Wall Street Ends 2021 With Existential Angst and Big Bonuses

While hosting retired partners at a dinner party in November, the Goldman Sachs Group Inc. Chief Executive Officer, David Solomon, proudly said his firm will feature among the most profitable large public companies this year. 

However, veteran banker Geoffrey T Boisi is surprised by how the excitement has taken a low-key. 

“I don’t know if malaise is the right word — it’s this uncomfortable feeling,” said Boisi 

Boisi left Goldman Sachs back in the 1990s to join JPMorgan Chase & Co as the vice-chairman. Later, he founded the Beacon group and Roundtable Investment Partners, where he is serving as the chairman and Chief Executive officer.  

In winding his remark, Boisi said, “People are more unsettled and ill at ease.”

The 74-year-old banker wasn’t simply alluding to the mood at the exquisite Manhattan’s Hudson Yards arts center that evening. 

Those who have enjoyed the past Wall Street booms agree that, in a sense, this one doesn’t evoke the best feelings. 

The wealth pumped in by deal makers and elite traders is possibly overtaken by the quick riches being flaunted by cryptocurrency enthusiasts, meme stocks, and fintech whizzes. 

There is also a sense of awareness that the financial sector is enjoying the benefits of the turmoil created by Covid -19 stimulus efforts and a bubble of market excitement that will fade away soon. 

J. Christopher Flowers, a prominent investor and former head of Goldman’s financial institution’s group, puts it this way.

Wall Street knows much of its windfall is coming from “speculative nonsense.” Take, for example, the glut of special purpose acquisition companies — or SPACs — making executives and some bankers rich as they rush to market. They have “a large element of baloney,” he said 

Banking’s Big Bonuses

During James Gorman’s five-year tenure at Morgan Stanley, the firm averaged close to US $3 billion of profit annually. But in this year’s first quarter alone, they made a whopping US $ 4 billion. 

JPMorgan, which hadn’t made US$25 billion before 2018, is expecting US $45 billion, while Goldman Sachs smashed its annual profit record around labor day.  

Several bankers, particularly those handling mergers and acquisitions, expect their bonuses to soar. 

Breaking Records

Clearly, Wall Street banks are breaking their 10-year-old revenue and profit records. However, in this race, you are not rated by what you have but by how much more you have than your competitors. 

During Wall Street’s pre-crisis boom, Facebook Inc. and Tesla Inc. were barely up and running, but right now, these companies’ founders alone are worth more than Citigroup Inc. 

Remember, this was once US’s most valuable bank. 

The packages that Goldman and JPMorgan gave their chief executives may pale compared to what Apollo Global Management Inc. and KKR & Co. will roll out for their bosses. 

Even Amateurs in meme stocks and crypto have shown off the Lamborghinis they have acquired from their new fortunes. 

Mark Gorton, chairman of high-frequency trading firm Tower Research Capital says there is always someone doing better than you and everyone measures their success against those people’s wealth.