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Your Take: Anger At Banker Pay

Posted By Jim On 10/21/2011 @ 7:37 am In Your Take | 36 Comments

When Goldman Sachs announced it would set aside $10 billion for staff pay this year, CNN Money [3] went to the Occupy Wall Street demonstrators and asked them what they thought. It was equal to $292,000 per employee, which is a drop of $78,000 from last year. The responses were what you’d expect – everyone was upset. They didn’t know why people needed to be paid that much.

Here’s the crazy part – bankers aren’t paid huge sums everywhere. In Germany, bankers aren’t paid millions to do their jobs [4] (I was very surprised to read how little they made). In the United States, where capitalism meets unchecked human greed, bankers are paid like professional athletes (you could argue athletes are paid too much, but that’s at least sustained by sports revenues). The bar keeps getting set higher and higher in order to get the “best talent,” whatever that may be in the eyes of the person writing the checks.

We pay bankers too much because we knocked down that wall separating basic banking and speculation. Speculators who guess right can pay vast sums to people who are good at picking the winning bets. Basic banking is boring, there’s no leverage, and you can’t make absurd sums of money. It’s like a grocery store that sells lottery tickets. The lottery tickets can make big bucks but lettuce and oranges are boring low margin items. When parts of Glass-Steagall were repealed [5], it set the stage for what happened. For political folks keeping score at home, the repeal was a bi-partisan effort. It was sponsored by Republicans, passed in a Republican Congress, and a Democrat President (Clinton).

So being paid vast sums is offensive, especially with unemployment is at fault, but politicians deserve the ire.

I’m curious to hear what you think about bankers being paid that much?


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[3] CNN Money: http://money.cnn.com/2011/10/20/news/economy/goldman_sachs_occupy_wall_street/index.htm?hpt=hp_t2

[4] bankers aren’t paid millions to do their jobs: http://www.vanityfair.com/business/features/2011/09/europe-201109

[5] Glass-Steagall were repealed: http://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_Act#Repeal

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