NEW YORK ( TheStreet) -- I've been waiting patiently for Wall Street to thumb its nose at the Financial Crisis Inquiry Commission and its best-selling report on the causes of the 2008 financial crisis. At last that day has arrived. It took precisely zero time.
You see, at the same time that the presses were grinding out copies of the 662-page, unsurprising but comprehensive report, the banks that got us into this mess were clutching firmly to one of their most cherished practices: The habit of paying themselves obscene sums of money. Wall Street compensation hit a record $135 billion last year, a 5.7% increase over 2009. Even though more of that pay came in the form of stock awards than in prior years, and there were "clawback" provisions in the event of future naughtiness, it really doesn't matter.
The reason lies in the word "obscene." I know, it's vague. You "know it when you see it," as a Supreme Court justice once put it -- and that's just what we were seeing in the run up to the financial crisis. And nothing has changed. See this Reuters analysis. At Bank of America (BAC - Get Report), the new home of Merrill Lynch, 31.5% of revenue went to compensation vs. 26.1% in 2009. At Goldman Sachs (GS - Get Report) the compensation-revenue ratio increased to 39.3% from 35.8%. Of the banks surveyed by Reuters, Morgan Stanley (MS - Get Report) is paying out the highest percentage of its revenue in compensation -- 50.6% -- but I guess that's OK because in 2009, it was 61.5%.
Sure, there's nothing illegal about banks doing any of this. They've paid back the taxpayer money that was used to bail them out, so they're in the clear. The problem is that what we're seeing here is a continuation of an ugly trend. The FCIC report was forthright in describing how Wall Street compensation levels contributed mightily to a fundamental change in the culture of the banks, one that set the stage for the financial crisis. It was a broad and damning indictment, one that received little notice while the media's attention was largely focused elsewhere.Turning to page 62, we see a chart showing how average financial and nonfinancial compensation remained roughly the same from the Roaring '20s through the Great Depression, World War II and afterwards -- right until 1980. Then the two lines began to diverge dramatically to the point that by 2009, average annual pay in the financial sector was topping $102,000, while everyone else was making just under $59,000.