Goldman Sachs (GS) is rumored to be raising bonuses. Morgan Stanley (MS) set higher base pay for its top executives. Despite the disapproval of members of the Administration and Congress, compensation on Wall Street is on its way back up.
Industry sources say that Citigroup (C) is about to raise the salaries of key employees by 50 percent. The move is meant to partially offset bonus caps that the government has insisted on at financial firms getting federal aid.According to Bloomberg, "The biggest increases will go to investment bankers and traders." Citi and other banks are arguing that if their key institutional workers do not get higher compensation, they will leave for private equity funds, foreign banks, and hedge funds. The argument is bogus.
Hedge funds are closing at a record pace and have been for nearly a year. Poor returns are driving investors to make redemptions. The industry is hardly in a position to do much hiring. The same is true for private equity firms. The LBO business has been undercut by a recession that has hurt cash flow at potential targets. Banks, which used to provide most of the capital for private equity deals, are hardly in a position to make risky loans.
Foreign banks may be a refuge for investment bankers who want more money, but many of those firms have lost as much if not more money than their U.S. counterparts.
Will the very best investment bankers find jobs that cause them to leave their current employers? Maybe. Can the rest of the bankers find higher paying jobs. Almost certainly not.
Douglas A. McIntyre is an editor at 24/7 Wall St.