The New York Times strikes fear in the hearts of remaining Wall Streeters by estimating that bonuses will be down $10 billion or more this year. Some think the fall will be even worse. Luxury goods companies, real-estate brokers, and New York are bracing for the worst.
In New York, government officials are preparing for what could be the biggest single-year decline in pay on Wall Street in history and with it a vexing shortfall in city and state revenues.
A review of the latest statements from the largest financial companies based in the city shows that they intend to hand out about $18 billion less in pay and benefits in 2008 than in 2007. The cutting of payrolls is well under way, but the full effect will not be felt until the year’s end, when bonuses for employees based in New York could shrink by $10 billion or more, according to city officials and compensation experts.
A decline in bonuses of that magnitude would easily eclipse the drop of 2001, the year of the 9/11 terrorist attacks, when total bonuses declined by $6.5 billion, according to the state comptroller’s estimates. City and state officials said the coming plunge in pay would have wrenching effects on the local and regional economies.
It would mean about $10 billion less in taxable income and several billion dollars less to be spent on apartments, furniture, cars, clothing and services. For many investment bankers and traders, year-end bonuses traditionally account for at least three-fourths of their income. But the downshifting of the Wall Street lifestyle has already begun.
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