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Wall Street "New" Math Just as Confusing as Old Math

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It’s not how much money you make, it’s what the money’s called. Not to mention what you’re called.

Just ask the Wall Street lower classes, those making between $250,000 and $500,000 annually. They’re reportedly dismayed by the real possibility that their 2010 annual bonus will be a lump of coal -- a big fat zero.

Trying to get regulators and regular people to pipe down over the exorbitant paydays even incompetent managers regularly pull down on Wall Street, some compensation managers came up with what should have been a win-win maneuver. They raised base annual salaries in 2009 and 2010 to cover what they otherwise would have handed out as year-end bonuses.

At Goldman Sachs, for example, managing directors are making $500,000 instead of the $300,000 they were making last year; Morgan Stanley and Credit Suisse directors are making $400,000, twice what they made last year.

But on Wall Street, there’s only one winner -- he who takes home the biggest bonus.

The midlevel managers whose end-of-year attaboy is subsumed in their salaries aren’t just nonwinners -- they’re “Zeros,” as in zero bonus.

One executive said people were confused by the new compensation system, even though their overall pay for the year is the same either way, the New York Times reported. “People expect a big bonus,” the unnamed exec said. “It is as if they don’t even see their base doubled last year.”

To grease these math-challenged squeaky wheels, at some outfits “we’ll throw $20,000 or $25,000 at each of the Zeros so they’re not discouraged,” another unnamed banker told NYT. “No matter what we pay people, it is never enough and they always find something to complain about.”

For the higher-ups who’ve arguably displayed an even more tenuous grasp of avant-garde mathematical concepts like “certified public accounting,” it’ll be business as usual. Wall Street’s five biggest firms have put aside nearly $90 billion for bonuses. At Bank of America, for example, top directors can expect a possible $1 million bonus; top vice presidents, $600,000. The Street can afford it – it generated $21.4 billion in the first three quarters of the year.

Some Wall Street watchers say the psychological toll on the Zeros will likely translate into fewer high-end impulse purchases come February, when the bonus money is paid out.
POSITION:  No positions in stocks mentioned.