Posted by Leonard Steinberg on November 27th 2013

Another story of mis-guided righteousness has emerged today: As a reaction to the outrage over excessive banker-pay, starting in 2009, the biggest Wall Street firms were pressured to pay their top money-makers in restricted stock, which usually vested in 3 or 5 years, rather than cash bonuses. The typical pay structure was 75% cash and 25% equity in 2007, before the crisis turned that on its ear. In 2009, Citi and Goldman delivered all of their bonuses to their top execs in the form of stock and options awards. As a result, a number of Wall Street’s top execs can begin to collect big stock bonanzas this year……and for some it will be the equivalent of winning the lottery as those stock prices have soared over the past few years.

In trying to promote longer-term performance paying out bonuses more in equity has actually resulted in MORE compensation being realized by them over the last several years, especially for top executives at JPMorgan and Goldman Sachs, whose share prices have rebounded sharply after plunging in 2009.

JPMorgan CEO Jamie Dimon,will be able to collect $19.3 million in restricted stock and options that are starting to become good and will be vested by the end of this year. That includes 195,000 shares of restricted stock awarded and 563,000 in stock options awarded to him in February 2010. JPMorgan’s stock trading around $57 per share, has risen 82% since the start of 2009, despite the $6.2 billion London whale trading debacle and a $13 billion government settlement to resolve mortgage-related claims and probes. Mary Erdoes, head of asset management, was granted stock options that were valued at $3.8 million in 2009. Those same options are now worth more $18.9 million.

Goldman CEO Lloyd Blankfein and President Gary Cohn are looking at 30 percent increases on restricted shares awarded in 2010 — now worth nearly $10 million. Goldman bankers who were awarded restricted stock must hold onto 75%of their holdings until 2016.

In short, what was supposed to be a form of punishment on what the world deemed overpaid executives has resulted in lottery-sized windfalls. The ‘punishers’ were dead right….but dead. The good news is we should expect lots of these dollars to flow into the economy, and luxury ticket items should fare well, including Manhattan luxury real estate. Some call it trickle down economics, but if you analyze the volume of real estate tax dollars, transfer tax dollars, mansion tax dollars, sales tax dollars, employment, etc, etc, the trickle is more like a gushing and should benefit all. Yes, those at the top will benefit most, but…..