Workers at major Wall Street firms will make as much as $140 billion this year, and the reaction from the public and Congress can already be predicted. According to an exclusive report in The Wall Street Journal, "Workers at 23 top investment banks, hedge funds, asset managers and stock and commodities exchanges can expect to earn even more than they did the peak year of 2007."
Wall Street executives will make the case that many firms like Goldman Sachs (GS) will produce record annual profit results for their shareholders, and that their stock prices have handily outperformed the market. But the board of directors approving the pay might have been better off delaying some of the payouts for a year, or reducing them in the name of self-preservation. Nothing is more likely to anger Congress and the Administration than headlines announcing that the average Goldman employee will make $700,000, which means its executives will make many times that.
Financial firms will advance the argument that they have to give out rich pay packages to keep their best workers. The issue that raises, of course, is where will all those people go to pursue their riches? There are only so many hedge funds and private equity firms, and many are not hiring because of the wounds they experienced during the credit crisis.
The hearings over Wall Street salaries will almost certainly start in Congress by the end of the year. Compensation is the perfect target for lawmakers to attack as a sign to voters that they are prepared to rip down the old system where the rich get richer. There is nothing wrong with being wealthy unless it is during one of the great economic downturns in U.S. history.
Douglas A. McIntyre is an editor at 24/7 Wall St.