Wall Street Pay Remains Touchy Subject

NEW YORK ( TheStreet) -- The subject of Wall Street pay just won't go away.

Goldman Sachs ( GS), which typically has among the richest and best-paid employees, distributed the smallest compensation in its history, on a relative basis. American International Group ( AIG) is reportedly overhauling its entire pay structure, moving more toward a model pioneered by former General Electric ( GE) CEO Jack Welch.

Citigroup ( C) sold off an entire business to get rid of its manager's pay controversy. For their part, the departing CEOs of both Bank of America ( BAC) and Morgan Stanley ( MS) took home no incentive compensation for 2009.

Just about every firm on Wall Street has reviewed and altered pay practices over the past year. The effort has been such that even President Obama, who has been leading the charge against big Wall Street pay packages -- calling the recipients "fat-cat bankers" as recently as December -- softened his stance this week.

In an interview with Bloomberg BusinessWeek, Obama was asked how he felt about JPMorgan Chase ( JPM) CEO Jamie Dimon receiving a $17 million stock bonus, and Goldman CEO Lloyd Blankfein receiving $9 million in equity-based compensation, for their performance last year.

"I know both those guys," said Obama. "They're very savvy businessmen. And I, like most of the American people, don't begrudge people success or wealth."

Yet the steady drumbeat of questions and criticism won't abate.

The reason is simple: The wealth gap between Wall Street and the rest of America is huge. According to federal data, the median household income was less than $51,000 in 2007 -- the year that represented Wall Street's peak. Keep in mind that each household has roughly 2.6 people, meaning each human gets $19,590 to survive on each year, or $53.67 per day.

Since then the gap has gotten even wider, with household wealth sinking by more than 25% from 2007 to 2009. Much of that wealth was holed up in home equity. Much of it has been sapped from the middle- and lower-class, who have lost homes and jobs amid the recession.

While there's less scientific evidence that pertains to Wall Street alone, the very wealthy -- those that earn many millions of dollars per year -- comprise just a tiny sliver of our society, with the most recent, pre-crisis estimates below 1%. A good number of those folks are leaders of corporate America -- the very people who sit on the Forbes List of billionaires.

While the Bill Gates and Warren Buffetts of the world have gotten poorer, as have the Dick Fulds, the money they lost isn't stopping them from putting food on the table. Mid-level bankers who lost their jobs, and their savings that were tied up in stocks, may have suffered too. But conventional wisdom says they may have had to trade in the Mercedes for a Volvo, not work three jobs to put food on the table.

There's also a good chance that bankers' unemployment was quite temporary: Capital markets activity has picked up remarkably; banks have been hiring for mortgage workout programs; and the private investment world and Europe have had "help wanted" signs on their doors for some time.

It's also worth noting that even if bankers are rich, few of them are as rich as the guys who make technological gizmos, animated films, toothpaste, or even the very publication in which angry Americans are reading about banker pay.

According to an analysis of 2008 filings by the firm Equilar, which teamed with the New York Times, there were only two financial CEOs among the 10 best-paid executives: American Express' ( AXP) Kenneth Chenault and Citigroup's Vikram Pandit, at No. 4 and No. 5. The top-earner was Motorola's ( MOT) Sanjay Jha, and other big league executives were Oracle's ( ORCL) Lawrence Ellison, Walt Disney's ( DIS) Robert Iger, Hewlett-Packard's ( HPQ) Mark Hurd, Procter & Gamble's ( PG) Alan Lafley and News Corp.'s ( NWS) Rupert Murdoch.

Rochdale Securities analyst Richard Bove notes that, with the dramatic pay overhauls this year in the financial sector, it's quite likely that bankers will slip further down the list.

"I have constantly pointed out that one can make more money playing third base for the New York Yankees, or being a shooting guard with the Los Angeles Lakers than one can get paid for running a financial company with hundreds of thousands of employees," Bove said in a note Wednesday, something that Obama also alluded to in his interview.

But of course the "Average Joe" reading about the millions of dollars that these folks are getting paid -- whether corporate titan or athlete -- probably has less anger toward them than muted jealousy. His tax dollars didn't help keep their franchises alive.

-- Written by Lauren Tara LaCapra in New York

More from Stocks

One-on-One With Carnival Corporation CEO Arnold Donald (Watch)

One-on-One With Carnival Corporation CEO Arnold Donald (Watch)

Replay: Jim Cramer on the Markets, Tiffany, Micron Technology and Union Pacific

Replay: Jim Cramer on the Markets, Tiffany, Micron Technology and Union Pacific

Carnival CEO Arnold Donald: China Will Become the Largest Cruise Market

Carnival CEO Arnold Donald: China Will Become the Largest Cruise Market

Stocks Finish Higher After Release of Fed Minutes

Stocks Finish Higher After Release of Fed Minutes

Has Wall Street Completely Lost Its Mind on General Electric?

Has Wall Street Completely Lost Its Mind on General Electric?