02/02/2011 09:45 am ET Updated Dec 06, 2017

Wall Street Pay Broke Record Last Year

Wall Street pay is rising, while income for normal Americans has stagnated.

Even as the real economy limped, financial firms paid employees a record sum last year, the Wall Street Journal reports. In 2009, the last full year data are available, average wages for Americans fell 1.5 percent from the previous year, according to the National Average Wage Index. Median household income in 2009 was "not statistically different" from 2008, according to the Census Bureau.

But total pay at Wall Street firms rose 5.7 percent in 2010, as the 25 companies that have already reported results shelled out a record $135 billion. Even as regulators pressured firms to alter compensation, prominent executives got big pay bumps, seeming to suggest that the former Wall Street culture has emerged virtually unscathed from the recession.

In the years leading up to the financial crisis, executives got bonuses based on their companies' short-term performance, a phenomenon that experts say encouraged excessively risky behavior. When lawmakers drafted regulations for the financial sector, executive compensation became a crucial subject for reform. The stimulus act, passed in early 2009, contained rules limiting pay.

But those rules have not worked, according to a December report from the Council of Institutional Investors. While some firms did decrease bonuses, they also raised base salaries to compensate. Even the new forms of pay -- such as restricted stock, designed to align executives' interests with those of shareholders -- don't effectively curb dangerous risk, the report found.

Indeed, combined pay at the financial firms surveyed by the WSJ hit an all-time high last year. Despite concerns in recent months that firms were suffering from a decline in trading volume, revenue rose 1 percent to $417 billion, another all-time record. Meanwhile, the percentage of revenue that went into employees' pockets climbed as well, from 31.1 percent in 2009 to 32.5 percent last year.

The taxpayer bailout that firms received during the crisis has helped amplify Wall Street's bottom lines. With hundreds of billions from the Troubled Asset Relief Program and other initiatives, the five biggest investment banks -- Goldman Sachs, JPMorgan, Bank of America, Citigroup and Morgan Stanley -- saw their revenues soar, Bloomberg News reported last year.

As TARP has wound down, the Federal Reserve has launched a $600 billion asset-purchase program, intended to augment the flow of cash through the economy, which has also been a direct and indirect boon for the banks. As it buys U.S. government debt, the Fed announces its purchases ahead of time, giving certain banks an opportunity to profit on the trades.