Big Fat Wall Street Bonuses Imperiled

The debt market's summer swoon could hit Wall Street's high rollers where it counts.

Normally, by late July, bankers at JPMorgan (JPM), Citigroup (C) and Bear Stearns (BSC) are busy jockeying for morning tee times. But with their firms stuck holding billions of dollars in loans they had hoped to sell, hard-hitting investment bankers suddenly have a more pressing concern: Will I get my bonus this year?

For years, the Wall Street banks have pulled down fat fees for financing private equity's corporate buying spree. Those fees fed record bonus pots that lined the pockets of bankers who worked on the deals.

But now investors are balking at buying debt tied to Cerberus Capital Management's buyout of Chrysler, among other deals. That has left the Wall Street firms that backed the LBOs holding loans they meant to sell -- loans that are now eating a scary hole in their balance sheets and, potentially, in the profit numbers that figure in the bonus pool.

It remains to be seen if this is simply a natural resetting from a frothy market or, as one banker put it, a "classic unwinding of a liquidity boom that was false and based on financial alchemy."

Either way, the turnabout has left M&A pros fearful that even the outsized fees generated earlier in the year -- when the buyout boom was rocking and rolling, and Wall Street was reporting record profits -- might evaporate by bonus time, under the weight of lost fees and hefty write-offs.