The New York Times reports that New York city and state officials are worried about revenue losses due to pay cuts in the financial services industry, which they expect to be worse that the dotbomb/post 9/11 cutbacks.
Frankly, that downturn was mild compared to 1990-1991, the early 1980s, or the particularly nasty 1973-1975 contraction.
From the New York Times:
A review of the latest statements from the largest financial companies based in the city shows that they intend to hand out about $18 billion less in pay and benefits in 2008 than in 2007. The cutting of payrolls is well under way, but the full effect will not be felt until the year’s end, when bonuses for employees based in New York could shrink by $10 billion or more, according to city officials and compensation experts.
A decline in bonuses of that magnitude would easily eclipse the drop of 2001, the year of the 9/11 terrorist attacks, when total bonuses declined by $6.5 billion….
It would mean about $10 billion less in taxable income and several billion dollars less to be spent on apartments, furniture, cars, clothing and services….
“As long as I’ve been in the business, I think this is the worst,” said Vincent Nastri, whose Barclay-Rex tobacco shop down the street from the New York Stock Exchange sells cigars for as much as $35 apiece. “It’s been a little on the quiet side — a little shaky.”….
The impact on the state and city budgets is likely to be severe because the financial-services industry provides almost one-fourth of all income earned in the city. That pay accounts for about 10 percent of the city’s tax revenue and about 20 percent of the state’s, said Kenneth B. Bleiwas, deputy state comptroller for New York City….
Gesturing toward the luxury-goods stores lining Wall Street, John Russo, who has worked in commercial insurance for 35 years, said the steep fall in pay was bound to cause disruption in the financial district.
“Look across the street: BMW, Tumi luggage, apartments,” Mr. Russo said. “When things get bad, the moving trucks come.”:
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I feel nothing, either way, for these people. They are the junk yard dogs of night.
I feel nothing for the Congressman he is for sale, and at the same time, been sold.
I feel nothing for the sycophant aristocrat, it’s a family matter.
I hurt for the soldier, for the minimum wage worker, my children, and my country.
Probably just the beginning. One can go broke quickly betting on the demise of the New York financial community. Still, the future looks a bit bleak for profits and bonuses. I’m not sure the model is broken but it sure is bent.
Look at the up side: that’s $18 billion that won’t leave the US for the Cayman Islands.
The river of tears that are flowing from my eyes for those poor unfortunates wouldn’t fill a thimble.
I just filed this story in a new folder labeled “Boo Fucking Hoo”
10 billion more for shareholders, investors, (or less to be ponied up by taxpayers).
Haven’t these poor guys heard of HELOCS or savings? Great way to maintain spending when income declines.
Nastri meanwhile may need to mark his cigars to market or start accepting CDOs as payment.
Problem is that finance has become such a big part of the economy that when it goes down, it does a lot of collateral damage.
I’d personally like to see these guys washing dishes, but that means the guys who wash dishes will wind up homeless.
Could be more. We still have the rest of the year to go! IF, as some predict, the DJI crashes through 10k, bonuses might be completely eliminated. So sorry. {lol}
Lose their bonuses? Hell, we ought to make them pay back the ones they stole creating this fiasco.
“Actually in the US Wall Street has become a place for the best and brightest and hardest working. Rather then a place for those correctly born and educated. So they will find another way to make money which may make the city even more interesting.”
Not likely, not that anyone deserves to make over $1mm, $1B, or whatever.
For example, in Texas in the late 80’s and early 90’s, many bankers, lawyers, and accountants were laid off with quality experience and credentials. Some downsized to lower-paying firms or smaller markets; some left the biz. Most had their balance sheets the life-time earnings shrunk.
In the early 2000’s in northern california, the same thing happened to many bankers, lawyers, and accountants doing tech deals.
It’s not the end of the world though. In time, most people adjust to things like this by revising their self-image and priorities. Some do make comebacks in other sectors or industries. But most do not.
“donna said… “
“Lose their bonuses? Hell, we ought to make them pay back the ones they stole creating this fiasco.”
No kidding.. I keep hoping for some plan to go back recoup most of what they stole.. If I saw this coming 2 years ago they certainly did in Nov 2007.. The whole thing is criminal..
Cin
The unholy alliance between Washington and Wall street has resulted in our economic sovereignty being imperiled. If our economic sovereignty is under threat, so is our national security.
The people responsible for this debacle whether through incompetence, greed, collusion, or corruption and traitors and should be treated as any other enemy of the state. Frozen bank accounts, pursuit, prosecution and imprisonment.
Help Wanted: a violin player with the world’s most smallest violin.
Reply to Anon of 10:37
These “best and brightest and hardest working” are in fact the cause of these current woes. If they’re so bright, hard working and good, then no need to worry as they’ll have saved and stashed enough (by getting out in time before the markets fell) to ride out these tough times satisfactorily.
As to them “finding other ways to make money which may make the city even more interesting” – I doubt it for the reasons provided above. Also they really didnt succeed in achieving that in 90/91 or the lesser recessions since!!
The decrease in their compensation is greater than the total budget of my entire great State of Colorado.
We got beautiful cliffs here for people like them.
stop it, yer making me puddle