<p>I worry about the salary cap, believe it or not.</p>
<p>A long time ago, GE bought Kidder Peabody. Jack Welch said something like “wow, I can’t believe what these guys are making” and tried to put an end to it. so what happened? A lot of the top talent at Kidder left, Kidder couldn’t compete, and Welch wound up shutting it down.</p>
<p>As long as there’s someplace else to go where they can do better, the top talent doesn’t have to stay. They don’t have to stay in US-domiciled firms that are bound to these salary restrictions. They can also start their own firms. Leaving the former places as shells that can no longer compete effectively.</p>
<p>There are commodity aspects to the business, but there are non-commodity aspects as well. companies have been shown to pay up for the advice and expertise of the best people, who have the best ideas, to address some of their biggest problems. Nobody thinks baseball player x is worth $10 million, or whatever, but if someone in Japan would pay it to him don’t think that the Yankess can get away with keeping his talents by paying a more “reasonable” $100k. Or perhaps a new "league could crop up right here in the US which would pay him more, leaving the old salary-constrained AL talentless and in the dust.</p>
<p>BCEagle91, with all due respect, your ignorance really shines through in your inability to pinpoint exactly what it is you have an issue with. You are dancing around the issue and refuse to really get to the root of why you (and the general public) dislike WS. You seem to epitomize Mainstreet’s ignorance regarding the doings of Wall Street. It seems to me as if you have a gripe with the concept of business and capitalism in general.</p>
<p>monydad, I agree completely. I think the salary cap will lead to an exodus of senior management and talent at the junior level leading to even more inadequacy at the remaining banks. This hits it right on the head:</p>
<p>fendrock, it’s hard to say. With Wall Street firms, a CEO is almost more of a figurehead than anything else. The overall success of the firm depends very little on a Blankfein or a Thain (formerly) or a Dimon. The CEO is only one person in a pool of senior leadership and even the senior leadership is supported by the doings of hundreds of thousands of other employees at the “junior” level. I think UBS LA is a great example: the CEO of UBS is not the one who brought UBS LA to fame; it was other senior management like Ken Moelis and Oliver Sarkozy who made it rain.</p>
<p>Couldn’t it be said that if a firm needs to be bailed out, it hasn’t been performing at a level where the CEO deserves the money s/he has been making?</p>
<p>After all, if not for the bail out, the CEO might not have any job at all.</p>
<p>As for Wall Street, better-paid bankers are clearly generally those considered to be more successful. Because their compensation is a direct function of their success. A huge proportion of their compensation is in bonuses tied directly to the profitably of the efforts of: their firm, their department, and,quite significantly,themselves.</p>
<p>As for one way this has been “shown”, I already cited the Kidder Peabody example.</p>
<p>This has nothing to do with their CEOs though, just the people doing the business.</p>
<p>"Why do I care if none of the investment banks can compete? How does that effect the American economy? "</p>
<p>That’s a complicated question. As a New Yorker, I am very concerned about the New York economy. I don’t see anything here to replace that area of commerce in this region here, if most of the major players relocate overseas.</p>
<p>But more generally, it sometimes feels to me like the US doesn’t make anything anymore. The industries where “the action” seemed to still be here were in computer & electronics related out west, and in securities & investment banking. I just hate to see another one of our perceived areas of international predominance slipping away.</p>
<p>I guess it also affects our economy the same way any industry does.US workers get paid here, spend their money here, there is a multiplier effect on spending that ripples through the US economy. A foreign worker gets paid overseas, he spends his money there, there is no multiplier effect here, no ripple effect for us, we here in the US are worse off.</p>
<p>People need jobs, in order to live someplace. Somebody has to be provideing them, here. If that industry is gone, who steps in, to provide replacement jobs here, where our (mortgaged) houses are?</p>
<p>Huh? Lazard, Greenhill, Evercore, Centerview, Perella Weinberg, Moelis & Co., Gleacher Partners – these are all investment banks, and none of them received TARP money. In fact, NO bank received TARP money safe the bulge brackets (i.e. GS, MS, JPM, Citi, BoA-Merrill, etc.). That’s a handful of banks out of HUNDREDS of investment banks that received aid – very small percentage.</p>
<p>“The industries where “the action” seemed to still be here were in computer & electronics related out west, and in securities & investment banking.”</p>
<p>It just occurred to me that maybe the common element is that in these fields people who have non-commodity, better ideas can get paid a ton, commensurate with their unique contributions. </p>
<p>As a country, I would not like to be left having to compete with India and China on basis of cost of production. Hence we need the “better ideas” industries. And better compensation opportunities help promote better ideas.</p>
<p>Couldn’t agree more monydad. While Main Street’s perception is that everyone on WS had a role in creating the problems, anyone who has worked there knows that isn’t true and some of the very top talent in the Country is employed there. The top people are being wooed by international banks, private equity, corporations, higher education and many others. It’s also long been a tradition on WS that if you don’t like the way things are managed, start a new firm. If the top people leave because of salary constraints, we all lose.</p>
<p>But I’ve argued this before on these boards and it all comes back to the Main Street/Wall Street divide. Most Americans simply have not been exposed to the complex working of the Street and stay focused on the media’s simplistic view of what went wrong.</p>
<p>I think Wall Street people are over paid as a general rule.</p>
<p>The fees are too high too.</p>
<p>And no, most people were not involved in the problems of wall street, but the problems have wiped out several years of profits at firms like merrill lynch.</p>
<p>An example…Paying these brokerage firms 1% a year to manage my money… (1/2 % maybe goes to the money manager) when stocks have gone nowhere for 12 years… stupid. And these money managers are very well paid. Over paid.</p>
<p>I had a broker call me from one of my brokerage firms several years ago. He wanted me to buy $50K to $200K in GMAC bonds and there was a short timeframe for the purchase. I expressed my doubts about the company and put him off. On the last day, he called again and I said no - I was concerned about the health of the company. So the purchase date went by and they were downgraded the next day.</p>
<p>My impression of Wall Street? They sell crap. Or whatever it is that they have to push. They really don’t care what happens after it’s gone. I recall Citigroup responding to concerns that they held a lot of Enron or Worldcom paper. Citigroup responded that they just managed to sell all of that paper to their customers. One could say that they were very smart for being able to dump it all. On the other hand, I would guess that their customers weren’t too happy. Anyone want to tell me the fairytale that this stuff doesn’t happen and that it won’t happen in the future?</p>
<p>Wall St didn’t exactly cover itself in glory with the auction-rate securities mess either. You complain that it’s a big place and that that’s not all Wall St. What are you doing to police your industry? It seems that this crap happens over and over and over again.</p>
<p>Wall street are intermediaries. If they are selling crap, that means there are companies producing crap, and incompetent buyers who will buy crap if someone tap dances in front of them. The originators and the buyers are to blame, not just the intermediaries.
If your house loses value, you don’t blame the real estate broker who sold it to you.</p>
<p>If someone is charging you too much, pay less to someone else instead.</p>
<p>Mostly they get paid so much because they do things of tremendous financial consequence to their customers, and they appear more likely to be able to do these things better than other parties the customers can otherwise find to engage who will ostensibly do the same things for less money.</p>
<p>There is a marketplace for their services, nobody is forced by shotgun to engage the services of any particular firm. It is their free choice to do so, or not. Companies evaluate all relevant factors, including fee structure, in making their decision to engage intermediaries.</p>
<p>Many of us did not want to buy the cdos. We didn’t partake in credit default swaps trading.
We did not want the leverage that was in the system and we didn’t play the leverage game ourselves.</p>
<p>Yet look where we are as a society now.</p>
<p>I knew what ws was doing was stupid. (I didn’t realize how big they were doing it).</p>
<p>Maybe you did too, monydad.</p>
<p>But that doesn’t matter to society.</p>
<p>It would have been better for society if ws showed a little self control.</p>