There they are again: the brash young men with slicked-back hair, prowling among the exotic sports cars in Steven Kessler’s East 34th Street showroom. They finger the buttery leather seats of an $84,900 1993 Ferrari Mondial, or dicker over the $179,000 price of a 1994 Lamborghini Diablo.
From late December through March, Wall Street’s bonus-paying season, when executives receive as much as five or six times their base pay in one lump sum, Kessler says he makes 80 percent of his sales to stock and bond traders with money burning a hole in their pockets.
“They are young, aggressive people who are able to make decisions spontaneously,” Kessler said. “They come to see what’s in inventory, and when they receive their bonus checks - bingo.”
Unlike most businesses, Wall Street rewards its workers strictly according to the previous year’s results, and 1996 was spectacular. The security industry’s 150,000 workers in New York City are expected to pull down bonuses of more than $8.1 billion, 30 percent more than the previous high of $6.2 billion in 1995, according to the New York state comptroller, H. Carl McCall. (That works out to an average of $54,000 a person, with bonuses ranging from $10 million or more for the biggest winners to a few thousand for the lowliest clerks.)
Although Wall Street employs only about 5 percent of the city’s private work force, the big year-end paychecks have a disproportionate effect on the local and regional economy, buoying everything from apartment prices to windfall tax revenues that can be sprinkled like stardust by City Hall in an election year.
There is much discussion on Wall Street of how the prosperity of the late 1990s differs from that of the often vulgar ‘80s, the era of “greed is good,” when many thought the party would last forever. Now many Wall Streeters say they are spending bonuses less flamboyantly, investing for the long term in the knowledge that what goes up also comes down.
But in the full flush of bonus season, when 25-year-old Masters of the Universe roam the city, ordering $12 martinis made with Ketel One vodka at the Four Seasons Hotel bar and $125 tasting dinners at Nobu in TriBeCa, self-restraint can be hard to find.
Dan Rubin, who had parked his Acura NSX-T sports car outside Steven Kessler Motor Cars recently, entered the showroom of bright red Ferraris and sleek Lotuses with his fiancee and said, “We’re looking for something more fun.”
Rubin dropped out of Princeton in 1994 to found Rubin Investors Group, a private company that had a banner year, he said, thanks in part to betting on the Internet. “I trade big positions in small companies and terrorize the chairman,” he said with a supreme air of assurance. Besides shopping for a new car, he had just bought a ski house at Stratton Mountain, Vt.
Many on Wall Street, of course, are not making extravagant sums. Only about 1,500 in the top tier of traders, analysts and investment bankers take home more than $1 million in total pay, according to compensation experts.
At the very top, the nearly 200 partners of Goldman, Sachs & Co. made between $4 million and $8 million apiece, according to people at the firm, although much of it is reinvested in the firm until they leave. Alan C. Greenberg, the chairman of Bear Stearns & Co., which had a record year for profits, made $18.8 million in 1996, according to the company.
The bonus system is deeply ingrained on Wall Street.
“In a five-minute meeting, they give you a piece of paper with a number on it,” explained an analyst at a major investment bank, who spoke on condition that neither he nor his firm be identified. “It’s awesome. In some cases it’s five, six or seven times your salary, your whole year in one payment. Since many people on Wall Street derive psychic pleasure chiefly from their earnings, it’s a lot more significant than, say, a schoolteacher finding out she got a 3.5 percent raise. It is the score.”
Most investment banks promote a culture of extreme discretion, playing down any flashy displays of wealth. Even in a Champagne-popping year like the most recent one, when Wall Street’s total profits were a record $12.5 billion, bonuses are discussed only tersely, in a kind of code. “Are you happy?” one Wall Streeter will say to another. “Yes, I’m happy,” the colleague will reply.
Many Wall Streeters declined to speak publicly about bonuses. In part that is a measure of the industry’s traditional conservatism. But it is also a reaction to the late 1980s, when Wall Steet was scorched by recession, as well as by public opinion, which tagged its players as money-hungry Gekkos after the character popularized by Michael Douglas in the movie “Wall Street.”
“You still don’t have the ugly behavior of the ‘80s,” said an equity trader at a major house who spoke on condition of anonymity. “People have all been sobered by the layoffs and entrenchment in the business. Everybody knows we made a lot of money, but it’s ‘When is it going to end?’ rather than ‘This could go on forever.”’
The spending of individual Wall Streeters depends to a great extent on age, according to interviews with securities workers. Young associates recently out of business school, who in very good years can receive total compensation of up to $250,000, are the ones most likely to seek instant gratification, spending on fast cars, Charvet ties, Hamptons summer rentals.
Real estate brokers say that the inventory of luxury properties in the city has not been so low in memory.
“Last January there was a lot of money, but this January there’s euphoria,” said Dolly Lenz, Sotheby International Real Estate’s top salesperson, who says she has made more than a dozen bonusdriven deals for luxury apartments since late last year.
She said she sold a 33-year-old single investment banker two side-by-side condominiums, for $1.9 million and $1.2 million, in the Trump International Hotel and Tower on Columbus Circle, Donald Trump’s latest gold-hued edifice.
Merchants House in TriBeCa, two former industrial buildings on North Moore Street that were converted to 23 large condominiums last year, have nearly sold out, many to Wall Streeters, at asking prices from $750,000 to $2 million.
“There is much more disposable income around,” said David Teolis, one of the buyers, who is a 30-year-old co-manager of a high-risk hedge fund. He described his spending as “pretty modest,” although he plans to fly to Vail, Colo., for the weekend this month and in the last year has visited Europe five times to see a girlfriend.
Some Wall Streeters said that the only real difference from the ‘80s is that the lavish spending is better hidden from the censorious and envious gaze of outsiders. Jeffrey T. Leeds, the founder and president of Advance Capital, a private investment fund, is one of the very few on Wall Street who openly questions the extraordinary sums received. “It’s obscene,” he said. “Of course it is.”
Will there be a backlash against this wave of fat and happy bonus babies? So far, there are no signs of one.
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