Underwriting Cycle

Just like the business cycle, underwriting IPOs and Secondary Offerings undergo cycles. Booms. Busts. This volatility explains a lot about the way in which investment bankers are paid: a senior banker might have a base salary of just a few hundred grand (which is like $32,487 in Des Moines, Iowa), but then get $5 million (or way more) in bonus money in a good year, and maybe $500k in a meh-to-bad year.

By having pay scale along with the markets, investment banks don't go bankrupt trying to pay huge guaranteed salaries along the way.