Bonus payments paid to top executives at U.S. financial firms jumped 17 percent in 2009, according to a leading official in New York States.
The annual bonus payments at Wall Street security firms were up 17 percent, to more than $20 billion, in 2009. That was the same year that the federal government provided billions of dollars to help the financial firms that were on the verge of collapse. Also, 2009 profits at the largest financial firms could surpass $55 billion. The previous year, 2008, the broker-dealers lost a record $42.6 billion.
These new figures come from Thomas DiNapoli, the Comptroller of New York State and a senior elected official in the state. He says Wall Street is vital to the economy of New York State - where many of the firms are headquartered - but for most Americans, these huge bonuses are a bitter pill and hard to comprehend. There's a lot of resentment, Mr. DiNapoli adds, against the industry over its role in the global economic meltdown.
"In 2008, while the industry saw record losses, Wall Street still paid out about $17.4 billion in bonuses and people expressed a lot of concern and outrage at that," he said. "Excessive risk-taking with other people's money had quite an impact on our global economy. We saw what happened with credit being frozen and unemployment soaring, too many Americans watching their savings vanish at a time when Wall Street still seemed to be paying out bonuses."
The New York State official wants to link compensation in the financial industry to long-term sustainable profits. He is also calling for government regulations to make sure the securities industry thrives without driving everyone else out on what he calls a fragile economic limb.
President Barack Obama has in the past criticized the large Wall Street bonuses as the height of irresponsibility, but more recently said he did not begrudge the bonuses paid at two large banking firms.
Joe Sorrentino, an executive compensation specialist, says the bonuses paid in 2009 are in line with what he was expecting in terms of the record profits. If there had not been as much of a public controversy about the bonuses, he adds, they would have been even higher. He believes that if the Wall Street executives are not paid a fair bonus, they can leave their firms and take their business with them.
New York State Comptroller DiNapoli, commenting on what he calls Wall Street's unprecedented recovery, says the input of taxpayer money had a big part to do with the return to profitability.
"Certainly while one year does not indicate a trend, there is hope, when you look at some of the different ways in which some of the firms are structuring compensation that Wall Street has gotten the message, that it is important to tie compensation to long term sustainable profits," he said.
DiNapoli says he looks forward to a profitable Wall Street in a way that will improve the economic well-being of all New Yorkers.