With JPMorgan stock sliding after Wall Street freaked out over the bank's forecast of sharply higher compensation, here comes Goldman with today's "hold my beer" moment.
According to Bloomberg, in an attempt to preempt defections of some of its top producers, Goldman is set to reward the "top 1%" at the bank with a special one-time bonus in addition to annual bonuses, in recognition of the bank's "roaring success" through the pandemic, a pandemic which we have said from the very beginning has successfully made the ultra rich even richer.
The unusual payments to partners - the ~400 bankers who fill out the investment bank’s highest rung - will add millions of dollars to many compensation packages, according to Bloomberg sources. The one-time payment is in addition to the larger regular bonus payouts that range from a few million dollars to multiples of that after a year of record earnings.
Goldman’s management, under pressure to fend off increasingly aggressive poaching on Wall Street (from other banks which paradoxically are also complaining about higher pay), views the extra boosts as a creative solution that will come with a warning: Recipients shouldn’t mistake the bumps as part of a new pay floor, according to Bloomberg which notes that when compensation is set next year, managers will ignore the one-time payouts when making comparisons.
Of course, if 2022 proves to be another extremely volatile year - and it most likely will be thanks to the upcoming Fed rate hikes and balance sheet drawdown - Goldman is looking at another blockbuster year for sales and trading (and/or another bailout)... and most likely another "one-time" bonus payment.
Goldman's unprecedented remuneration comes as bosses across Wall Street are "sweetening" payouts this year after showing restraint in the first half of a two-year trading and dealmaking boom unleashed by the pandemic. At the end of 2020, they were wary of appearing extravagant amid Covid-19 outbreaks and uncertain the boom will last and amid public outcry over pay. But now, seemingly unconcerned about higher pay in a time of surging wages for everyone, they are feeling the pressure to open up their wallets to keep top producers happy and prevent them from jumping ship.
Perhaps the biggest irony of this aggressive boost to compensation is that it comes just days after Goldman's economists wrote that there is "little sign of a wage-price spiral" a report that was so silly, we didn't even bother covering it on this website.
Maybe Goldman meant for everyone else, except for Goldman.