Cry me a river: Wall Street paychecks may wither

H/t to the Big Picture.

Here’s the problem with various officers and employees at banks and financial institutions and other corporations making insane amounts of money:

It is one thing when the best-paid people seem to be the smartest and the most accomplished. Those who make much less may not like it, but the differential seems understandable. It is another thing when those people are shown to have committed huge blunders that would have driven their companies out of business, and them into the unemployment line, but for government bailouts.

Executives in the financial sector have been grotesquely over-compensated for the quality of their work. The “smartest people in the room” were every bit as venal and short-sighted as the rest of us, and now they’re using our tax dollars to figure out how to continue to live a life of luxury.

It should piss us the hell off.

They won’t disappear overnight, of course. The sad story of how Merrill Lynch bosses handed out bonuses just before the Bank of America takeover was completed — and just before about $15 billion in losses materialized from Merrill’s portfolio — reinforces the suspicion that Wall Streeters see themselves as entitled to outsize paychecks even if their companies are failing.

But there’s hope:

Are financial workers overpaid? And if so, will it continue?

The answers, according to a new study by two economists, are yes, they are overpaid, and no, it will not last.

There is a systemic problem – a lot of institutions were doing bank-like work without the banking regulations. They created inside these firms an environment in which workers came to believe that they deserved the massive, insane amounts of money they were making because they were making the firms massive, insane amounts of money. If I were a cynic, I’d suggest that problem really lay in a social world that valorizes profits above all else, that sees making money as the highest order goal a person can have. I’d suggest that the problem is found in a business world that has been willing to mortgage everything in the pursuit of this quarter’s profits.

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  1. #1 by Frank Staheli on January 23, 2009 - 3:07 pm

    I agree.

    The environment of corruption was headlined by (a) a corrupt government which encouraged businesses to make loans where loans should never have been made, and (b) a Federal Reserve system that flooded money into the market directly through the financial institutions, thereby encouraging them to “mortgage everything in the pursuit of this quarter’s profits.”

  2. #2 by Ken on January 23, 2009 - 6:28 pm

    Irresponsibility and corruption in both the government and private sector has gotten us into this mess, but the buy everything on credit mentality that pervades society is also to blame. We all want instant gratification and never think about the long term consequences. I have gotten into trouble with credit before so I know full well the hell it is. The nice TV, surround sound stereo systems are nice but if you are so strapped for cash you can barely feed your family those things mean nothing. Now I pay cash for things and I enjoy them much more. If I don’t have the money I do without it until I do. We need to get back to that. Stop living on credit because the day of reckoning will come and it takes a long time to dig yourself out. Debt is bondage, and if anyone tells you different they are selling you something*.

    *Italicized line lovingly lifted from The Princess Bride.

  3. #3 by Becky on January 23, 2009 - 7:00 pm

    My sister and I were just discussing this. We were the ones who used credit carefully, if at all, paid off our homes early, sacrificed buying and instead saved for short and long term, planned for emergencies, did all the right things. What happened? We both regret our conservative ways and wish we had saved less and spent more. We ended up losing more than those who lived from paycheck to paycheck.

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