Wall Street profits revive, bank bonuses may jump

New York Stock Exchange member firms earned a record $35.7 billion for their broker-dealer operations in the first six months of this year, which is 1-1/2 times above the previous high-water mark set in 2000, the state comptroller said in a report on Tuesday.

Six of the top U.S. banks set aside $112 billion for salaries and bonuses, including deferred payments, during the first nine months of this year, Democratic Comptroller Thomas DiNapoli also reported.

He said this period of extraordinary profitability, coupled with the companies' job cuts, could push their payments to employees above the levels seen in 2007 -- before the financial crisis hit stock markets.

The six banks are Bank of America , Citigroup , Goldman Sachs , JPMorgan Chase , Morgan Stanley and Wells Fargo .

The national economy is slowly improving, but Wall Street has recovered much faster than anyone had envisioned, DiNapoli said. Profits should top levels seen in 2006, he said, partly because of the historically low interest rates.

Salaries and bonuses paid by the country's six biggest bank holding companies, after adjusting for mergers and reorganizations, hit nearly $164 billion in 2007, DiNapoli said. The total then fell to $137.2 billion in 2008.

To equal the 2007 total, the six banks would have to set aside more than $50 billion in the fourth quarter.

Though employee pay has rebounded at four of the top banks, it still is declining at Merrill Lynch, which is now part of Bank of America, and Morgan Stanley, the comptroller said.

Looking at a different set of financial companies, New York Stock Exchange member broker-dealer firms, DiNapoli said employees who survived waves of job cuts also stand to get higher bonuses this year, partly because their ranks have thinned.

These companies set a record for compensation of just over $71 billion in 2006, DiNapoli said, citing data from the Securities Industry and Financial Markets Association. In 2007, the total they paid in salaries and bonuses slipped 2.1 percent, followed by a 14.1 percent drop in 2008.

A securities worker's average paycheck followed a similar pattern, slipping to $392,130 in 2008 from $401,500 in 2007, the comptroller said.

The securities industry's crisis last year caused 106,300 New York City residents to lose their jobs from September 2008 to September 2009, he reported. Many service companies -- from law firms to florists -- rise and fall with Wall Street.

About 43 percent of the 265,200 jobs that have been lost throughout the state can be traced back to Wall Street, DiNapoli reported.

One big uncertainty for the city, state and federal governments, which all must close huge deficits, is whether Wall Street -- either voluntarily or under pressure from regulators -- will pay more of their bonuses in stock than cash, which could shrink tax collections.

(Reporting by Joan Gralla; Editing by Gary Hill)