Goldman Sachs 2007 Bonus Pool Is Large Enough for Bear Stearns to Swim In
By Christine Harper
Bloomberg — When Goldman Sachs Group Inc. employees cash their year-end checks, they’ll have enough money to buy Bear Stearns Cos.
Goldman, the biggest and most profitable U.S. securities firm, set aside $16.9 billion to pay salaries, benefits and bonuses in the first nine months of 2007, according to the company’s third-quarter earnings report. The stock market values Bear Stearns Cos., the fifth-biggest firm, at $14.7 billion. Bonuses, the majority of Wall Street compensation, are typically paid after the fiscal year ends this month.
The figures demonstrate how the fortunes of U.S. investment banks have diverged this year during the collapse of the subprime mortgage market and a credit-market contraction that has saddled the biggest lenders and brokerages with at least $40 billion of writedowns. While analysts expect Goldman to top last year’s profit record, they estimate that Bear Stearns’s earnings will drop 27 percent. Goldman’s shares have added 12 percent this year while Bear Stearns’s are down 37 percent.
“This has been a year of winners and losers on Wall Street and there will be incredible variance on bonuses from bank to bank,” said Michael Karp, chief executive officer of Options Group, a recruiting firm based in New York. “The fact that Goldman Sachs can pay its employees more than Bear’s market cap speaks to this disparity.”
Goldman climbed $4.77, or 2.2 percent, to $223.16 in New York Stock Exchange composite trading today. Bear Stearns rose $2.09, or 2.1 percent, to $102.00.
Cayne, Blankfein
Bear Stearns Chief Executive Officer James Cayne, 73, has watched the market value of his firm decline more than $10 billion from its February peak. Two of the firm’s hedge funds, which invested in securities linked to subprime home loans, have filed for bankruptcy protection and company President Warren Spector has been ousted. Analysts expect earnings at the company, the No. 2 underwriter of mortgage-backed securities, to slump amid falling house prices and surging defaults on U.S. home loans.
Goldman, under Chief Executive Officer Lloyd Blankfein, 53, navigated through the worst credit contraction in at least nine years, posting record fixed-income revenue in the third quarter, aided by investments that gained in value as mortgage securities fell.
Goldman employed 29,905 people at the end of August, almost double the 15,516 working at Bear Stearns.
