Morgan Stanley To Cap Cash Bonus At $125,000 (With Footnotes)

Tyler Durden's picture

That after last year's abysmal performance on Wall Street, best summarized by the following quarterly JPMorgan Investment Banking revenue and earnings chart, bonuses season would be painful should not surprise anyone. But hardly anyone expected it to be quite this bad. The WSJ reports that Morgan Stanley, likely first of many, will cap cash bonuses at $125,000 and "will defer the portion of any bonus past $125,000 until December 2012 and December 2013" with bigger 'sacrifices' to be suffered by the executive committee which, being held accountable for the collapse in its stock price, will defer their entire bonuses for 2011. Morgan Stanley is likely just the beginning: "As banks report fourth-quarter results this month and make bonus decisions for 2011, total compensation is likely to be the lowest since 2008." This means that once Goldmanites get their numbers later this week, we will likely see a mass exodus for hedge funds which remain the only oasis of cash payouts on Wall Street. Alas, unlike the Bank Holding Companies, a series of bad decisions will result in hedge fund closure, as the TBTF culture will never penetrate the stratified air of Greenwich, CT. And with bonuses capped at about $80K after taxes, or barely enough to cover the running tab at the local Genlteman's venue, the biggest loser will be the state and city of New York, both of which are about to see their tax revenues plummet. And since banker pay is responsible for a substantial portion of Federal tax revenue, look for Federal tax withholding data in the first few months of 2012 to get very ugly, making America even more responsible on debt issuance, and likely implying the yet to be re-expanded by $1.2 trillion debt ceiling will be breached just before the Obama election making it into the biggest talking point of the election cycle.

But back to the sad fate of banker bonuses and tiny violins:

At Goldman Sachs Group Inc., which, like Morgan Stanley, reports earnings this week, many of the roughly 400 partners can expect to see their 2011 pay cut at least in half from 2010, according to people familiar with the situation. Pay for some employees in the New York company's fixed-income trading business will shrink by 60%, with some workers getting no bonus, these people said.


Morgan Stanley is likely to cut compensation by 30% to 40% for many of its traders and bankers, especially those who focus on fixed income. Stock trading and parts of investment banking will likely be spared from pay cuts, though they are liable to have bonuses deferred.
Senior employees across the board will be affected by the changes in the makeup of the bonus, which for a Morgan Stanley or Goldman


Sachs trader can often outpace the continuing salary, according to the people familiar with the situation. The roughly 40 people on Morgan Stanley's management committee will see 85% of their bonuses deferred, a person familiar with the matter said.

The average of pay deferred, for all employees to whom it applies, will rise to about 75% from about 65% in recent years, this person said.

As for the footnotes:

The firm is taking a different approach with more-junior employees, or those without titles like managing director, executive director or vice president. Those employees, who often use their bonus money for day-to-day living expenses, will see only 25% or less of their overall bonuses deferred. Those employees who are paid less than $250,000 in overall pay won't have deferrals applied to their bonuses.


Of course, Wall Street workers may get paychecks this year from previous deferred bonuses. That will soften the blow somewhat from lower bonuses in early 2012. Morgan Stanley executives and many employees also receive part of their compensation in deferred stock.

Which brings us to another topic: namely the qualitative aspect of weekly initial claims (as opposed to just quantitative). Because while firings this year may have peaked at levels modestly lower than last year, it is the foregone paychecks which this year have soared compared to last year. Furthermore, with banks about to enter 6-12 months of global deleveraging as Basel III is knocking ever louder, the probability that many of the laid off bankers find a parallel job in the space is shrinking by the day. Which is precisely why we are very curious to see what TrimTabs tax withholding data indicates about the quality of terminations and lost jobs, because with the surge in banker layoffs and far lower bonuses, it is very likely that US tax revenues are about to fall off a cliff.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
aaxiom's picture

OMG! What will these poor bankers DO???

TheFourthStooge-ing's picture

Doesn't anyone care about the poor hookers?!

How will the coke dealers be able to send their kids to a good school?

Nobody cares about the human element in tragedies such as this, and it makes me sad.


LongBalls's picture

Hahahahah! It's finally time for those sorry pieces of scum to return their holiday gifts for a change! Hope you kept the reciept blowhards. I love success stories. Especially by those who don't cheat and steal.


Welcome to the 99% bankster bitches!!! Now fuck off!!!!

Manthong's picture

The LDBB Index (Lap Dance Blow Booze) will plummet to levels not seen since spring, 2009.

Bananamerican's picture

"Welcome to the 99% bankster bitches!!!"

They're still 99% douchebags and useless gourmands...

See what a year without taxpayer bailouts does to the jerking class?

Soon it will be model planes and bottles of Pabst

Bobbyrib's picture

"See what a year without taxpayer bailouts does to the jerking class?"

Operation Twist?

Caviar Emptor's picture

I can feel the frustration and taste the tears. I think we should hold a candle-light vigil outside MS for thenext 5 nights and sing we shall overcome. 

The Big Ching-aso's picture



I think I'm developing a teardrop in me one good eye.

Gidas19's picture

They forgot to mention that instead of yearly bonuses, there will be quarterly ones!!!!

slewie the pi-rat's picture

we're sorry!  you've hit the fuking lottery!

well, they stole it fair & square, and at least the stockholders aren't gonna get it...

Oh regional Indian's picture

Just because it's Slewie....

Austerity BeCheeses!!!!


I know a couple of Banskters and they are sweating, sweating!

And as another aside, most people cannot handle the truth.



BTW slewie, I'm sure you've read in serach of the miraculous? Right? Most diffficult lesson there and one you clearly keep falling/failing at : DO Not Display Negative Emotions". Right? I knew you felt like a flake re. the G teachings. It's all clear to me now.

prains's picture

 Those employees who are paid less than $250,000 in overall pay won't have deferrals applied to their bonuses.


just put a fork in me I'm done

centerline's picture

Is alot of money.  I would wager they are worked like dogs though.  Perform or die.  Fun career choice for sociopaths I suppose.


Rynak's picture

From someone who in the past was close to them (and then rejected them).... their lifestyle basically is "spend on the now, and worry about the "then" as well as your "conscience" later"... basically, volatility is their game, hoping that the CURRENT winning spree will never end, while spending obscene incomes like there's no tomorrow.

Not incompatible with "working them like dogs".... the "middle class" of them, would basically imagine themselves as on the highway, when actually they're just controlled tools, disposable as soon as the surplus no longer satisfies their inefficient pay.

And nope, i'm not sorry for them..... good riddance, scum.

Unfortunatelly, i doubt that said "riddance" will happen at all, without a fight. For now, they're plain as simply whining........... cue central banks.


RockyRacoon's picture

Well....  That's one way to curb the Wall Street extravagant pay packages.   Not one the oligarchs had in mind, but it works for me.   They'll have to recalculate all those multipliers of how much the 1%ers are superior in compensation to the rabble.   So sad.

centerline's picture

Sure sucks to be some ivy-league dickhead who just spent a wad of cash, good chunk of time, and tons of ass kissing to get into the "club" and find out the party is over.


Timmay's picture

No worries, they will be first in line for the next scam, I mean career.

TheFourthStooge-ing's picture

All that money they spent on velvet knee pads and silk jizz bibs - wasted.


sun tzu's picture

how about paying them with some of the worthless toxic debt "assets" they've been peddling.

RockyRacoon's picture

You mean they eat what they kill, eat their own cooking.   Fabulous metaphor! 

After all, they killed a lot of value, and cooked some books.

May they choke on either.

MsCreant's picture

Imagine if there was some event that created a "game on" kind of situation where everyone had to come clean about their books as fast as possible. I don't know the events, certain prosecution, threat of death by hanging, something. 

We'd all choke. It would also be great. 

I have a feeling this collapse will not be such a disaster for all.

I hope you are doing well. How is your property coming along? Planning your garden? 

RockyRacoon's picture

Hey, Missy.  I'm prepared for a medium sized "disaster".   My spring garden will be done, but not to the extent it has in the past.  The former years were for the practice, and for stashing some heirloom seeds.  I'm confident that I can do what is needed, when needed, and protect my "investment".   No more starting plants from seed again.   I'm focusing on making life lighter and more mobile.

MsCreant's picture

Understood. When the house was destroyed I was able to get to my bugout stuff quickly. It was a good thing and the fire drill told us we were not as prepared as we would have liked to be. We were quite cumbersome, but then again, we were trying to save as much as possible. My yard is a disaster but I hope to get it up and running this summer. Got to start where you are at. Davey Jones may have some ideas to share with me. Seems he is making his work 24/7/365.

bob_dabolina's picture

 "likely implying the yet to be re-expanded by $1.2 trillion debt ceiling will be breached just before the Obama election making it into the biggest talking point of the election cycle."

You made it move.

Seasmoke's picture

oh boy a whole lot of other people are going to feel the squeeze even more, on this news.......Bloomberg, Cuomo, Christie, etc....

nasa's picture

short coke and high end hookers. long meth and crack whores.   

b_thunder's picture

so those who gross less than  $250K are considered "poor" and won't get any of their $$ deferred?  

and thsoe w/out the fancy title - they are "low middle class"?

i thought that when USA enters the phase that frnce went through in 1792-94 and russia in 1917-18 some walls treeters wil be spared. i think i was wrong! 


Dr. Engali's picture

I wonder if those bankers that get their deferred comp in December get it before or after the Mayan calendar ends.

My cognitive dissonance's picture

Loved the footnotes.

In other words the teat is drying up.

williambanzai7's picture

Cry me a river...


Time for a Reggie post on the rosey outlook for Manhattan real estate, commercial and residential.

847328_3527's picture

that's the secretarial bonus cap, right?

LongSoupLine's picture

wow, bonuses plummet, downgrades of countries and the EFSF...boy look at those futures crash.

What?  They're climbing hard and 1300's about to be blasted you say?

Well...big fucking shock that is.

Dr. Engali's picture

The market is looking for a blow off top. Creeping up every day until the final short throws in the towel. After it's captured as much retail as it can on the long side as they can't resist the temptation. Then once that's happened this no volume market will plummet faster than Obummer's demigod approval ratings.

Clowns on Acid's picture

Well this news should be bullish for Manhattan real estate....oh yeh and all those CDOs wiith the Manhattan mortgages in backing them....

junkyardjack's picture

Manhattan real estate never goes down.  There are still the criminals trying to flee China that will gladly pay out their stolen funds to buy an apartment.

junkyardjack's picture

The only appropriate reply that I could think of

non_anon's picture

oh, how charitable of them

Mr Lennon Hendrix's picture

Drudgereport is having another poll.  Surprise, surprise, Paul is winning.

Real Estate Geek's picture

WTF is up with Huntsman endorsing Romney instead of RP?  What a tool.

Mr Lennon Hendrix's picture

Ron Paul is kicking ass and taking names.

Ron Paul Defends Cuts to Overseas Military:

Teamtc321's picture

Thanks for the link LH, that is exactly what we all want imho. 

Mr Lennon Hendrix's picture

Paul schooled that panel and made them look ignorant, especially the beard from the paper.