Free Markets, Free People

Action : Reaction

Gee, I wonder who would have guessed that this would happen:

In a London preview of Wall Street’s bonus nightmare, more than 1,000 investment bankers have quit Royal Bank of Scotland to work at rivals due to curbs on their paychecks, according to people familiar with the situation.

Wall Street banks fear top talent would flee en masse for greener pastures if Uncle Sam’s pay czar, Ken Feinberg, and Congress try to put more ceilings on bonuses and pay at financial firms.

In the UK, the rules are modeled after US actions to curb pay at firms bailed out by the government.

[…]

The protest exodus at RBS — first reported on the Web edition of the Times of London — involved less than 5 percent of its banking professionals.

Some headhunters see more bankers jumping ship in the coming year as the controversy deepens over pay freezes and curbs.

Pay people less than they think they can earn elsewhere, then “elsewhere” is where you will find them.

Some will say that these ship-jumpers can’t be worth too much if their companies had to be bailed out, but that gets it exactly backwards. For the most part, it’s those who are responsible for the floundering that will be left working for the rotting (and now government owned) corpse, while those most capable find positions in more stable firms.

There’s nothing particularly bad about this sort of slough off, except that with the bailouts thrown into the mix, it’s the public that’s left holding the bag. Absent the government takeovers, the same sort of thing would have happened, only in a quicker, more orderly way (see, e.g. the fallout from the collapse of Arthur Anderson, or the bankruptcy of BearingPoint).

Moreover, the demonization of Wall Street types accomplishes nothing constructive, and may very well convince otherwise enterprising young B-school grads (or potential grads) to employ their intellectual talents in other fields that may not fully capture their potential or interest. All that does is deprive the rest of us of smart, young and industrious business people who might make our world better, and instead treats us to a glut of some other professionals that we likely don’t need (i.e. lawyers). And we really don’t want that now, do we?

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4 Responses to Action : Reaction

  • For the most part, it’s those who are responsible for the floundering that will be left working for the rotting (and now government owned) corpse, while those most capable find positions in more stable firms.

    Because as a general rule, you don’t hire away the idiots.  Well done, government!

  • Don’t know if you’re citation of Arthur Andersen is an apt example here.  I know a lot of people who worked in IT for that firm that had trouble finding jobs after their auditing folks caused the company to collapse.  The accounting people, on the other hand, invariably moved on to other Big 6 firms.

  • may very well convince otherwise enterprising young B-school grads (or potential grads) to employ their intellectual talents in other fields
    I’d like to believe that and maybe it’s true, but frankly, I have no idea what other fields except possibly lobbyist that would pay better and have a future (heavy of the have a future bit). At the moment the Obama Administration seems hell bent on destroying all good jobs or sending them offshore.  It’s a new idea of “leveling the playing field … make everybody poor.

  • The Socialist experiment, known as The Obama Administration, gets more ridiculous with each passing day.
     
    3 years, 1 month, and 13 days to go, folks. Let us hope we survive it.