View from Manhattan: Wall Street's pre-poll tax dodge

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'THAT time of the year' - when firms award partnerships and determine Christmas bonuses - has come unusually early to Wall Street this year.

The past week has found an inordinate number of young brokers and lawyers sobbing into their beer in the bars of lower Manhattan, contemplating the Brooklyn Bridge as they explain that they have been passed over for promotion. At a firm like Goldman Sachs, Wall Street's last big private partnership, not being among the 35 elevated to power and profit-sharing this year means losing two noughts from one's year-end payout. And for many hard-working lawyers and accountants, failing to 'make the cut' means it is time to consider a career change.

Traditionally most of this goes on in December, when managers have a good idea of year-end profits and know whom they will need in the coming year and what they can afford to pay them. But Wall Street is making decisions on partnerships and year-end bonuses early this year, apparently to allow highly-paid employees the option of taking their bonus money - the bulk of their annual earnings - during the 1992 tax year.

Those who wait until January to bank their earnings risk running afoul of new taxes on the rich promised by Bill Clinton: a 36 per cent marginal rate for those earning more than dollars 150,000 and a 10 per cent surcharge on salaries of more than dollars 1m; and for their employers, the loss of corporate tax deductions for any pay in excess of dollars 1m.

With the average salary on Wall Street these days well shy of dollars 100,000, the early- bonus policy is largely a public relations exercise, a timely reminder to the nation's brokers and traders that their employers, for the most part, are not big fans of the Democrats. (Conspicuous among those firms not offering special, pre-election tax dodges are houses like Lazard Freres, chaired by Felix Rohatyn, a long-time Democrat and potential Treasury Secretary, and Goldman Sachs, co-chaired by Robert Rubin, a Clinton economic adviser.)

At the same time, Mr Clinton has managed to raise record amounts of campaign money - for a Democrat - on Wall Street this year. Like his running mate Al Gore, who also did well with the financial community when he sought the presidential nomination four years ago, Mr Clinton has close friends on Wall Street who came through for him early in the primary process. Much of the dollars 65m he has raised has come from business people betting on his growth, technology and infrastructure policies.

'The big question is why people whose taxes are going to go up are giving money to him,' said Susan Levine, an investment banker with Shearson Lehman Brothers who personally raised dollars 200,000 for Mr Clinton's campaign among her colleagues - dollars 125,000 of it before the Democratic convention in July.

An informal poll of brokerage economists by the Independent this week suggests a strong majority favouring Mr Clinton's economic platforms, apparently concluding that the dangers of the US deficit and potential inflation pale beside the prospect of continued weak growth.

A Clinton victory also has many supporters among Wall Street's stock pickers, who have been competing feverishly in the past week to identify companies that will benefit - and those that will suffer - from a return of stimulative, interventionist and re- regulatory economics.

While many investors, including his critics, are confident he will make good appointments - Paul Volcker, the former Federal Reserve chairman, is on his transition team, and another potential Treasury Secretary - Mr Clinton 'simply cannot bring himself to fully endorse the market place as the primary resource allocator', according to David Shulman, equities strategist at Salomon Brothers in New York.

While many of Mr Clinton's policies are still vague, 'at a minimum he will raise taxes on the wealthy, reduce defence spending, expand education and infrastructure programmes and increase regulation, especially in health care'.

Most winner lists include:

Cyclical manufacturers that benefit from growth, especially lean lower-cost producers like Chrysler and Caterpillar.

Engineering and construction firms like Morrison Knudsen and Fluor.

Technology and education-related computer issues, such as Cray Research, Kendall Square Research and Apple Computer.

Retailers poised to take advantage of restored consumer confidence, like Wal-Mart and Toys 'R' Us.

Health maintenance organisations that are likely to form the core of Mr Clinton's national medical insurance plan, like US Healthcare.

Among the losers:

Luxury retailers like Tiffany.

Industries likely to be re-regulated, like banks, airlines and chemicals.

Big-ticket defence contractors.

Exporters and foreign firms that could be hurt by international trade war and higher multinational corporation taxes.

Bush abroad

George Bush, however, remains the clear favourite of most American business and financial leaders, and the same is true of their colleagues in Europe. This is most decidedly the case in the UK, according to a poll conducted by the United Parcel Service last month among 1,450 senior European executives.

Indeed, the survey suggests British business leaders are even more hostile to Mr Clinton than their US counterparts, favouring Mr Bush by a margin of 69 per cent to 14 per cent.

German chief executives, managing directors and and finance directors also prefer Mr Bush, 46 per cent to 32 per cent, while the Spanish were split evenly.

Europe-wide, the margin was much closer, with 40 per cent of business leaders choosing the incumbent president over his Democratic challenger. Mr Clinton was the favourite of executives in France (40 per cent to 27 per cent), Italy (44-37), the Netherlands (48-35) and Belgium (40-39).

Sixty-two per cent of those polled said the outcome of the election would have a direct impact on their business.

(Photograph omitted)