BULL BONUS BONANZA

By GEORGE J. CHURCH

If Alan Greenspan aspired to be the Grinch who stole Wall Street's Christmas, he spoke up too late. The Federal Reserve Board chairman's warning of "irrational exuberance" in stock prices braked the market for just two days before investors stepped on the accelerator again, sending the Dow Jones industrial average into uncharted territory. So brokerage and investment-banking firms and their employees are whooping it up with perfectly rational exuberance: they are closing the books on their most profitable year ever. Year-end bonuses will surpass even those of the best years of the junk-bond infused, too-much-is-never-enough 1980s. "It's obscene," admits a bond trader, "unless you're on the receiving end."

With bonuses typically accounting for up to 90% of annual pay, this year at least 1,500 Wall Street hotshots will earn $1 million or more in the year-end bonus bonanza. Says Alan Johnson, a New York compensation consultant: "This is the best year ever in terms of pay, probably 30% higher than the high point of the '80s." In the first nine months of 1996, any number of Wall Street firms had already earned considerably more than they did in all of 1995. In addition to brokering stocks, investment firms are benefiting from underwriting fees on a record number of initial public offerings, fees for handling mergers and acquisitions, also at a record, and from a busy bond market. "Usually Wall Street is three up and two down," says Johnson. "This year everybody is up."

Even a lower-echelon dealmaker or trader could drown in this year's bonus pool, filled by the huge flow of investors' money into Wall Street and by auction-quality bidding for talent. "It's like Madonna or Michael Jordan," exclaims Alan ("Ace") Greenberg, chairman of Bear Stearns and one of the Street's franchise players. This year Ace scored bonuses, on top of his cheesy $200,000 base salary, adding up to $18,840,701 in cash, stock and what a proxy statement calls "other compensation," more than double the pedestrian $8 million he got last year. And that's not the biggest take on the Street, or even in his own company. President and chief executive James Cayne will collect $20,159,337, enough to impress even an N.B.A. point guard. An embarrassment of riches? Perhaps. Bear Stearns executives agreed to change the bonus system next year to take a smaller percentage of the company's earnings.

More typically, an investment banker at the managing-director level who earned a $1.5 million bonus last year will collect between $2 million and $2.3 million this year. A midlevel bond trader may well draw $750,000, about 50% more than in 1995 (which was a very good year). At Morgan Stanley, bonuses will increase anywhere from 30% to 40%, with the biggest checks going to investment bankers who handled stock deals, and mergers and acquisitions.

Even those just joining the gold rush are sharing in the treasure. Goldman Sachs, Merrill Lynch and others are fighting one another to pay up to $125,000--plus the proverbial bonus--annually to newly minted investment bankers. Do they deserve it? Wrong question. Money is the way Wall Street keeps score, and the industry has been running it up. "This is America," is the answer of Bear Stearns' Greenberg. "If they get it, they deserve it."

At the same time, non-American firms like Deutsche Bank, Union Bank of Switzerland and Britain's NatWest are trying to muscle in on the gold mine by hiring away some of the hottest prospectors. Deutsche Bank lured investment banker Frank Quattrone from Morgan Stanley, apparently by offering the kind of deal that made it easy for him to walk away from a reported $10 million job at his old firm. Goldman Sachs is attempting to stave off poaching by creating a new rung on the corporate ladder: junior partners, who will share some of the riches traditionally reserved for full partners. The company named 38 new partner-managing directors to the post. Moral: on Wall Street as in sports, you can keep your stars only by paying at least as much as they might get to jump to a rival team.

If these numbers seem staggering, well, that's because they are. While Wall Street is flush with 50%-plus pay hikes, pay raises for the Main Street crowd--the rest of us--have been on a six-year decline. In 1990, raises averaged 5.5%; next year they will hit only about 4.3%. The U.S. median income of $34,076 wouldn't cover the tax bill of this year's investment banker. "Wall Street is totally out of context with general industry," says Johnson. "The average person is worried about the increase in the cost of living, and Wall Street is taking a quantum leap. It is so out of touch with the environment people work in."

Does this mean the red suspenders, Masters of the Universe days of the '80s are back? Not quite, say most Wall Streeters. There may be even more money now, but it actually has to be earned: no more quick fortunes peddling junk bonds. And no money just for showing up. Bonuses now are tied to profits, not revenues, and are spread around more widely. Goldman Sachs, for instance, is giving even its support staff bonuses equal to 25% of their base pay. Says a senior executive at Lehman Brothers: "Since the '87 crash, people making money are suspicious about how long it will last, and have a little less hubris."

Well, maybe. But cigar bars are sprouting up all over the place, with sales of premium, hand-rolled cigars rising about 50% this year, to nearly $600 million. Luxury goods from Jaguars to jewelry are flying out of stores, and Manhattan's chichi restaurants can't possibly charge enough.

Back too is the lush, year-end holiday party but with a '90s twist: quiet consumption, meaning that the posh hotels and clubs swell with revelers, the Cristal champagne ($190 a bottle) still flows, but gone are the ostentatious soirees of yore. Not unlike a Jil Sander suit: it's sleek, simple and elegant, but it still costs about $3,000.

A more definitive, albeit unscientific, bellwether that the good times may be back is the price of prime Manhattan real estate. The Corcoran Group, a New York City real estate broker, has no trouble selling eight-room apartments at an average price of $1,170,000, vs. $889,000 last year, many to Wall Street types, who typically pay 100% cash. Chairperson Barbara Corcoran sees only one difference from the '80s: "Then everybody bought with reckless abandon. In the '90s they put on a show of caution--and then they buy with reckless abandon."

--Reported by Stacy Perman/New York

With reporting by Stacy Perman/New York