Will Bonuses Bounce Back on Wall Street???

I’m curious to see what everyone’s thoughts are. I’m not just talking about the next few years, but more like 10-15 years down the road. Without trying to make it political I worry about potential taxation and policies implemented to level the playing field. I’m more worried about this and not so much the economy bouncing back. Will we ever see big pay days again?

those days are over.

It is inevitable that bonuses will bounce back, the question is when. The US is a late stage consumer economy. There are very few ways to make huge money at this point in the country’s industrialization. Finance is one of those ways. Once we get into a raging bull market with a hot stock market and M&A deal flow, the bonuses will come back. It’s a matter of time. In terms of politics, Wall Street owns the government, the policies will be changed at some point to suit the financial capitalist overlords. I wouldn’t expect this to happen in the next few years, but if your time line is 15 years out, I think there is a very good chance of that happening.

I think 2007 levels might be a stretch. There were prop traders at big banks making like $50 million at one point. Imagine what would happen if those guys took the wrong side of a trade. Banks should rightfully clamp down on certain sorts of acitivity.

But with that being said, current bonuses are somewhat depressed at the moment. Sooner or later, the economy will grow and banks will return to profitability. More importantly, when Joe the Plumber has money in his pocket, he will stop protesting about class division or bank “mismanagement”. Bank compensation will fall under the radar again, and bankers will start paying themselves more.

Agree with bromion.

After the 2008 fuckboggle, did we see anything actually curtailing banks’ power?

Glass-Steagal, Volcker’s rule, blah blah blah.

Nothing has changed, this is true. Comp is down because we are in a secular bear market, not becuase industry fundamentals are permanently different. The Wall Street overlords still have dominion over everything (they create nothing, they own!). Comp will once again reach stratospheric levels during the next bubble whenever that is.

Edit: What ohai said, this non-issue will eventually fall by the way side again once the plebs get back on track.

Dodd-Frank is a huge pain in the ass, actually. Reporting and disclosure requirements are increasingly onerous. Banks need more support staff to help with compliance. Also, spreads will decrease because you have to disclose more price information to clients.

It will be a while before the industry recovers from this. Most likely, banks will reduce their S&T divisions and focus more on investment banking or wealth management. S&T will rebound somewhat once political scrutiny goes away, but I doubt that it will get back to pre-Lehman levels - not for a long time, at least. Things will get better than they are today, but how much better is the question.

I don’t work in finance, so apologies in advance for dumb questions:

What’s S&T?

Is Dodd Frank for banks = Sarbanes Oxley for the rest of us? Tons of documentation, supposedly holds CxOs responsible.

S&T = Sales & Trading

ohai, can some (most?) of that activity be relocated overseas? Why doesn’t Goldman open prop trading in the Bahamas or something?

I know many of the more established hedge funds are choosing not to register and will run with smaller amounts of private capital, and / or are relocating to jurisdictions in which they don’t have to register. I don’t think any of the registration stuff is actually going to make markets any less volatile over time, but I suppose we’ll see.

M&A bonuses will be back in force unchecked once the cycle turns, as will private equity I’m sure. Nobody ever learns lessons on Wall Street, the same themes just repeat every few decades.

People have short term memory in this industry. Leverage will be back and the cycle will repeat. Human nature.

Hmm… good question. I suspect that there are some laws that prevent US financial institutions from doing this on a wide scale. Otherwise, maybe companies think the “talent” won’t follow them to other countries. It’s hard to even start a trading desk outside of a handful of (very expensive) US cities. It would be even more difficult to move to a different country, as nice as that country is.

It could also just be old world thinking. Who knows.