Part of today’s Wall Street Journal’s editorial on the “political class” going after Wall Street’s compensation levels:
Yet the hard truth remains that whether on Wall Street or across the American business landscape, compensation levels are a business judgment made under the pressure of competition. The “idiots” notwithstanding, Wall Street has lots of highly talented financial minds and mobility among firms based on compensation is routine.
If Congress is going to start setting legal limits on salaries and bonuses in the U.S., it is going to drive talent out of Bank of America and these other banks and into institutions without such limits, perhaps abroad. The same goes for Attorney General Cuomo’s implied threat of prosecutions.
A few quick facts about Wall Street bonuses. The pretext for the political outrage was the New York comptroller’s report this week on the aggregate data for bonuses in 2008. That “irresponsible” bonus pool of $18 billion was for every worker in the New York financial industry, from top dogs to secretaries. This bonus pool fell 44% in 2008, the largest percentage decline in 30 years. The average bonus was $112,000; bonuses typically make up most of an employee’s salary on Wall Street. The comptroller estimates that this decline will cost New York State $1 billion in lost tax revenue and New York City $275 million. Both city and state may have to announce layoffs.
I find it interesting that a mouthpiece for an industry which requires approximately $4 trillion dollars worth of taxpayer money to stay solvent would use “business judgment[s] made under the pressures of compensation” to argue the need for “average bonuses of $112,000″.
It seems to me that Wall Street’s new socialists still want to live under capitalism’s old rules. When it suits them.
Of course, I’m surprised that Wall Street seems so surprised by the blowback coming from everyone who doesn’t work in downtown Manhattan. Especially when one considers the fact that the $4 trillion bank bailout is coming from taxpayers who live in a country where the median household income is about $50,000.
The Wall Street Journal editorial board can huff and puff all they want in their sly little way, but the whole equation isn’t all that complicated. Or huff and puff worthy.
If your industry needs trillions of dollars from the taxpayers to stay afloat because your industry’s firms developed a business model that turns out to be “shit” well, those firms don’t deserve bonuses for producing “shit”. That goes for the folks at the top, in the middle and all the way down at the bottom of the industry.
And it is perfectly appropriate for Washington to legislate how taxpayer money will be spent. That’s what Washington does.
Once Wall Street stops needing taxpayer dollars, Washington will stop hyper-legislating New York’s affairs (I have full faith and confidence that the banking industry’s well connected lobbyists will see to that).
Until then, we should all be quite content to bid any banker who wishes to try their luck abroad, “Bon Voyage!”