Torches and pitchforks
The New York Times reports today that Wall Street firms paid something like $18.4 billion in bonuses this year, “the sixth largest haul on record.” That, despite one of the worst financial crises in history. We care about this because a lot of those bonuses were probably paid with your tax dollars (thanks, TARP!).
Wall Street says, hey! We’re playing fair! Bonuses are down 44% from last year! They also argue that they have to pay their people obscene amounts of money to keep them from defecting to other firms (as if this were a great time to switch jobs).
But this pay structure is clearly insane. The average Wall Street bonus this year – average – was $112,000. That’s in addition to salary and stock options. These are not doctors who study for 12 years, or astronauts, or scientists who are inventing shiny new things that make life easier. They are (many of them) 27-year-old kids from Long Island with Master’s degrees in economics or finance, whose job is to use other people’s money to buy things at one price and sell them at a slightly higher price.
While these middlemen (and women!) are necessary for the gears of capitalism to turn smoothly, I’m skeptical that their relatively small contribution to society is worth so much compensation. In fact, in my experience, whenever disproportionate compensation is offered in exchange for fairly basic tasks, it ends up selecting for the clever, daring, and unscrupulous among us, who are willing to do things like clear-cut rain forests, counterfeit Rolexes, and build sub-prime mortgage-backed securities shell games.
Clearly, the system has failed, and the libertarian “I leave you alone, you leave me alone” ethos didn’t work: We left them alone, and they leveraged the hell out of everything and drove the market off a cliff. Massively disproportionate compensation structures played a part, and now we’re all suffering (and paying) because of it.
Maybe it’s time to get out the tar and feathers and cap some bonuses.
UPDATE: Oh hey, look at that.
Tags: compensation, Finance, insanity
January 31st, 2009 at 03:54
I’m waiting for someone to flip out over yr description of the failure of libertarianism, but it’s the funniest and most accurate thing I’ve read about the free-marketly minded in a long damn time.