Comp season, break out the popcorn

This week is banking bonus week and the Daily Mail is carefully working itself (and its readership) into a froth of rage, hyperbole and errors:

...staff at Goldman Sachs are expected to reward themselves(1) £8.3 billion in bonuses(2) on Wednesday. The American investment bank, which employs 5,500 staff in the UK, will be the first to unveil its telephone number-sized(3) rewards – an average of £250,000 a person(4) – as part of the latest round of bonus updates.

Taking them in order:

1. Hopefully obviously, it's not the case that every banker sticks his or her grubby paws into a barrel full of dollars and pulls out what he or she likes. The Goldman Sachs partners will allocate the available bonus pool between the divisions; each division's partners will then allocate most of what they have around their profitable traders, and the remnants get handed down the management chain, shrinking as they go. The only way a "banker" can determine his own bonus is to threaten to leave if he doesn't get at least $X, and in today's banking job market the number of people who can make that threat effective are few.
2. The "bonus" pool is actually total compensation - you have to take away what people are actually paid as a salary before you can start to dole it out in cash bonuses, shares, and deferred shares.
3. Taking a typical phone number of 01234 567890, that looks like $1.2bn (if we are generous and assume the DM is referring to the original dollar figure rather than the UK equivalent). I rather doubt even the top partner is going to get 10% of all compensation to himself.
4. There will be very few people with a total compensation around £250,000. The troops in the trenches making up most of Goldman Sachs' 32,600 headcount will get much less than £100,000 in total compensation; they'll be lucky to get a bonus of 25% of their salary. Not peanuts, to be sure, but less than half the average. Those earning above £250,000 will mostly be managing directors, partners and perhaps very senior vice presidents. Best guess is that there are around 2000 MDs and partners.

I particularly treasure the Daily Mail reader comments on this:

The US government gave them huge amounts of money with no recourse. So what happened there and now that they are making losts of money how is the US taxpayer going to get some of it back. Its absolutely Obscene. What sort of INSIDE deals were being done in US government. Seriously.
- EUSSR, London, 13/1/2013 17:28

Yes, I'd imagine the US government is gnashing its teeth at only getting a 22% (annualised) profit on its enforced loan to Goldman Sachs. The fiends!

What I don't expect to see is any comment about Goldman Sachs profits and bonuses from a certain G. Osborne. Assume the DM is correct in the figure of £8.3 billion total comp, and given 5000 people in London, that's £1.3bn in pay to be taxed. Assuming a conservative average tax take of 50% (50% top level income tax + 2% ee NI + 13.8% er NI == 65.8% marginal tax over £150K, so 50% average over all employees seems low if anything) the Treasury will see a total of £650 million in tax from London-based Goldman Sachs employees this year. Toss in JP Morgan, Barclays, Lloyds into the mix and I would think Mr. Osborne is going to keep his mouth shut about the evil bankers.