NEW YORK (Reuters) - Bonuses on Wall Street rose 17 percent last year to $20.3 billion even as the industry faced a public backlash over pay practices.
The rise in payouts, reported by New York State’s comptroller, came at a time when Wall Street was recovering from the financial crisis of 2008, which forced a taxpayer rescue of the industry that, in turn, stoked widespread anger across the United States.
Comptroller Thomas DiNapoli said on Tuesday profit for all of Wall Street could top $55 billion for 2009, nearly triple the previous record year. Last year, the U.S. economy began to stabilize and lenders raced to repay federal bailout money they had come to view as a stigma.
Average taxable bonuses on Wall Street rose to $123,850 in 2009, DiNapoli said. Compensation at Goldman Sachs Group Inc, JPMorgan Chase & Co and Morgan Stanley, three of New York’s biggest banks, rose 31 percent, he added.
The comptroller’s annual report on Wall Street pay is closely watched not only by Wall Street, but by politicians eager to rein in runaway pay in a still-weak economy where unemployment remains high and tax revenue remains depressed.
While bonuses are well below the level set in 2007 and are now more closely tied to company performance, DiNapoli acknowledged that many may consider them out-sized given the persisting problems of the economy.
“Incomes are back to levels that many can only dream of,” DiNapoli said, adding that there “remains a great deal of resentment against the Street.”
Taxpayers in 2009 rescued the U.S. banking industry with hundreds of billions of dollars of bailouts, putting into focus pay practices on Wall Street banks.
The White House said on Tuesday that U.S. President Barack Obama remains frustrated over Wall Street’s executive bonuses.
“Wall Street appears not to hear the outrage and the frustration each day on the pay practices that we’ve seen so far,” White House spokesman Robert Gibbs told reporters.
Obama last year appointed a “pay czar” who had the authority to restrict pay at firms that received extraordinary bailouts.
DiNapoli said there’s no doubt that the taxpayer support fueled Wall Street’s return to profitability and the increase in 2009 bonuses.
“A lot of this is fueled by the federal money that helped these firms get back on their feet very, very fast,” DiNapoli said.
The public outrage over pay affected the pay practices at some banks, even after they had paid back the taxpayer bailout. The anger stemmed from the quick return to profitability and large bonuses so soon after the bailout.
Goldman Sachs, for example, curbed compensation in the fourth quarter of 2009, taking it off pace to shatter the record $20 billion it paid out in 2007. It instead made a $500 million charitable contribution.
Banks also changed their compensation structures to pay employees in stock that must be held for multiple years, a tack designed to curb risk-taking for short-term gains.
The change in compensation structure made it more difficult for the comptroller’s staff to calculate 2009 bonuses, which increasingly are being paid in installments. The report included cash bonuses and cases where stock bonuses were taxed.
DiNapoli said financial firms devoted a much lower share of net revenue to compensation compared with past years, adding that tying compensation to long-term sustainable profits “is a step in the right direction.”
DiNapoli said Wall Street’s quick return to profitability and out-sized bonuses are bittersweet to New Yorkers, who were angry about the taxpayer bailout but reliant upon the industry as a key tax revenue generator.
Wall Street’s bonuses will boost state revenue by $600 million above the previous year’s collections.
For New York City, every $1 billion of cash bonuses equals about $20 million of tax revenue. But the Comptroller’s office said New York City revenue from bonuses was likely to fall short of projections by about $75 million.
Additional reporting by Jonathan Spicer and Joan Gralla in New York and Matt Spetalnick in Washington; Editing by Lisa Von Ahn, Maureen Bavdek, Matthew Lewis and Steve Orlofsky