As financial firms report stronger performance, the word on the street is that bankers’ bonuses are poised for a massive comeback.
A report in The New York Times indicates that, though it may well be controversial, many investment banks have collected big fees from trading debt and arranging capital raisings during the first quarter.
After a 50 percent decline in revenue in 2008, Goldman Sachs is on track to match the $38 billion it generated in 2006. JPMorgan Chase generated a record 9 percent share of the European investment banking market through May of this year.
Star performers will expect to be duly compensated for the results.
According to The Times, banks are also rapidly freeing themselves of their government shackles. Ten American banks already have paid back the taxpayer-injected money that helped rescue them late last year. Banks are starting to refuse additional government-guaranteed funds.
In order to avoid public outcry, banks stretch annual pay over several years, as this will help ensure that no banker is too well compensated, at least publicly.
Banks are also setting up ways to grab back bonuses if the deals don't pan out. So-called improved incentive structures may make it easier for them to argue away bonuses of $10 million or more for their major players.
Some politicians have begun to voice concerns, commenting that some of this year’s profits have been made possible only with the aid of government financing programs.
Though there is talk on Wall Street for big bonuses for the big players, ordinary investors whose portfolios were ravaged by the market last fall are being advised to no longer even consider retirement.
Instead, they consider a "three year sabbatical," and then return to the workforce again, writes Bob Adams, CEO of New Global Initiatives, in Barron's.
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