Bankers in America’s financial heart saw their bonuses fall by only a third last year, despite the financial devastation wreaked on Wall Street, it emerged yesterday.

Thomas DiNapoli, the New York State Comptroller, said that Wall Street’s bonus pool fell by 44 per cent to $18.4 billion (£12.9 billion) last year, the biggest percentage fall in 30 years.

However, because 19,200 people were dismissed from their financial services jobs in 2008, there were fewer people to share in the pool. This meant that the average bonus was down 36.7 per cent, at $112,000.

Mr DiNapoli forecast a tough 2009 for the street’s workers. “The industry is still continuing to write off toxic assets. It’s painfully obvious that 2009 will be another difficult year.”

Richard Lipstein, managing director at Boyden Global Executive Search, said that many of Wall Street’s redundant employees had left the financial sector altogether. “Lots of people are making mid-career changes,” he said.

Bank of America (BoA) is expected to tell its bankers today that their bonuses will be deferred for at least a year. The new policy, likely to be announced when BoA informs employees of their 2008 bonuses, will mean that payments of $50,000 or more will be held back until 2010.

The bank is at the centre of a row over bonuses, after John Thain, the ousted Merrill Lynch chief executive, rushed through up to $4 billion worth of incentives for staff in the weeks before the bank’s takeover by BoA.

Andrew Cuomo, the New York attorney-general, has subpoenaed Mr Thain as part of his inquiry into bonus payments by banks that have received US government bailouts. BoA’s board last night expressed its support for Kenneth Lewis, the bank’s chief executive, who has been under fire for his handling of the Merrill acquisition.

Investors remain confident that the Obama Administration is close to finalising plans to set up a bad bank to relieve financial groups of their toxic assets. The S&P 500 Financials index closed up 28.4 at 874.1.

The markets managed to shrug off an announcement by the International Monetary Fund that losses in the banking industry could reach $2.2 trillion by the end of the financial crisis. The IMF had previously estimated a total sector loss of $1.4 trillion.

Shares in Citigroup rose almost 21 per cent after the news, while BoA was up 19 per cent. Shares in Wells Fargo, one of America’s biggest retail banks, rose by 24 per cent, even though it had surprised investors with its first quarterly loss since 2001.

Wells Fargo insisted yesterday that it would not need any further assistance from the Government’s $700 billion Troubled Asset Relief Programme (Tarp), despite making a $2.5 billion loss in the final quarter of 2008.

Wachovia, the crisis-hit rival bought by Wells Fargo last October in a $15.1 billion all-share deal, made a $11.1 billion loss after writing down $2.8 billion in assets and building up its credit reserves by $4.2 billion.

Wells Fargo reassured investors that it would maintain its 34 cents-per-share quarterly dividend. The bank has had $25 billion from the Tarp.

Laura Tyson, an economic adviser to Mr Obama, raised investors’ hopes of more dramatic action from the White House to stem the red ink at America’s banks. Speaking at the World Economic Forum in Davos yesterday, she said: “The natural next step, which is real simple, is you take the bad assets out, the balance sheets are hit really hard, you recapitalise banks with different rules and they go out again and lend.”

The Federal Deposit Insurance Corporation has been pressing to run the bad bank, but the plan, which must be approved by Congress, could push the cost of the Tarp above $1 trillion.

Fed's boost for banks

— The US Federal Reserve kept the federal funds rate at 0.25 per cent or below yesterday and said that it would be prepared to buy long-term government debt to rescue the economy. The funds rate is the interest rate that banks charge each other on overnight loans.

—The Fed said that the present rate, set in December, was likely to remain at the same “exceptionally” low level. Instead of changing the rate, it will try to target specific assets and markets to restore normal credit conditions.

— Greg Salvaggio, vice-president of trading at Tempus Consulting in Washington, said: “This is good news for the dollar. We think it will keep consolidating against the euro, moving toward $1.30.”

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