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Wall Street Profits On Pace For Record, Industry Recovering 'Faster Than Expected': NY State Comptroller


It took Wall Street just one year to make its way back to record profits.

According to a report released Tuesday by the comptroller of New York State, Thomas P. DiNapoli, Wall Street is turning around "much faster than expected" and is on pace to pull in record earnings this year.

New York City's four largest investment firms -- Goldman Sachs, JPMorgan Chase, Merrill Lynch and Morgan Stanley -- earned $22.5 billion in the first nine months of 2009. Wall Street's earnings, should they remain steady for the rest of the year, could lead some firms to eclipse 2007's record profits.

From DiNapoli's report:

"The national economy is slowly improving, but Wall Street has recovered much faster than anyone had envisioned. Profitability is on track to exceed 2006 levels, which was a banner year for the industry. Strong profits have been driven by low interest rates, which reduce the cost of doing business.


Compensation is also increasing faster than expected, leading to expectations of higher bonuses. The federal government, which spent trillions of dollars to support the financial sector, has taken steps that may restrict cash bonuses and defer compensation to future years in an effort to reduce excessive risk-taking and reward long-term performance. While these initiatives may reduce personal income tax collections in the short term, New York State and New York City could benefit from increased stability in the financial sector. industry added 3,600 jobs in September 2009.)"

The six largest bank holding companies in the U.S. dedicated $112 billion to compensation during the first nine months of the year, the report noted. Even Merrill Lynch, which last $41 billion in the first nine months 2008, is expected to pay out sizable bonuses this year.

Deeper in the report are some indications of the disparity between Wall Street's ability to generate cash for its employees and its ability to create jobs and stimulate the larger economy. Though each new job on Wall Street creates two additional jobs in other industries in New York City, pay for bankers and traders may still be out of whack. "The securities industry accounted for 24 percent of the wages paid in New York City in 2008, even though the industry accounted for only 5 percent of the jobs," the report stated.

The average securities industry salary in 2008 was $382,130, down from a peak of $401,500 in 2007. (Keep in mind that the median income in America was approximately $50,000 in 2007.)

The average securities industry salary in New York was more than six times greater than in other industries. And since 2003 salaries in other industries in New York have grown just 20.4 percent, while Wall Street pay has jumped 73 percent.

"Consumers are still finding difficultly accessing the credit markets," DiNapoli's report states, while commercial credit has declined by 52 percent since its peak in July 2007.

READ the entire report:
http://www.huffingtonpost.com/2009/11/18/wall-street-profits-on-pa_n_361811.html

wall_street_report_2009- 16 pages:

http://www.docstoc.com/docs/16696089/wall_street_report_2009

... this "industry" and the collateral damage which sets the context for this "success":

The investment bank, Lehman Brothers which went bankrupt at the height of the crisis was larger, at $700 billion, than the stimulus bill or of either of the two bank bailouts (Bush's or Obama's). That bankruptcy was also more than 10 times the size of Enron, which had been one of the largest previous bankruptcies. Lehman plus Washington Mutual together represented the bankruptcy of over $1 trillion of assets with the collateral damage running to hundreds of thousands (if not millions) of jobs before the total impact can be calculated. This is while completely ignoring Bear Stearns and the rest of the imploders. All of this is also before taxpayer and Federal Reserve "infusions" are considered.

It is not surprising in the least that the remaining stump, "has recovered much faster than anyone had envisioned."

I get that this crisis is much bigger, much worse than is being disseminated, but how does the size or extent of the crisis make the seemingly rapid "recovery" of the "stump" not surprising?

I want to think that I am noting getting this because it is early and I don't have my morning legs, yet... :)

Interested to hear what anaxarchos has to say.

Maybe, because so much of the financial industry has imploded, that there are fewer places (the stump) available for investment of capital. Not only is there less competition for the "stump" firms, but they have shed labor costs in their holdings. Faster recovery and more efficiency for the survivors.

That is a very real destruction of capital. Eating your own is a tried and true way of getting through a "crisis".

EDIT: this is part of the introductory remarks from the sections of Theories of Surplus Value that Anax posted


Secondly, however, the destruction of capital through crises means the depreciation of values which prevents them from later renewing their reproduction process as capital on the same scale. This is the ruinous effect of the fall in the prices of commodities. It does not cause the destruction of any use-values. What one loses, the other gains. Values used as capital are prevented from acting again as capital in the hands of the same person. The old capitalists go bankrupt. If the value of the commodities from whose sale a capitalist reproduces his capital was equal to £ 12,000, of which say £ 2,000 were profit, and their price falls to £ 6,000, then the capitalist can neither meet his contracted obligations nor, even if he had none, could he, with the £ 6,000 restart his business on the former scale, for the commodity prices have risen once more to the level of their cost-prices. In this way, £ 6,000 has been destroyed, although the buyer of these commodities, because he has acquired them at half their cost-price, can go ahead very well once business livens up again, and may even have made a profit. A large part of the nominal capital of the society, i.e., of the exchange-value of the existing capital, is once for all destroyed, although this very destruction, since it does not affect the use-value, may very much expedite the new reproduction. This is also the period during which moneyed interest enriches itself at the cost of industrial interest. As regards the fall in the purely nominal capital, State bonds, shares etc.—in so far as it does not lead to the bankruptcy of the state or of the share company, or to the complete stoppage of reproduction through undermining the credit of the industrial capitalists who hold such securities—it amounts only to the transfer of wealth from one hand to another and will, on the whole, act favorably upon reproduction, since the parvenus into whose hands these stocks or shares fall cheaply, are mostly more enterprising than their former owners.

"In this way, £ 6,000 has been destroyed, although the buyer of these commodities, because he has acquired them at half their cost-price, can go ahead very well once business livens up again, and may even have made a profit. A large part of the nominal capital of the society, i.e., of the exchange-value of the existing capital, is once for all destroyed, although this very destruction, since it does not affect the use-value, may very much expedite the new reproduction."

I think that explains it...

"...it amounts only to the transfer of wealth from one hand to another and will, on the whole, act favorably upon reproduction, since the parvenus into whose hands these stocks or shares fall cheaply, are mostly more enterprising than their former owners."

"This is also the period during which moneyed interest enriches itself at the cost of industrial interest."

If you go right back to the original:


"The productive forces at the disposal of society no longer tend to further the development of the conditions of bourgeois property; on the contrary, they have become too powerful for these conditions, by which they are fettered, and so soon as they overcome these fetters, they bring disorder into the whole of bourgeois society, endanger the existence of bourgeois property. The conditions of bourgeois society are too narrow to comprise the wealth created by them. And how does the bourgeoisie get over these crises? On the one hand by enforced destruction of a mass of productive forces; on the other, by the conquest of new markets, and by the more thorough exploitation of the old ones. That is to say, by paving the way for more extensive and more destructive crises, and by diminishing the means whereby crises are prevented. "

Overproduction, commodities can not be sold, capital can not be invested....

Destruction (both figurative and literal) wipes out the excess and then some. The survivors emerge into a new world in which markets have magically reappeared. The crisis is over, until it is recreated again. This happens for enterprises, segments, and nations, though unevenly. The greater the destruction, the better the "dawn". The more policy moderates the destruction, the sooner crisis reemerges (this last should be called "Keynes' Dilemma").

War is the best of all. I've written it before, but, in the U.S.:

Before the Civil War, 3 millionaires...
After the Civil War, 1500...
After WWI, 15000...
After WWII, 150000...

Opportunity leads to destruction leads to opportunity. Meanwhile, there is a wider and wider gap between the internal rules of the system and "the welfare of the people".

Perpetual warfare and spending a quarter of the domestic product on the Versailles palace? Shit, that ain't nothin' but feudal lethargy. Watch these guys.

The light is getting stronger and shining more broadly by the day! These are enlightening exchanges, to say the least...