For bankers used to making millions of dollars in bonuses, $400,000 might seem like a big comedown. Goldman Sachs (GS) has elected to make that the cap for cash compensation for everyone at the firm including partners.

Some bonuses will drop by 80%.

According to the FT, "The rest of partners’ compensation packages will be paid half in stock and half in options, which will be priced based on the close of Goldman’s share price on Wednesday." Some of the compensation will be deferred which is a regular practice.

How can these people live on such sharply curtailed payouts? The answer is that they may not be able to, at least with huge apartments, country homes, private schools, and limos with drivers. Places like Tiffany may face two or three years of sharply falling sales.

There is on unfair aspect to the pay cuts. In some divisions of Goldman bankers probably made the firm billions of dollars. Because of overall losses and public perception of avarice in the industry they will go under the axe with everyone else.

If they could get jobs with massive pay packages somewhere else, the most talented traders and bankers would leave. Unfortunately, there is nowhere else to go.

Douglas A. McIntyre

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