NEW YORK - Wall Street's five biggest firms are paying a record $39 billion in bonuses for 2007, a year when three of them suffered the worst quarterly losses in their history and shareholders lost more than $80 billion.
Bonuses for 2007 will exceed the $36 billion distributed in 2006, when the industry reported record high profits.
Goldman Sachs Group Inc., Morgan Stanley, Merrill Lynch & Co., Lehman Brothers Holdings Inc., and Bear Stearns Cos. together awarded $65.6 billion in compensation and benefits last year to their 186,000 employees.
The New York-based firms, which shed 25 percent of their equity value in 2007, have said they're eliminating at least 6,200 jobs amid mounting losses from the collapse of the subprime mortgage market. The payouts come as the US economy slows, with unemployment rising, retail sales declining, and new home foreclosures surging to a reord.
"To many people, it will be shocking and questionable," said Jeanne Branthover, managing director of Boyden Global Executive Search in New York. "People in New York in the world of investment banking will understand it. It's critical that pay is still there or you're going to lose really good people."
The industry's bonuses are larger than the gross domestic products of Sri Lanka or Bulgaria, and the average bonus of $219,198 is more than four times the median US household income in 2006, according the US Census Bureau.
Shareholders in the securities industry endured their worst year since 2002, as Merrill and Bear Stearns slumped more than 40 percent in New York trading. Morgan Stanley fell 21 percent and Lehman dropped 16 percent. Only Goldman rose, up 7.9 percent.
"Wall Street firms have always been run, and likely always will be run, for the upper-level management, not for the shareholders," said James Ellman, of San Francisco-based SeaCliff Capital.
