Shops on standby to mop up the bonus

Bank executives in the US will be popping the corks again this Christmas. Photo / Martin Sykes

Fancy a tipple to celebrate that bonus? At the World Bar, an exclusive Manhattan lounge overlooking the UN headquarters, staff are ready to serve up a US$50 cocktail blending Remy XO cognac, Pineau des Charentes and Veuve Clicquot champagne, topped with a layer of 23-carat liquid gold.

The World Cocktail is a popular purchase during good years for Wall St bankers, and the World Bar's boss, Mark Grossich, is optimistic about Christmas sales despite a certain downscale feel to party bookings this season.

"People still want to celebrate," he says. "And what else are they going to do with their bonus money? They're going to spend it on nice things."

Many Americans reacted with amazement to Britain's 50 per cent windfall tax on bankers' bonuses.

There is little chance of such a measure in the US, even though Wall St bonus payments are expected to shoot up by around 40 per cent to US$26 billion this year.

Factoring in salaries, pension contributions and other forms of pay, overall remuneration in New York's financial sector, according to an analysis by the Wall Street Journal, could top US$140 billion, beating the record US$130 billion payout in 2007.

The average employee's take-home package could reach US$143,400 ($198,000).

Just as in Britain, the wider American public is not impressed. Unemployment has topped 10 per cent, small businesses are biting the dust in ever-increasing numbers, and with the housing market in the doldrums homeowners are set to see US$500 billion of property wealth evaporate this year - if they're lucky enough to avoid repossession.

Reaction in Washington, however, has been curiously muted. After blasting Wall St bonuses as "the height of irresponsibility" in a bad-tempered outburst back in January, Barack Obama quickly backed down from a threat to cap payouts at US$500,000.

The White House has initiated only modest measures - the introduction of "say on pay" votes by shareholders on top-level boardroom remuneration, and the appointment of a "pay tsar" whose remit to scrutinise pay contracts extends only to companies in receipt of government bailout funds.

"If you ask what the political viewpoint is outside Washington, people are livid ... at levels of pay," says Martin Baily, a senior fellow at the Brookings Institution and a former economic adviser to President Bill Clinton.

"There's been a kind of in-your-face attitude by some of the financial institutions which hasn't helped. But whether that's enough to stimulate a reaction on Capitol Hill - I suspect not."

Traditionally, the US has tended to be more tolerant of inequality than European nations. In a society explicitly built on a dream of rags-to-riches aspiration, there is less willingness to condemn rewards at the top. But the speed of the return to blooming health at elite Wall St banks has appalled many people.

The top target for populist opprobrium is Goldman Sachs which, uniquely, insists on distributing as much as 40 per cent of its revenue to employees, a sum set to exceed US$20 billion this year, amounting to more than US$700,000 a staff member. A US$500 million charitable donation by the bank has failed to cut the mustard and Goldman's chief executive, Lloyd Blankfein, has embarked on an erratic charm offensive, remarking (jokily, says a spokesman) that his staff were doing "God's work", then apologising in public for Goldman's involvement in "things that were clearly wrong".

A leading US union, the Service Employees International Union, wrote to Blankfein last week, highlighting that Goldman is the biggest shareholder in Burger King, with a 10.3 per cent stake.

The SEIU pointed out that the fast-food chain's staff are paid a median wage of US$6.33 an hour, often getting no healthcare insurance - a stark contrast to the well-feathered nests of Goldman's own employees. In a modest concession, Goldman last week said its top 30 executives would get their bonuses in shares over a five-year period, rather than cash. But this is unlikely to mollify anger over the sums.

Goldman is not alone. JP Morgan bankers are set to get around US$482,000 this year, while Morgan Stanley's staff can expect an average of US$252,000, according to estimates by David Trone, an analyst at Fox-Pitt Kelton.

Eminent names in the economic world are among those critical of the quick return to splashy payouts.

At a conference in Britain last week, former Federal Reserve chairman Paul Volcker asked why no bank chief had admitted that such sums were excessive. "Wake up, gentlemen. Your response, I can only say, has been inadequate."

Banks have toned down, or cancelled, Christmas parties this year. Yet in many cases senior executives shrug at the bonus controversy, arguing that they have no other way to keep a competitive edge.

For the prosperous recipients of six-or seven-figure payouts, spending opportunities abound. At a Ferrari showroom on Manhattan's Park Ave, the newly released two-door Ferrari California convertible starts at US$197,000. A Ferrari spokesman says: "Traditionally, yes, we do get customers from Wall St. They typically fit our type of client."

Wilbur Gonzalez, a real estate salesman, says he has sold two downtown apartments at more than US$5 million this year, compared with none last year. The buyers were Wall St bankers.

"They're very definitely out there. They're shopping very quietly, but they are shopping," says Gonzalez.

Young Wall St high-flyers, he says, are hungry for pads in neighbourhoods such as SoHo and Tribeca but, more often than in the past, their spouses do the looking.

And they don't want vendors to know who they are. "I've had two buyers who requested that we really didn't mention their profile to other brokers - they preferred to stay anonymous as long as possible."

BIG NUMBERS

US$26b expected in Wall St bonuses this year, up 40 per cent.
US$140b expected total remuneration.
US$143,400 expected average pay for each employee.

- OBSERVER