Wall Street jobs and bonus cuts to hurt growth??

I am not even sure how should one react to such stuff. This news item from Reuters says:

As Wall Street traders cheered positive jobs data on Thursday, they seemed to ignore layoffs and bonus cuts on their own trading floors that will hurt growth in the broader U.S. jobs market in the coming months, TrimTabs Chief Executive Charles Biderman said.

Large U.S. banks have outlined plans to lay off nearly 40,000 employees so far this year as a result of the European sovereign debt crisis and weak economic growth, according to a Reuters tally. Reports from compensation consultants such as Johnson Associates and Options Group suggest that Wall Street bonuses may decline as much as 30 percent to 40 percent this year. That will only hurt U.S. wage growth more in the weeks ahead, Biderman said, since bonuses are typically paid from late December through early February.

The earnings report from Jefferies Group Inc (JEF.N) on Tuesday may offer clues to broader Wall Street trends. Jefferies’ fiscal year ends November 30, a month earlier than those of bigger rivals like Goldman and Morgan Stanley. The investment bank laid off roughly 70 people in equities trading and cut overall compensation and benefits 24 percent during its fourth quarter. Chief Executive Rich Handler and a number of other senior executives also agreed to forgo bonuses for 2011. “We recognize our shareholders had a tough year,” Handler said. “We’re shareholders and we’re getting zero bonus.”

Well, it seems despite all the mess some people still have sympathies for bonuses and job cuts in Wall Street…They have brought the whole world down with their risks. They still feel they deserve bonuses when people are struggling to get monthly pays and stay employed..

Just a few days back Simon Johnson pointed how things still remain crazy. The world is being pushed into austerity and the modern banker continues to make merry:

Santa Claus came early this year for four former executives of Washington Mutual (WaMu), a large US bank that failed in fall 2008. The Federal Deposit Insurance Corporation (FDIC) had brought a lawsuit against the four, actions that included taking huge financial risks while “knowing that the real estate market was in a ‘bubble.’” The FDIC sought to recover $900 million, but the executives have just settled for $64 million, almost all of which will be paid by their insurers; their out-of-pockets costs are estimated at just $400,000.

To be sure, the executives lost their jobs and now must drop claims for additional compensation. But, according to the FDIC, the four still earned more than $95 million from January 2005 through September 2008. So they are walking away with a great deal of cash. This is what happens when financial executives are compensated for “return on equity” unadjusted for risk. The executives get the upside when things go well; when the downside risks materialize, they lose nothing (or close to it).

…We should learn from both the WaMu and the Occupy movement. In both cases, the lesson is the same: concentrated financial power is a gift that keeps on giving – but not to you.

Another interesting post is on whether Ivy league grads are still taking up jobs in Wall Street post crisis. There are mixed responses. Princeton grads still look at Wall Street, Yale and Harvard figures have gone down…Volcker would be pleased with latter two and disappointed with former..

And then there is a nice e-book from voxeu titled –Why do we need a financial sector? I did point to a Haldane piece in the same book questioning the high value add of finance sector.

So more and more qs being asked. And here we have finance execs lamenting on no bonuses…

3 Responses to “Wall Street jobs and bonus cuts to hurt growth??”

  1. Books to read on financial speculation « Mostly Economics Says:

    […] picks for the kind of financial sector  developments we are seeing these days… GA_googleAddAttr("AdOpt", "1"); GA_googleAddAttr("Origin", […]

  2. Mahesh M Piddshetti Says:


    Really surprised to see the title. More the innovation in financial products higher the degree of problems the common man has to suffer.


  3. Are Americans Bayesians? « Mostly Economics Says:

    […] a free market economy anymore but run for a few powerful people as criticized by Luigi Zingales, Simon Johnson and many […]

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