Wall Street woes a bonus problem for NYC

New York —- The storied Wall Street bonus is an economy of its own: boosting tax revenues, driving real estate sales and paying for everything from Ferraris and private jets to diamond earrings and lavish holiday bashes.

But for many, the party’s over.

Top Goldman Sachs executives are forgoing cash or stock bonuses this year. Leaders of other financial institutions may follow amid public anger over the global financial meltdown.

And as the trend of bonuses going bust trickles down from CEOs to office workers, businesses that count on the annual influx of bonus dollars expect to feel the pain.

“Some of the big money is just not coming,” said Pamela Liebman, chief executive of the Corcoran Group, a leading New York real estate firm. “When Goldman doesn’t give bonuses and Citigroup lays off 52,000 people, it’s scary.”

New York’s real estate market traditionally soaks up much of the bonus money as bankers, brokers and traders splurge on pricey Manhattan apartments.

A bad bonus season is “definitely going to put a drag on the market,” Liebman said.

Last year, the securities industry paid $33.2 billion in bonuses, down 2 percent from the record $33.9 billion in 2006, the New York state comptroller’s office said. The average Wall Street year-end bonus in 2007 was about $180,000.

This year, “it’s a new ball game,” said Robert Whalen, a spokesman for the comptroller. He said that with all the upheaval among financial companies, “it’s not going to be the Wall Street that it has been for the last 15 or 20 years.”

Wall Street cash and stock bonuses will likely decline up to 35 percent overall and up to 70 percent for top executives, says compensation consultant Johnson Associates Inc.

“It was a miserable year for the industry,” managing director Alan Johnson said. “Those professionals who were fortunate enough to keep their jobs will see the fallout.”

And so will New York’s luxury market.

The economic brakes are on at Gotham Dream Cars in Manhattan, which rents Ferraris, Lamborghinis and other exotic vehicles. A $400,000 Saleen S7, a 550-horsepower “race car built for the street,” costs $2,750 for the first day —- with an online discount.

While the company is on track for its best year because of a strong spring and summer, business since September has fallen 15 percent compared with last year, founder Noah Lehmann-Haupt said.

“People are just spending less across the board,” he said. “We’re not Wal-Mart. We’re not seeing business go up, because it’s a flight to value and we’re definitely not value.”

Likewise, holiday shopping for jewelry is still “a question mark,” said Gem Sezgin, an owner of Ultimate Jewelry Designs.

“We’re hoping that it’s going to be the best, but what I’m smelling is it’s going to be 25 [percent] to 30 percent down from last year,” he said. “This Christmas, in general, every big company is thinking that it’s going to be low.”

A poor bonus season also means potentially disastrous shortfalls for government budgets. New York City depends on Wall Street for about 9 percent of tax revenues. For the state, it’s 20 percent.

“Whenever you have economic downturn, people tend to spend less,” Whalen said. “You see that with Wall Street earners as well, it’s just a little more profound because they have more money.”

But not everyone is hurting.

“There are still people out there making money, and they still want to celebrate by driving nice cars,” Lehmann-Haupt said.

He said a client recently bought one of the company’s largest rental packages.

The client’s business? He runs a collection agency.

Added Lehmann-Haupt: “Clearly he’s doing well.”

WALL STREET BONUSES COULD BE IN FOR RECORD FALL

Incentive funding is projected to fall sharply in 2008 for most workers …

Senior managers at commercial and investment banks, 55-70% decline

Staff positions at commercial and investment banks, 20-30%

Hedge funds, 25-35%

Fixed income management, 35-45%

Asset management, 20-25%

Source: Johnson Associates Inc.

… At a rate rarely seen in recent years

….Street Bonuses ..Change

2007..$33.2 billion ..(-2.0%)

2006..$33.9 …………32.0%

2005..$25.7 …………38.2%

2004..$18.6 …………17.7%

2003..$15.8 …………61.3%

2002 ..$9.8……….(-25.0%)

2001..$13.0……….(-33.2%)

2000..$19.5 …………44.3%

1999..$13.5 …………48.5%

1998 ..$9.1……….(-18.8%)

1997..$11.2 …………14.5%

1996 ..$9.8 …………59.3%

1995 ..$6.2 …………26.8%

1994 ..$4.9……….(-15.7%)

1993 ..$5.8 …………18.1%

Note: 2006 and 2007 figures subject to revision.

Source: New York State Deputy Comptroller’s Office