Innumeracy on the Street
The New York Times inadvertently explains the financial crisis today: Wall Street traders, it turns out, are innumerate. Many firms doubled base salaries and eliminated bonuses for midtier employees after the crash, and apparently this is causing panic among the troops:
One executive, whose firm prohibited discussing the topic with the news media, said the bump in base salaries had confused people, even though their overall compensation was the same. “People expect a big bonus,” this person said. “It is as if they don’t even see their base doubled last year.”
Dealing with the Zeros can be complicated. “It’s a real headache,” said another senior banker, who asked not to be identified because the topic is so volatile at his company.
But not to worry. The Zeros might be confused by this financial trickery, but the industry as a whole is still doing great:
In terms of overall profit, Wall Street is on track for one of its best years ever, although it will trail 2009, which was pumped up by federal bailout money and the rebound from the financial crisis. In the first three quarters of the year, Wall Street earned $21.4 billion, putting it on track to easily outpace 2006, when the economy was booming, and well ahead of the New York City government’s initial estimate of $20.6 billion for profit in all of 2010.
Chief executives, says the Times, will continue to get paid the old-fashioned way, "with bonuses climbing into the stratosphere as the shock of the financial crisis fades and pay for the top tier climbs back toward historical averages." Good to hear.