Thursday, February 05, 2009

On $500k a year

Hmm... after tax, that's barely above the carrying cost for a family of 4 in Manhattan -- assuming the usual private schools and a typical banker's wife ;-) See here for detailed accounting -- warning, may perturb your hedonic treadmill :-)

I understand the pay caps don't limit incentive stock option compensation. Perhaps that leaves some wiggle room, depending on what people think about the future value of bank shares (and modulo the inevitable nationalization we keep putting off). You certainly have to apply a deep discount relative to cash.

Some individuals are going to hop to foreign and smaller banks which are unencumbered by pay caps, or to hedge funds and money management firms. But I doubt job hopping is very easy for most employees right now, so I suspect this pay cap isn't going to hurt the banks that much (certainly far less than they've hurt themselves recently!), at least until conditions start to improve.

I'm interested in opinions from people on the Street, though :-)


Anonymous said...

As long as the options are puts, they're golden!

Anonymous said...

What is a typical base salary? That is, what would someone earn if they got no bonus? Is $500,000 unreasonable for most bankers? What might be the range of base salaries on Wall St.?

Anonymous said...

"a typical banker's wife"

You mean a gold digger?

"Is $500,000 unreasonable for most bankers?"

It isn't reasonable for anyone. It's far past the 999th percentile.

Lower incomes will mean lower rent and lower eveything else in Manhattan.

Unknown said...

Like every other person these folks have come to terms with their new reality. Reality does have to change to suit them; they have to adapt to the new nreality.

Anonymous said...

Steve your boy (Obama) is starting to show that he is a purely political animal. His notions suggest that he doesn't understand what he is doing. I am beginning to think we will soon be wondering if Bush was not really a genius compared to Obama and his gang of corrupt politicians.

Anonymous said...

Actually, aren't these pay caps intended to apply only to the 5 or 6 most senior "named officers"? If so, the muni portfolios of such individuals will be throwing off far more than 500k after tax ...

I suspect we may never see them materialize at any large institution (say more then 250bio of assets).

Anonymous said...

Lame article. The first "living expense" is,

"Barbara Corcoran, a real estate executive, said that most well-to-do families take at least two vacations a year, a winter trip to the sun and a spring trip to the ski slopes.

Total minimum cost: $16,000."

The author was obviously just trying to stretch the numbers as much as possible.

Steve Hsu said...

Did you read the article?!?

The first lines are:

Private school: $32,000 a year per student.

Mortgage: $96,000 a year.

Co-op maintenance fee: $96,000 a year.

Nanny: $45,000 a year.

We are already at $269,000, and we haven’t even gotten to taxes yet.

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