Expert View: The bonuses in the Big Apple hide a tale of two cities

The golden elite of this glittering city have never had it so good
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The Independent Online

The small bedside cabinet in the modernist shop on Madison Avenue caught my eye. I decided to brave the hostile, stick-insect assistant. "Seven fifty," she said. "Eh?" "Seven hundred and fifty thousand dollars." I shuffled out. If you have to ask...

In the financial community, the good times are back in style, and nowhere more so than on Wall Street. New York State's comptroller has just announced year-end bonuses amounting to a colossal $21.5bn (£12.2bn), up 17 per cent on the previous year. This booty was shared among some 170,000 people, but that's still an average of $126,000 a piece.

At a Manhattan dinner last week for Nylons (those of us who divide a large part of lives between New York and London) we talked about little else. Wall Street is very much a money culture. The reality is that incomes are skewed disproportionately to the top of the pyramid: that 170,000 represents the whole industry, right down to the janitor.

At the top are the hedge fund managers, and industry leaders. Men (and a few women) such as Goldman Sachs's chief executive, Henry Paulson (total compensation last year: $38m) and Merrill Lynch's boss, Stanley O'Neal, whose stock options alone were declared last week at $20.2m. Further down are the rainmakers who rake in the $10m cheques, and below them the managing directors who receive what one real estate broker this week laughably called "the small bonuses of $4m or $5m".

In this climate, it's easy to feel underpaid. One friend of mine has a member of staff who is lying to his wife this week, because he's raking in less than $1m. I'm told first year associates are shamed if they receive less than $250,000.

All of this crazy money is a considerably distorting factor in the broader economy of New York City. Hence that real estate broker's haughtiness. Uptown, a condominium still in construction at 15 Central Park West is attracting record prices. Daniel Loeb, the hedge fund star of Third Point, reportedly paid $47m for the penthouse. One of over 100 apartments sold for an average price of $10m. For those mad enough to live above the shop, a development at 55 Wall Street comes complete with its a Cipriani bar and a private cinema.

All in all, condominium prices in Manhattan have risen 25 per cent in the past year to $1.5m, but most of this came at the top end. The problem is that all this largesse is disproportionately going to very few, and only in one industry, finance. New York's unemployment rate remains at more than 6 per cent (above the national average), and of the 45,000 jobs created last year, 25,000 were in finance. In the media sector, the city's other great professional employer, jobs are reportedly down by more than 30 per cent since 11 September 2001. New York remains a big centre for the advertising industry, but whereas 20 years ago a half of the world's agencies were headquartered there, now less than a third are.

The gap between rich and poor in America is getting wider, with New York leading the disparity league table as shown by the release of federal income statistics last week. The richest 20 per cent of its population earned 8.1 times more than the poorest 20 per cent. They have seen their incomes rise three times faster than the poor have in the past 20 years, helped to a large extent by President George Bush's rich-friendly tax policies. The more progressive New York State taxes mean that the top 0.4 per cent of New York's earners now account for an astonishing 40 per cent of the tax base.

Away from the Wall Street feeding frenzy, I must confess, last week was a depressing time to be in New York. The papers were filled daily with the many child abuse scandals emerging from run-down, rat-infested apartments off Manhattan. The golden elite of this glittering city have never had it so good. The rest...

Christopher.walker@tiscali.co.uk

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