On Wall Street, sky-high payouts may fall to Earth

NEW YORK -- With the economy faltering, financial workers everywhere fear layoffs. But even those who keep their jobs may face a different future than they had imagined -- one without the big payouts that have long made Wall Street a beacon for the ambitious and the acquisitive.

Those finance industry workers still standing after the banking collapses of the past year had to contend with a major slash in bonus pay -- with many losing as much as one-third of their total compensation. Then the Obama administration imposed a pay cap of $500,000 on certain senior executives whose companies receive substantial bailout money.

Now, analysts anticipate pay will sink even further, and some question whether the shift could permanently downsize the high-flying culture of Wall Street.

"It's going to drop again in 2009, so it's a huge change," compensation consultant Alan Johnson said of the falling bonus payouts.

Johnson said the new federal pay caps have many Wall Street workers concerned that their incentive pay could disappear altogether, cutting their compensation to one-third of what it was.

In the neighborhood surrounding the New York Stock Exchange, many finance industry employees say they are more worried about keeping their jobs than they are about their paychecks dwindling. Some believe the loss in compensation goes with the territory.

Most finance sector employees have come to depend on bonuses and incentives to cover about two-thirds of their total income -- but in 2008 that bonus pay was sliced by about 45 percent, cutting total compensation by about one-third, Johnson said.

At the big investment firms, workers are trying to come to grips with the changes.

"Morale is terrible right now," Johnson said. "People are getting laid off. Pay is down. You're working really hard."

Analysts believe the federal pay caps imposed on some of the highest-level executives, combined with public anger surrounding Wall Street bonuses, may very well trickle down to reduce the pay of employees at all levels of finance firms.

New York Mayor Michael Bloomberg recently said that more than half the city's financial services sector employees make less than $100,000 a year.

And at the upper range of the ladder, long-term pay cuts could permanently shift the character of Wall Street -- long famous for drawing daredevil risk-takers seeking a luxe lifestyle.

Growing up in suburban Summit, N.J., David Gunther was surrounded by investment bankers and luxury sedans. After visiting a cousin on the floor of the New York Stock Exchange, he was hooked.

"Being down there, everyone's yelling. They have their own language, their own talk, their own swagger," said Gunther, 23. "It always seemed like fast easy money" and was "portrayed as one big party."

Gunther thought he might land a job making $80,000 out of college. Instead, shortly after graduation he was living with his parents and looking for his first job -- hoping now for $30,000 a year, and considering other industries.

"The game's completely changed," he said.