A new annual report predicts that Wall Street incentives will increase by an average of 40% in 2009, one year after the beginning of the financial meltdown. This is mostly the result of near-record revenues from fixed-income, commodities and foreign exchange trading, where businesses are growing stronger. However, the employees of hedge funds, private-equity firms and prime-brokerage operations will see a decline in their remuneration by up to 30 percent because of lower return on investments.
The report showed that bonuses at financial firms are being offered more and more in the form of multi-year stock options. Despite the increase in stock options, bonuses are believed to remain below the 2007 record levels.
To prevent a repeat of the financial crisis, the Federal Reserve is working on rules to ban excessive banker pay. The Federal Reserve will monitor incentive compensation at banks that encourages excessive risk-taking.
Bernard Matthys
money.cnn.com
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