Bonus boom time returns to Wall Street

Author: By Margareta Pagano, Business Editor

But even bigger news was that bonuses are back big-time and Wall Street titans
Goldman was predicting that pay this year is set to beat the boom levels
enjoyed even before the financial crisis. If Goldman can maintain the growth
levels reported so far this year, then staff are set to share total pay and
bonuses of more than $22bn, which will mean they will earn huge amounts,
just as they did in 2006 and 2007. In the event, Goldman’s bankers will
share $6.6bn for this period and they have set aside $11.4bn for pay for the
first six months of the year. If the second half proves as good, it will pay
out roughly $770,000 for each of the 29,400 workers ? and maybe as high as
$900,000 for the year.

Meredith Whitney, the star analyst who called the top of the banking industry
in October 2007 when she warned that Citigroup was facing a capital
shortfall of up to $30bn, added to the euphoria when she advised clients to
get back into the share-buying market ? and specifically back into Goldman
Sachs. Not only did Whitney, now a bit of a media star in the US, tell CNBC
viewers to expect the “mother of all mortgage quarters”, but she
predicted that Goldman would soar at least 30 per cent, so even she was
surprised at just how good the results would be from fixed income,
currencies and commodities trading.

Not everyone is celebrating. Financial analyst Max Keiser accused Goldman of
running the US government, while US lawmakers attacked the firm for paying
out juicy bonuses so shortly after the investment bank was rescued by the
taxpayer. Mr Keiser, in the US magazine The Deal, described Goldman as “scum”
and claimed it controls the Federal Reserve and Treasury, caused the
financial crisis, and front-runs on every deal on the New York Stock

But Goldman, used to such vitriol after a recent attack by Rolling Stone
magazine, is defiant, arguing it has paid back the $10bn in taxpayers’ funds
it borrowed from the TARP scheme and paid out dividends to taxpayers.
Analysts say Goldman chief executive Lloyd Blankfein has played a blinder by
sticking to a business model which everyone deemed dead and broken only a
few months ago. While rivals such as Morgan Stanley have cut back on risks,
Goldman traders have been out making markets in their traditional areas.

At JP Morgan, chief executive Jamie Dimon reported equally fabulous figures,
with record profits from trading and stock underwriting. JP Morgan put aside
$14bn to pay its 229,000 staff for the first half and $6bn for the 25,700
investment bankers.

Even the UK felt the benefit ? Wall Street’s bonanza boosted UK banking stocks
as investors anticipated banks would outperform expectations ? shares in
Barclays rose 9 per cent last week, while shares in RBS, due to report next
month, are up over 7 per cent.

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