HOWZAT

This year Blankfein’s compensation alone is expected to top $50m — he made $38m last year. And some of his rivals are not far behind. Last week Morgan Stanley awarded its chief executive, John Mack, shares and options worth $41m.

Top traders and bankers on Wall Street typically make a base salary of $100,000 to $250,000 — the “real” money comes in the bonus. Overall, bonuses are expected to be up 15% to 20% over 2005, with those at Goldman rising by as much as 30%. ()

The reason is record profits. This month Goldman reported that quarterly profits had soared 93%. The bank earned nearly as much per share in 2006 as it had in the past two years combined, both of which were also record years.

For the year, Goldman produced record revenue of $37.7 billion and a record profit of $9.5 billion, or $19.69 a share.

In the fourth quarter, the bank earned $3.1 billion, or $6.59 a share, on revenue of $9.4 billion. Investment-banking revenue climbed 42% to $1.3 billion, and trading and principal investments rose 57% to $6.6 billion.

Goldman has made much of its extra profits by trading on its own account — rather than by using the traditional bank model of trading for other people and then taking a share of the profit.

The bank made $1.3 billion in a single trade this year. For decades Goldman has been cultivating contacts in China. In April the bank invested $2.6 billion in Industrial and Commercial Bank of China; when ICBC went public in October the investment was valued at $3.9 billion. It is believed to be the largest single gain on an investment Goldman has made since it opened its doors in 1869.

The last time western capitalists pulled off a trade this profitable in China “they were selling opium”, wrote Trader Monthly, a magazine that chronicles the lives of the financial elite.

Some analysts, however, say the impact of the big payouts can be exaggerated.

Ken Goldstein, economist at The Conference Board in New York, said: “Sure it’s important to the bankers and whoever cleans their pools. But to the rest of us, it doesn’t mean much. The American workforce is about 140m people and this is a $12 trillion economy. This is big money for some people but it’s a drop in the bucket for America.”

Outsiders might think bonus day would be akin to winning the lottery — racing hearts, joy and jeroboams all round. Not so.

“It’s not very Christmassy at all. Actually it’s quite horrible,” said one former Goldman employee of life in the bank at bonus time. “Nobody does any work, rumours fly all day and the atmosphere is tense.”

Many of those getting the biggest bonuses have long gone beyond the need for more money. This is about ego and your place in the pecking order. As Gore Vidal noted, it’s not enough to succeed, others must fail. If your “hopeless” colleague gets the same outsize bonus as you, what does that say about you? In many banks it is a sackable offence to disclose your bonus, so rumours are rife. And unlike in most professions where a bonus is likely to be token, this annual pay round really matters.

A good year for Wall Street is good news for New York as a whole. Even more than in London, New York city’s fortunes are tied to the financial-services community. Wall Street generates one in every five dollars made in the city and its money funds everything from thriving restaurants and bars to art galleries and exclusive shops.

Wall Street employees generated $2.1 billion in 2005 tax revenues and each new financial position filled created three more lower down the chain, according to New York Comptroller Alan Hevesi.

Wall Street’s wealthy workers earned an average of $289,664, or about five times as much as other employees in the city last year.

Bankers have never had it so good. But, say some observers, after decades in which the British have almost caught up with the Americans in their love of wealth, this year’s bonus season may mark a turning point.

“There has been a huge explosion in payments to the rich over the past 20 years. And partly that has been due to a significant cultural shift in this country,” said Stewart Lansley, the author of Rich Britain, The Rise and Rise of the New Super-Wealthy.

Under Tony Blair average earnings have risen 30% while the earnings of the top 1,000 have gone up ninefold, he said. The richest 1% owned 17% of the nation’s wealth in the 1980s; now it is up to 23%.

Lansley believes there could be a middle-class backlash against huge payouts and shareholder rebellions over executive rewards.

But that is unlikely to deter the young bonus-seekers who, if disappointed, are capable of turning to litigation.

This year the securities house Nomura was sued by a London-based broker who was dissatisfied with his £1.3m bonus.

Millions are just not enough for some.