Bonuses to hit pre-downturn highs

Year-end bonuses

Year-end bonuses are firmly back on the radar. Wall Street may be about to begin the annual rite of tallying bonuses, but in the shadow of an economic crisis and with consumer confidence at an all time low, concerns that bonuses could return to pre-downturn highs are surfacing.

Analysts are now predicted that top Wall Street executives could be expecting massive bonuses this year, despite the billions of dollars having been dolled out in bailout packages to rescue ailing firms.

But while some analysts accept that big bonuses are just an inevitable part of the culture of Wall Street, the biggest concern is that the expected bonuses are so big - perhaps the biggest industry wide since 2007, at the height of the bubble - that they are essentially rubbing salt in the wounds of the taxpayer.

According to a study released yesterday by pay consultants Johnson Associates, a closely watched annual signpost for the bonus season, projected financial industry payouts would be up by 40 percent on 2008 - which saw bonuses plunge in the midst of the financial crisis.

Restrictions

Its not all plain sailing for Wall Street, however. President Barack Obama's special pay master Kenneth R. Feinberg, has restricted pay at the seven companies that received extraordinary government support, though most of the industry remains outside of his jurisdiction.

However, based on policies reached at the G20 Summit in Pittsubrgh in September, big banks are facing changes to their bonus systems and, as such, many banks are planning to increase the percentage of bonuses paid in the form of stock or options.

Nonetheless, whatever form bonuses for 2009 take - most of which will be calculated between now and the end of the year and paid out in early 2010 - they are bound to be controversial given the resentment directed at the financial industry by American taxpayers.

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