Wall Street profits and pay roared back in 2009 after the worst year on record, according to a new report by New York State Comptroller Thomas DiNapoli.
Overall, compensation at Wall Street firms rose 27 percent to an average of $340,000. The average taxable bonus rose to $123,850. The annual report only calculates compensation and bonuses paid to employees of Wall Street firms who work in New York City.
"For most Americans, these huge bonuses are a bitter pill and hard to comprehend," said DiNapoli in a statement. "There's a lot of resentment against the industry over its role in the global economic meltdown. Taxpayers bailed them out, and now they're back making money while many New York families are still struggling to make ends meet."
DiNapoli's office estimates total profits at Wall Street firms will exceed a record $55 billion, compared to a record loss of $42.6 billion in 2008. That would be nearly three times greater than the previous record.
Calculating how much banks paid to employees in 2009 proved to be complicated. Banks made "unprecedented changes" in how they awarded bonuses in response to criticism about past pay practices. Banks paid more bonuses in stock rather than cash, deferred payments over several years, and included "clawback" provisions to recover bonuses related to employees engaging in excessively risky behavior.
"We cannot see a repeat of the risky behavior that crippled our economy," said DiNapoli in the statement. "Tying compensation to long-term sustainable profits is a step in the right direction."
At the same time, DiNapoli's office is concerned that state tax returns will actually decline because of compensation being deferred over several years or paid in stock instead of immediately-taxable cash bonuses.
New York state has historically relied heavily upon revenues from taxes on bonuses paid out by Wall Street firms, in some years accounting for nearly one-fifth of the total budget.
Stock Bonuses Bad for State Budget?
The decline in state revenues will worsen the state's already-strained finances -- New York faces a $21 billion budget deficit for the fiscal year that ends in April.
The state was also hurt by a drop in hiring by the financial sector. Employment at Wall Street firms fell 16.7 percent from November 2007 to August 2009, a loss of nearly 31,500 jobs. Since December, just under 4,000 jobs have been created.
For every person hired at a securities firm, three other jobs are created in New York state, according to the Comptroller's office. While Wall Street employees represent only five percent of all the jobs in New York City, they account for nearly a quarter of all the wages paid in 2008.