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On Wall Street, sky-high payouts may fall to Earth

With the economy in the throes of a historicmeltdown, financial workers everywhere fear layoffs. But even thosewho keep their jobs may face a far different future than they hadimagined -- one without the big payouts that have long made WallStreet a beacon for the ambitious and the acquisitive.

Those finance industry workers still standing after the brutalbanking collapses of the past year had to contend with a majorslash in bonus pay -- with many losing as much as one-third of theirtotal compensation. Then the Obama administration imposed a pay capof $500,000 on certain senior executives whose companies receivedsubstantial bailout money.

Now, analysts anticipate pay will sink even further, and somequestion whether the shift could permanently downsize thehigh-flying culture of Wall Street.

"It's going to drop again in 2009, so it's a huge change,"compensation consultant Alan Johnson said of the falling bonuspayouts.

Johnson noted that pay has often dropped as part of a cyclicaldownturn and then rebounded after a few years. But he said the newfederal pay caps have changed the equation and have many WallStreet workers concerned that their incentive pay could disappearaltogether, cutting their compensation to one-third of what it was.

In the neighborhood surrounding the New York Stock Exchange,many finance industry employees say they are more worried aboutkeeping their jobs than they are about their paychecks dwindling.Some believe the loss in compensation goes with the territory.

"You eat what you kill. It's a performance-based industry,"said broker Drew R. Alexander, who has seen his pay drop sinceOctober and reports that some friends have lost upwards of 60percent of their income.

Even many of those performing well are being forced to cut backon some expenses. Most finance sector employees have come to dependon bonuses and incentives to cover about two-thirds of their totalincome -- but in 2008 that bonus pay was sliced by about 45 percent,cutting total compensation by about one-third, Johnson said.

That means, according to Johnson, that workers who recently gottheir MBAs and once would have expected more than $150,000 inyearly pay likely got about $105,000. Vice presidents, who in flushyears have made $300,000 to $500,000, saw a drop of $90,000 to$150,000. Even secretaries, who including a small bonus often makeabout $50,000 a year, have seen a drop.

At the big investment firms, where historically hundreds ofemployees have made millions, and thousands have made $300,000 to$500,000, workers are struggling to come to grips with a world gonesuddenly awry.

"Morale is terrible right now," Johnson said. "People aregetting laid off. Pay is down. You're working really hard."

A number of firms have seen a jump in the employee hours spentat the company gym, as people try to cope with decliningopportunity and rising stress, he said.

Analysts believe the federal pay caps imposed on some of thehighest-level executives, combined with public anger surroundingWall Street bonuses, may very well trickle down to reduce the payof employees at all levels of finance firms.

"It will have a deflationary impact on the organizations,"said Pearl Meyer, executive compensation consultant with StevenHall & Partners. "But I don't know how permanent that is."

"At the lower level, you're hitting Christmas money" with suchcuts, along with home and car payments, Meyer said. New York MayorMichael Bloomberg recently noted that more than half the city'sfinancial services sector employees make less than $100,000 a year.

And at the upper range of the ladder, long-term pay cuts couldpermanently shift the character of Wall Street -- long famous fordrawing daredevil risk-takers seeking a luxe lifestyle.

Growing up in suburban Summit, N.J., David Gunther wassurrounded by investment bankers and luxury sedans. After visitinga cousin on the floor of the New York Stock Exchange, he washooked.

"Being down there, everyone's yelling. They have their ownlanguage, their own talk, their own swagger," said Gunther, 23."It always seemed like fast easy money" and was "portrayed asone big party."

Gunther thought he might land a job making $80,000 out ofcollege. Instead, he's living with his parents and looking for hisfirst job -- hoping now for $30,000 a year, and considering otherindustries.

"The game's completely changed," he said.

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