Visualizing The Last Three Bonus Seasons

While banks would be the last entities to reveal disclosure on bonuses during the current time filled with populist agita and froth (it certainly would "destabilize" the financial system if Joe Sixpack was aware that XYZ's main bond trader made $50 million simply by buying short and lending long), none other than Tim Geithner's treasury department provides a convenient way to track aggregate bonus dissemination data in the form of daily tax withholding data from the Financial Management Service. A historical analysis indicates that December and January are traditionally the high outlier months when it comes to tax withholdings, for the simple reason that these two months is when the majority of bonuses payments are disbursed, and being defined as "supplemental income" and taxed at a flat Federal rate per IRS publication 15, they provide the double whammy of increased income tax withholdings and a higher withholding rate. Zero Hedge has compiled daily data from the past three years' bonus seasons to determine whether there is any secular shift to bonus outlays, not just on Wall Street but Main Street as well (surprisingly for the Obama administration, the bulk of withholdings does not come from Wall Street). Our observations were somewhat unexpected.

To compile the data, we aggregated the daily work day disclosure from http://www.fms.treas.gov/, starting at the nearest work Monday in December (for all but the 2009/2010 bonus season, this was a December day, while the "first" Monday of the 2009/2010 period was on November 30, 2009, which we included for a comparable analysis). Analogously for the tail end, we counted through the "last" Friday of the January bonus season, which in 2007/2008 fell on February 01, 2008, which we also counted for comparable purposes. We then proceeded to calculate the approximately 42 work days in the "bonus periods" of December-January, without adjusting for the Dec. 31/last Friday of any given year. The result is presented on the chart below.

As the chart indicates, the trendlines across all three years do not diverge until the 9th workday in December, at which point incremental "supplemental" payments start hitting paychecks en masse, and thus boosting Treasury withholdings. As highlighted, both 2007 and 2008 demonstrate quite a few "boost" days, which shift the trendline progressively higher. Curiously, for 2009/2010 there have not been many such one-day "boosts" which could be interpreted that there are no days in which banks have made payments yet. As banks tend to clulster check writing on the same day for strategic reasons, just as they notify their employers of what their bonus numbers will be at or around the exact same time in the year, this explains why Wall Street would provide a material "boost" to the average trendline. It is also notable that the 2009/2010 cumulative withholding today is roughly $40 billion below the 2007/2008 and 2008/2009 trendlines. While this could be explained by the lower overall employment, as many have noted, unemployment has hit the lower income classes more selectively than the higher wage earners during this recession. It stands to reason that bank bonus disbursement actions likely account for a substantial portion of this variation.

Yet one curious observation is that while many have noted that bonus pools last year were half what they were in the prior year, the cumulative withholdings for 2007/08 did not differ materially from 2008/09. Assuming a $40 billion decline in overall disbursements, there should have been a much more pronounced impact on the 2008/2009 curve compared to the prior year, yet there was virtually none. Furthermore, if indeed 2009/2010 bank bonuses are supposed to be an all time record, this has yet to be experience by the Treasury in the form of increased withholdings.

A granular analysis of the 9 work weeks in the bonus seasons yields the following chart, which indicates just on which days major bonus outlays may have occurred.

As the chart indicates, there were 5 outlier days in 2007/2008 compared to 3 in 2008/2009 and one in the current period. Yet even that outlier could not counterindicative, as it combines the last Friday of 2009 (New Year's Day) and the first day of 2010, which traditionally have been substantial withholding days (in 2007/2008 these occur in the Mon/Wed sequential outlier duo). Obviously, the 2009/2010 series ends this last Friday as data through the end of January is still forthcoming. If banks truly anticipate making major bonus payments, we expect to see some substantial withholdings jumps in the last two weeks of January 2010.

Yet what is certain is that the average withholding amount over the past three years has declined substantially: from $8,580MM in 2007/2008, to $8,130MM in 2008/2009 and all the way down to $7,294MM in 2009/2010. Even assuming a major bounce in Wall Street bonuses, this likely will be insufficient to stabilize tax benefits for the Treasury.

This analysis ignores February bonus payments: a practice favored by a few banks, and one which we invite our readers to conduct at their leisure. Zero Hedge will repeat this analysis once the month of February is complete in order to evaluate what the full net impact of the last 3 bonus seasons to replenishing America's empty coffers has been.

Comments

[Mrmojorisin515]

ha zero hedge has an advertisement for chevy, for shame zero hedge for shame!  Can't you at least have ford or something, i mean i guess its ironic that you speak of government ills but are excepting money from a government company.  Such is the world we live in now i days i suppose

[David449420]

Those ADs are the reason you are able to access ZH at NO cost to you.  The Irony of it amuses me to no end. Nothing is for free.  The management of ZH has to pay to run this web site.

So they need income.  Have you paid ANYTHING to ZH yet?

Wake up, guys. 

That ZH management was able to get their funding from the very system that they are intent on exposing the failings of (and ultimately, to cause to fail) is nothing beyond Genuis.

I almost think I should NOT expose this secret, Known by those in the Know. 

I do not see those ads, at all.  If you use a web browser called Firefox, and a tiny program known as an add-on, you too, can have this almost completely effective relief from ALL commercial ads.  (The add-on is called No-Script.) 

I did not even know that ZH had secured funding from one of the gov't owned car companies until I read this thread.

I don't find much these days to feel good about. 

But. Finding this out, that ZH secured funding from the very entity that is one of their targets, has made my day.

Probably, I should have said nothing, and just enjoyed the moment of realization. 

After all, we don't want to give the game away to the (suckers) Advertisers.

Enjoy your Sunday evening.

[Anonymous]

Sorry, it just means that advertisers do not care about the content of ZH, and are counting on readers to not care either. The fact that large companies post ads here, through agents or directly, is just proof that this is an entertainment site, not news. For entertainment, it is excellent. For education, pretty good. But for changing the world, not so much.

But before you criticize these comments, put a crowbar in you wallet and give ZH some paypal love. I have - and I bet a lot of you clever-avatar-name jokers have not.

[Careless Whisper]

These bonuses are out. of. control.

Dennis Kozlowski is in jail for looting the shareholders of Tyco, yet the Wall Street bankstas walk around like legit guys. They act like they are doing the shareholders a favor.

I don't get it.

[trav7777]

Maybe they are all on the Geithner tax plan?

From my own limited personal experience, let me say this:  everyone that I know who is "connected" in some way, in DC here it's to the government, is doing better than ever.  They see no crisis in anything; their peer group is all full-speed ahead in their own words.  One guy didn't even "see" a housing crisis of any kind.  Basically said it didn't exist as far as he was concerned or could see.

Those people are doing well, the entire rest of the workforce is getting fucked.  Anyone who is a skilled tradesperson is having issues, except for people like my orthodontist, who has also not seen a falloff, but he is among the best around so that could have something to do with it.

Ordinary IT professionals, people in middle management...everyone I know is borderline petrified.  There have been too many rate cuts, hours cuts, job cuts...everybody knows somebody who is out of work, has been, or is about to be.  I live in a wealthy school district and the administrators confide in me that every other family has an earner out of work.  It's something that has cut ALL across the workforce spectrum, except for at the connected level.  Anyone who has an in to the government is doing exceptionally well, and that includes Wall Street.

Even among banks, there have been lots of layoffs, but among the tiptop executives, true to form, they are the ones carving up the cash for themselves in ever greater amounts.

[Absinthe Minded]

I'm in NH and it's the same here, all of the trades are hurting bad. The manufacturer I work for has been treading water but the lack of housing being built concerns me. I know we have a housing glut but that is what built this economy. I don't know what we are going to revive it with, we don't make anything here any more. I wish I could see light at the end of the tunnel, but it doesn't look good.  

[Anonymous]

Just 50 million? Ha, chump change in a multi-trillon dollar bailout universe. By the time Bernanke turns off the printing presses those bonuses will be the equivalent of two bits in today's terms. The rest of us will be starving in the streets, but that's not Wall Streets' concern.

In fact Bill Gates, George Soros, or Warren Buffet wouldn't bother bending over to pick up that spare change if they found it laying on the sidewalk.

Bring on the Fed's equivalent of the Zimbabwae Trillion dollar bank note! I'm getting tired of carrying around these large wads of FRN $100 and $1000 dollar bills!

Hey buddy, can you break a Trillion dollar bill?

[bugs_]

Many of the remnants of dot com also pay

their exec bonuses in Feb.

[blindfaith]

and, so now that we all made a fuss over these 'cash' bonuses, the bumbs are going to give the bonuses as "stock", GREAT. Now they will be paying capital gains instead of ordinaly income taxes on the loot.

[Anonymous]

Eliot Spitzer Talks To Fareed Zakaria About Wall Street Bonuses (VIDEO)

Spitzer made the point that when it comes to holding banks accountable, the political divisions of left versus right are disappearing:

http://tinyurl.com/ybgckzw

[FreakuentFlyer]

actually, since i am not getting any of this money, i am almost ok that the bankers are getting them instead of the ordinary folks, or the poor - cause this way, the bankers will get taxed a much higher rate, hence more money for the deficits, as opposed to the bottom brackets receiving some additional income at a lesser tax rate - and income which would go straight into walmart (aka debt to china).

so this is double whammy - by "allowing" such obscene bonuses the net positive on our debt approaches 2x the delta of the max-min tax rate times the total bonuses awarded LOL?

[Anonymous]

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