over potential manipulation of foreign exchange rates. Goldman Sachs just revealed it’s being investigated over foreign exchange rates as well, putting it in the company of at least seven other banks. The list goes on.
There are, however, some signs of moderation: Goldman Sachs put aside 41 percent of its revenue for employee compensation during the first nine months of the year, according to Bloomberg News, which is a slight decrease for the company. And others might find encouragement that relatively more money may be flowing to people involved in the more boring parts of the business—asset management—rather than to high-rolling fixed-income traders. As Bloomberg’s Matt Levine puts it: “There’s only so much damage a bad retail broker can do; bad bond traders have more scope to cause trouble.”