Big banks as Petri dishes for lower compensation?

A lot people have wondered whether the high-paid employees at the top investment bank are really worth the money they’re paid.   After all, they were at the wheel when the car went into the ditch.  Could you do just as well by paying less?

Well, it looks like we’re going to get a chance to find out.  In the wake of looming federal legislation that will put serious compensation caps on institutions that have received money under the Troubled Assets Relief Program, the New York Times reports that top earners are fleeing TARP-funded institutions for foreign banks and smaller outfits.  Those who have a choice are apparently leaving in droves, leaving behind their lower-paid colleagues who will not be hit has hard by the compensation caps.

It will be interesting to see whether the loss ofthese  millionaire traders hurts or helps firms like Goldman Sachs, Morgan Stanley, and Citigroup, who are now going to be run by people whose compensation is regulated by the Treasury department, while their outfits like Credit Suisee, Deutsche Bank, Aladdin Capital, and a host of new boutiques will keep paying those astronomical bonuses.  Stay tuned.

[Frank Snyder]