2012 proved to be quite profitable for some who earn their livings on Wall Street. For others, it was a different story. Lower pay, forever-damaged reputations and plain old corporate greed were the hallmarks of this roller coaster year in the financial sector. In short – investors hit big. Others? Not so much. If you are – or were – a Wall Street trader, odds are, you took your fair share of hits. Here’s a look back as we stroll down Wall Street.
Here are a few facts that might have escaped you as we rushed to bring one scandalous breaking story after the other over the past year:
Did you know Standard & Poor’s 500 Index is up by 27 percent this year? And did you know this marks the first significant increase since 2003?
Here’s something else you might be surprised to learn: Bank of America is up a whopping 104 percent. Hard to believe, right? After all, it was the nation’s biggest banks whining and bellyaching over financial difficulties, too-harsh regulations and declarations that they were no longer allowed to do business as they once knew it. Sounds tragic, really, until that that triple digit increase hits you.
Remember those shareholders who fluctuated between despair, hostility and hope? Turns out, all of that exerted energy must have paid off. As big firms cut jobs and hours, it was those shareholders who enjoyed impressive profits on the fears of Americans. Everything from the healthcare crisis to the fiscal cliff to the presidential elections – there was always a way to turn a buck and these folks mastered it. As employees worried about their jobs, saw heads roll – including two leaders of the two largest banks in the country – and trading losses, others were rolling in their successes. But before all of those mountains of money were made, we have to keep in mind some of the news events that kept all eyes turned the financial sector as a whole and big banks and credit card companies specifically:
That pesky LIBOR scandal just will not go away. Criminal charges are now being contemplated on more involved and the repercussions are just now being realized by many, even though the story broke months ago. The interest rate manipulation scandal, really, is just now unfolding and you can be sure we’ll be hearing more about this well into 2013.
It was the tougher regulations many were sure would ease with the presidential election. Big banks funneled millions into the Romney campaign, in part because of his promise to overturn those new financial regulations like Dodd Frank and specifically that area known as the Durbin Amendment.
Everyone senses the winds of change, too.
There’s always grumbling on Wall Street, which is pathetic given how overpaid we all are, but there is a level of angst this year that is just unprecedented,
Gordon Dean, a former Morgan Stanley employee who gave more than two decades to the company and who left to co-found a San Francisco advisory firm earlier in 2012,
It’s just a profound sadness and dissatisfaction.
Massive Job Losses
There have been more than 30,000 job losses on Wall Street from nine of the nation’s biggest banks, including Deutsche Bank, Barclays, Bank of America, CitiGroup, JPMorgan Chase, Goldman Sachs, UBS and Morgan Stanley. And those 30,000 job cuts were made during the first nine months of 2012, too. The pink slips eased to a small degree as the presidential election came, all were hopeful of seeing President Obama become a one term president. Of course, we know it didn’t happen that way and those millions and millions of campaign donations were for naught.
But that wasn’t all Wall Streeters saw in 2012. The average pay is a staggering 50% less than salaries in 2007. You can be sure, too, that shareholders are not happy and with many of them with the mindset that they have nothing to lose, have begun speaking their collective mind.
Shareholders have become a lot more vocal,
said Benjamin Hesse, a stock manager who oversees a team of 15 analysts and fund managers at Fidelity Investments,
Managements are taking more shareholder-friendly steps, and that’s really across the board.
Meanwhile, many banks have turned to restructuring their products and services. Citigroup is the one with the biggest changes. It’s the nation’s third largest bank and its assets increased – over two short days, mind you – by nearly 5%. The reason is simple: the board gave CEO Vikram Pandit the boot. You may recall that shareholders cast its non binding vote that meant Pandit’s massive comp package was little more than wishful thinking. Once his replacement was named, the big bank’s stocks enjoy a more than 6 percent. Michael Corbat wasted no time in announcing the bank would be cutting 11,000 jobs.
At the same time, UBS announced it would be cutting 10,000 jobs and Goldman Sachs is also shrinking its employment numbers. There’s no doubt – Wall Street is evolving. Gone are the good ol’ days when money was seemingly being printed out of nowhere and lining pockets up and down the prime piece of real estate. What eventually emerges remains to be seen, but make no mistake: 2012 will go down as one of the most volatile and times of change in American history. Hang on folks, we’re just getting started.
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