Wall Street bonuses

They’re coming and the ramoras are drooling. Big bonuses mean lots of money to buy houses and some realtors are predicting a hot spring market. Maybe. But how much of those bonuses willl be in stock? To me, that’s a problem; to David Ogilvy, it is not.

There are also firms like Goldman Sachs, which said last year that its top executives will be paid in stock, which could hinder sales. But Greenwich Realtor David Ogilvy said they can borrow against that.

I’m a remora, but I’m a scum-sucking bottom feeder too and the idea of a bunch of Wall Streeters financing huge homes with loans against their employer’s stock excites me as much as a short seller viewing a flock long on the Euro – happy days will come again, soon.

10 Comments

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10 responses to “Wall Street bonuses

  1. seriously?

    Here’s reality:

    Mid Level Director at Morgan Stanley (ie, 35 year old guy). Probably has a kid or two. Living in Manhattan, maybe, wants to get out because the crown prince is approaching school age. Decides between Westchester, parts of NJ and Connecticut. For some reason, chooses the longer commute of Connecticut (lower taxes? guess what, if his office is in NYC and he’s earning money in NYC, NY taxes that, so try again).

    He’s making “only” about 100k a year in Salary. (Quick aside: And ok, for you that live in less expensive areas, right now you are ranting that “100k is a lot of money” and yes it is, in OMAHA. It is not, unfortunately, in this area of the world where tear downs in the slums of Stamford cost $400,000. That’s just reality, learn to deal with it).

    So, he realies heavily on his bonus. He’s a good kid. Grew up in a middle class house, worked hard in high school, got into a decent school, decided to go into banking (why – BECAUSE THAT IS WHERE THE MONEY IS (was)!) instead of becoming a doctor who is now taxed and sued to death). Worked 100 hour weeks and got into Wharton for his MBA.

    Paid at least $200,000 for his MBA (yup, including lost wages etc) so decided again to go into banking (why, BECAUSE THAT IS WHERE THE MONEY IS (was) and he has to pay off those LOANS! He can’t go become a product manager at proctor and gamble making $125,000 for the rest of his life if he wants to pay off those loans).

    Finds true love in New York while working at Morgan Stanley to a beautiful young lady who I am sure loves him for his dedication to his job (it’s got nothing to do about the dollar signs she sees).

    Fast forward to today. He is told this week that he is indeed getting a $500,000 bonus (rejoice!), and here is how it breaks out:

    1) 25% Cash (500,000 *25%*.55(net of taxes) = NET $69,000!!!)
    2) 40% in Restricted stock that is tradeable 1/3 each year over the next 3 years. (Ok, lets assume he wants to trade the whole thing immediately = $110,000 NET CASH after TAXES!!!!)
    3) The rest (for those liberal arts majors out there, that is 35%) is VESTABLE (that means its not yours unless you are at the end of the year) over the next three years.

    So, for those sellers awaiting this 35 year old to come swoop in and pay $800-$1000 per square foot for your crappy house so he can commute over an hour to his crappy job in midtown so his wife can live in Greenwich and keep up with the Joneses…..I wish you luck. He “only” has made, in net after tax cash in the last 12 months $55,000 (net salary after tax) + 69,000 (cash bonus) + 110,000 (if he sells his stock immediately) = $234,000!

    GOOD LUCK TO YOU!

    (now, the smart answer to the above is that the sellers are really awaiting the super rich hedge fund guy or private equity guy who is not subject to the whims of the government with these silly Tarp Taxes (don’t get me started on that — why aren’t the Car Companies paying the tarp tax – isn’t that who LOST THE MONEY!)

    Sorry for the rant.

  2. hedgie

    $500K is chump change in this town… When I used to make that amount working at a major NYC investment bank, all I could afford was ~$1.5mm place in OG… Now that Obama is going to impose a fee on banks (“fee” is new term for what was formerly referred to as “tax”), don’t expect a fast recovery in the Greenwich RE market.

    Only hedge fund guys making seven figs and MD’s at Goldman can afford the quintessential $4mm house in Greenwich.

  3. Anonymous

    Sure, some NYC guys will choose Greenwich for cheaper taxes and far lower housing costs than Manhattan

    But most with bucks already own a decent house. Others are prob gun-shy about illiquidity and leverage after ’08, so unlikely to be aggressive in any house purchases. Lots of peer pressure to be conservative when senior execs don’t want more bad bonus publicity for firm

    And many left in IB will seriously consider value of continuing to earn funny money at a public co., as opposed to HF or PE…..which are more mobile entities that can flee NYC region (along with their biggest earners and taxpayers)

  4. Cos Cobber

    Seriously,

    No one making 500k is buying 1000 sq ft real estate in greenwich. I think RE brokers are far more interested in those making over 1mm a year and up. the 500k guy or gal is still looking at crap in Cos Cob, NoPo or elsewhere in suburbia which = small commissions and financing headaches.

    Think bigger Seriously.

  5. FlyAngler

    Seriously? – Very accurate depiction of what is what this year. Sounds like knowledge based on experience.

    As for the impact, the WSJ seems to suggest there is already activity, though not in the $5mm+ range.

    http://blogs.wsj.com/developments/2010/01/12/outraged-over-wall-street-bonuses-not-new-yorks-brokers/

  6. seriously?

    From Bloomberg, But I am sure this won’t affect real estate values.

    By Ambereen Choudhury and Elisa Martinuzzi
    Jan. 13 (Bloomberg) — Bank of America Corp., the biggest U.S. lender, plans to cut the cash component of investment bankers’ bonuses to about 15 percent as politicians seek to rein in the payouts, four people familiar with matter said.
    Senior bankers will get 5 percent to 15 percent of their bonus in cash, compared with about 50 percent at Bank of America last year, said the people, who declined to be identified because the talks are private. Junior bankers may get 25 percent of their bonus in cash, two of the people said. The rest will be paid in shares and cash over time depending on the stock’s performance, the people said.
    Bankers’ bonuses are under scrutiny after the industry received $637 billion in bailouts from U.S. taxpayers. Bank of America repaid $45 billion of government rescue funds in December, freeing it from federal pay restrictions. The Charlotte, North Carolina-based bank said last week it expects to pay record bonuses to some employees while keeping the overall cost of compensation below previous years.
    “Many of the banks would love to pay more in stock and less in cash as it ties bankers in for the long term,” said Philip Keevil, senior partner at investment bank Compass Advisers LLP in London and a former head of Citigroup Inc.’s European mergers team. “It causes no pain to senior guys at the top of the banks. They have had many years of very high earnings, so they don’t need that cash.”
    President Barack Obama said in December he was frustrated that Wall Street firms that benefited from taxpayer bailouts continue to enrich top executives, investment bankers and traders. U.K. Chancellor of the Exchequer Alistair Darling last month imposed a 50 percent tax on banks paying discretionary bonuses of more than 25,000 pounds ($40,000).

    February Payout

    Bank of America will determine how much cash to set aside to cover bonuses at the end of this month and pay them in February, one of the people said. A spokeswoman for the bank declined to comment.
    Of the 33 analysts that track Bank of America, 25 rate the shares a “buy”, and not one has a “sell” recommendation, according to data compiled by Bloomberg. The stock, which traded as low as $2.53 in February, rose 1.7 percent to $16.63 as of
    1:55 p.m. in New York trading today.
    Billionaire hedge fund manager John Paulson said in November that the bank’s shares may rise to $29.81 by the end of
    2011 as writedowns ease. Paulson & Co. held 160 million shares on Sept. 30.

    Merrill Lynch Bonuses

    Fees from Bank of America’s investment bank and capital markets units ranked second in 2009 among Wall Street firms, trailing only New York-based JPMorgan Chase & Co. Bank of America Chief Executive Officer Brian Moynihan said on Jan. 4 that fees were buoyed by the takeover of Merrill Lynch & Co.
    during the credit crisis. Merrill posted a $27.6 billion loss in 2008, its last year as an independent company.
    Merrill had 696 employees who received a bonus of at least
    $1 million in 2008, compared with 172 at Bank of America, according to a July 2009 report by New York Attorney General Andrew Cuomo. The 149 highest-paid bonus recipients at Merrill Lynch received $858 million in total. The only banks that paid more $1 million-plus bonuses were Goldman Sachs Group Inc., the most profitable firm in Wall Street history, which paid 953 bankers, and JPMorgan, with 1,626.
    Merrill, the world’s biggest broker at the time, agreed in September 2008 to be acquired by Bank of America after more than $50 billion of losses and writedowns tied to the collapse of the subprime-mortgage market. It struck the agreement the same weekend Lehman Brothers Holdings Inc. filed for bankruptcy.

  7. mike

    The people I know in the hedge fund world are rolling in dough. Forget the bankers. I know three people right now looking to buy new houses in Greenwich, from $4 million to over $10 million.

  8. Fake Walt

    Mike @ 3:23…I am sure that CF would fork over a percentage of his commission for the contact info of those hedgies looking to buy property in Greenwich.

    Off to London

    Kind Regards,

    Fake Walt

  9. kidding really!!

    Seriously! – spot on.
    Don’t forget the guys that had it and now are in same boat as this 35 year old BUT have the big life.