Wall Street bonuses
Most Americans have expressed outrage over the magnitude of Wall Street bonuses, given the way the banks benefitted from federal bail-out money and turned profits with the help of government-backed low-interest loans. But the same bonuses are also providing hope to a variety of New Yorkers, from luxury retailers to waiters. Morgan Stanley, Bank of America, and J.P. Morgan Chase are handing out bonuses that match or exceed pre-recession levels. All of this is enough to make many Manhattanites optimistic that some of the cash will trickle down through the city's economy. Like the rest of the country, New York has suffered from foundering retail sales and the less-than-robust housing market. "It's not only that these people spend money on products. They also spend on services: maids, chefs, catering, and dog walkers," says Milton Pedraza, CEO of the Luxury Institute, a New York research firm.
The rest of the country may not be able to relate to what's considered a bargain among New York's financial community, but there are "deals" to be had throughout the tristate area. Yachts in all sizes and price ranges have returned to the market, many of them in foreclosure, says David Pugsley, vice president and general manager of Brewer Yacht Sales. Sales of luxury jewelry and watches fell by 40 percent last year, Pedraza says, leaving buyers room to negotiate prices. When banks such as Lehman Brothers and Bear Stearns failed, many wealthy New Yorkers sold their second homes on Long Island and in surrounding areas. "When you're nervous about your job, the last thing you want to do is tie yourself into a second or third mortgage," says Pamela Liebman, president and CEO of The Corcoran Group. "People are now taking advantage of the value in those properties."
Even with the mantra of deals, deals, deals, many Wall Street types may not spend their bonus money as lavishly in 2010. It's true that this year's bonuses are expected to match or exceed pre-recession levels, but financial planners say their clients are being more prudent this time around. Often, bankers may need to replenish their cash cushion, beef up disability insurance, or map out a new budget that takes into account the amount of money they will receive in restricted stock in lieu of bonus cash.
One hour north of New York City, in the seaside bedroom community of Westport, Conn., this attitude of spending and investing conservatively has already taken hold. There, Wells-Fargo Advisers senior vice president Howard Matson has been busy meeting with Wall Street clients as he's done for the past 26 years. But this year he's not dwelling on big-ticket toys. The large expenditures this year? Setting aside money for private schools and college funds. "In past years, where I would see the majority of a bonus allocated to a new- or vacation-home purchase," Matson says, "now clients may allocate one fourth of a bonus to a high-end purchase."
