But of course the biggest beneficiaries are those who get the mammoth checks and, in not a few instances, are so thankful they head straight for the door and sign up with a different brokerage promising them even greater riches next year. These do not include secretaries and clerks, whose bonuses run $10,000 or so. The folks who do the heavy liftingthat is, bankers who dream up odds-are-they'll-fail mergers over bottles of wine that cost $1,000 and traders who pass around the same piece of paper all day adding God-only-knows-what value to our liveswill get the big numbers, $1 million and up. Way up. Overall, the average bonus will total a record $125,500, up 6% from last year. For overseeing a firm that collects enough in fees and commissions to afford such munificence, CEO Henry Paulsen at Goldman Sachs got $38 million. John Mack at Morgan Stanley got $23 million. Actually, the figure for Mack is only $11.5 million. I annualized it; he was there just half a year.
I believe in the free market as much as anyone. If you can get someone to believe you are so valuable that they'll pony up enough loot for you to pay cash for a summer house in Tuscany, by all means take it and don't ask a lot of questions. But it would be nice if the folks that Wall Street serves made out toonot like bandits, but like the hard-working and trusting investors that most of them are. The gut-wrenching comparison that best illustrates that something may be amiss: in 2005, the average diversified stock fund returned 6.7%; bond investors gained under 1%; the average stock rose just 3%, according to market tracker Lipper. Those seriously sub-par returns don't square with a record Wall Street payday.
The lush bonuses reflect stepped-up mergers advice as well as Wall Street's ability to make money in markets that go nowhere by playing both sidesbetting on rising prices some of the time and falling prices at other times. Can you say hedge fund? Sure, the hefty pay filters through the economy, especially in New York. But the bonuses this year call to mind the title of Fred Schwed's famous book on how the Street works: Where Are the Customers' Yachts? Schwed asked the question in 1940. Maybe it's time to start asking again.