Wall St bonus picture goes from bad to worse

By Joseph A. Giannone - Analysis

NEW YORK (Reuters) - With each passing day, the forecast for Wall Street bonuses only grows worse.

In less than two weeks, Morgan Stanley and Goldman Sachs will tell their bankers and traders how much they will receive in annual bonuses for one of the worst years ever for the securities industry. Bonuses represent the bulk of a Wall Streeter's compensation and in a good year could reach anywhere from $500,000 to several million dollars for a top producer.

Yet executives face a backlash against lavish pay after world governments put trillions of taxpayer dollars at risk to keep banks from failing. That pressure, combined with evidence that losses are continuing to mount and that revenue is falling hard, is expected to shrink payouts.

"It's a very tough year. People who still have jobs have to reset their expectations," said Eric Moskowitz, a compensation consultant at Wall Street recruiting firm The Options Group.

Compensation experts a month ago estimated that the biggest investment banking companies would slash annual bonuses by 50 percent, on average, and by more in businesses gutted by the breakdown in global markets.

Conditions have only grown worse in recent weeks. Fourth-quarter results are expected to be abysmal, while the layoffs keep piling up. Banks and insurers have announced about 200,000 job cuts since banks began experiencing problems with mortgages and other credit last year.

Gray skies turned even darker this week as several analysts told clients that Goldman Sachs Group (GS.N), one of the few firms that avoided major losses throughout the credit crisis, could post more than $2 billion (1.4 billion pounds) in fourth-quarter losses fuelled by nearly $9 billion in writedowns. Morgan Stanley (MS.N) also is expected to report a loss.

On Thursday, Credit Suisse (CSGN.VX) announced it would slash 5,300 jobs, or 11 percent of its staff worldwide, a day after U.S. middle-market leader Jefferies Group (JEF.N) slashed 10 percent of its workforce and closed some emerging-market offices.