Wall Street bonuses expected to tumble

Consultant firm projects bonuses in financial sector to sink in 2008 on credit problems, decline in business, and mounting layoffs.

NEW YORK - Looks like Wall Street bankers can kiss those fat bonuses goodbye this year.

Some bankers' bonuses will be slashed by nearly half in 2008, and most can expect a 15% to 25% reduction from last year's levels, according to a recent projection from compensation consultancy firm Johnson Associates.

Johnson Associates expects the big wigs to give up the most, with bonuses of senior firm managers at investment banks tumbling 35% to 45% from 2007 levels. With the public scrutinizing deep-pocketed CEOs when most Americans are penny pinching, shareholders may not stand for executives taking home millions while their companies lose billions, the consultancy firm said.

Other staffers at investment banks could see their extra compensation sink 20% to as much as 30%.

Hedge fund managers and commercial and retail bankers' bonuses could be 15% lower, while real estate brokers may have to take home 10% less than last year.

That's because banks have experienced "a fundamental change in business," weighing on their results, according to the consultancy firm. The subprime mortgage meltdown and ensuing credit crisis have hampered banks from engaging in their core lending businesses. As a result, layoffs, write downs and huge losses have mounted for the industry, and stocks have been hammered.

Merrill Lynch, Citigroup, Wachovia and many others have reported staggering losses and took billion of dollars worth of writedowns because of bad mortgage bets. When the final quarterly results are tallied, the financial sector is expected to report total profits of just $8.9 billion in the second quarter, down 85% from earnings of $61.3 billion a year ago.

Recently the meaty bonuses that bankers had become accustomed to began to shrink. Wall Street bonuses sank 4.7% in 2007 as firms' impressive results became impressive losses and 2008 looks to like it might be much worse.