December 20, 2006 in Business

Bonuses a boon for NYC economy

Adam Goldman Associated Press
 

NEW YORK – When Michael Aaron learned that Wall Street investment banks were going to be shelling out record bonuses this holiday season, the savvy wine merchant uncorked his own plan to make serious dough.

He bought a double-page ad in the New York Times, boasting a rare bottle of 1995 Dom Perignon that costs $14,950.

“We thought we’d put this temptation out there,” said Aaron, chairman of Sherry-Lehmann wine store on Madison Avenue.

A report released Tuesday by the New York state comptroller said Wall Street is expected to pay out $23.9 billion in bonuses this year, shattering last year’s record by 17 percent.

The most jaw-dropping bonuses are being doled out by Goldman Sachs Group Inc., the world’s largest investment bank. The company reported a staggering profit last week of $9.4 billion and said it was dedicating $16.5 billion for salaries, bonuses and benefits at the end of the year.

The upper echelon of Goldman Sachs – called the “golden 25” – could get at least $25 million each.

Lehman Brothers Holdings Inc. and Bear Stearns Cos. said they would pay out about $12 billion in compensation – more than $300,000 per employee.

Morgan Stanley Inc., the second-largest U.S. investment house, gave chief executive John Mack $40 million in stock and options for 2006, reflecting one of the largest bonuses awarded to a Wall Street CEO.

The bonus numbers are especially mind-boggling when compared with the salaries of average New Yorkers.

The comptroller estimated that bonuses will average $137,580 in 2006, although most Wall Streeters make much more than that. Excluding people working on Wall Street, the average New Yorker earned $56,634 in 2005. Wall Street accounts for less than 5 percent of all the jobs in the city but more than 20 percent of the wages.

“When Wall Street does well, New York City and New York state do well,” Comptroller Alan Hevesi said. “Wall Street bonuses are spent in the city and in surrounding suburbs on entertainment, real estate, automobiles, and other consumer goods, all of which generates jobs and tax revenues.”

Real estate is a big beneficiary of bonuses, as plenty of bankers look to upgrade their digs or buy their first pad.

“A lot of my Wall Streeters have been pounding the pavement anticipating the bonuses,” said Louise Phillips Forbes, of Halstead Property. “They’re prepared to pay a tremendous amount of money.”

Earlier this month, Forbes said she sold 11 apartments. More than half of those buyers worked on Wall Street. Forbes says she has about 200 apartments for sale ranging from $500,000 to $6 million. Many of those, she said, will go to bankers.

Jeff Falk, president of BMW of Manhattan, has an advantage over real estate brokers.

They can’t bring their wares to the doorstep of the investment and banking community, but he can.

In July 2005, BMW of Manhattan opened a second showroom on Wall Street. He said his company plans for bonuses, ensuring it has enough inventory to satisfy any urges to buy a sleek BMW.

Falk said he’s running an ad that says: “My bonus is faster than your bonus.”

And you can’t forget that Wall Street essential – the fancy suit.

“It definitely means business,” said Phil Kornblatt, director of retail for Hickey Freeman, a maker of fine suits that are popular on Wall Street and routinely cost $1,500. “We noticed a big increase in sales, and I believe most of it is due to the bonuses.”

© Copyright 2006 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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