Despite Turmoil, Wall Street Bonuses Survive

Lehman set aside $6.1 billion so far this year, Citi, $25.8 billion, JPMorgan $17.6 billion, Bank of America $14.3 billion, Goldman $11.4 billion, Merrill $11.2 billion, and Morgan Stanley $10.7 billion.

All of them, except for Lehman, will get $125 billion from the Federal government's efforts to rescue the financial system, and in individual amounts that equal or exceed those accrued compensation numbers. Citigroup, for example, is getting a $25 billion infusion of government money.

Banks are bound to be sensitive to the political and public relations problems associated with paying blockbuster bonuses, but that's not going to stop them from paying something, most likely in the form of stock. Deferred stock awards, which don't have to be added to expenses until they vest, will likely be a popular way of rewarding employees this year.

"We expect to see cash drop quite significantly," says David Schmidt, a pay consultant at James F. Reda & Associates.

Given that there are a lot fewer workers on Wall Street these days than there were last year, those who are getting bonuses may benefit from not having to share the pot with as many colleagues. Then again, they may just feel lucky to have a job.

New York's Independent Budget office forecast 20,000 job cuts earlier this year, but the actual number is now expected to exceed that by a long shot. At Merrill Lynch alone, the job losses could total 10,000 as the company merges with Bank of America, says Ladenburg Thalmann Analyst Richard Bove. Barclays is also seen cutting thousands of jobs as it acquires Lehman Brothers' U.S. brokerage operations.

Guarantees are complicating pay matters this year. Along with its acquisition of Lehman operations, Barclays inherited a $2.5 billion bonus accrual fund for New York-based Lehman employees, an amount greater than the $1.7 billion it is paying for the company. Angry Lehman workers in London wanted to know why they didn't have access to a similar pool.

The $2.5 billion pool, which was kept separate from Lehman's bankruptcy filing, works out to $250,000 for each New York-based Lehman employee, which is better than the $180,000 average Wall Street bonus in 2007, when Lehman was still a solvent company. Barclays says the money is an accounting accrual and that it has no obligation to use it to pay bonuses.