Paying The "Best People" On Wall Street

From Pay curbs a right of ownership by David Weidner:

Maybe the biggest mistake made by the likes of Smith, Thain, Tiger Management's Julian Robertson or former New York Mayor Rudolph Giuliani, when defending bonuses, is they forget that making the rules about pay is part of the right of ownership and an essential part of capitalism and free markets.

After doling out more than $350 billion to acquire stakes in investment banks and commercial banks, the U.S. government -- you and I, as taxpayers -- definitely own the biggest banks on Main Street and Wall Street.

Put it this way: Citigroup Inc. and Bank of America Corp. each received $40 billion in cash and more than $360 billion in guarantees. Yet, Citigroup has a market value of only around $22 billion. Bank of America is valued at about $34 billion. Morgan Stanley is worth about $24 billion.

The list goes on, but you get the picture. The government either has effectively bought majority stakes in these companies or put more cash into them than they are worth. If these companies did not want the government exercising its right of ownership, then they should have not accepted the cash and prepared a bankruptcy filing.

It's true firms that haven't taken government cash will have a competitive pay advantage. That's how it should be. Firms that are run right should have an advantage. Why would we reward banks and bankers who got it wrong?

All this nonsense about Americans not understanding compensation on Wall Street is a bunch of elitist posturing. We understand it perfectly well, thank you. We know that even the most troubled of firms will look for ways around the new pay caps. We know that some people will flee for riches at smaller banks or hedge funds. We can live without the high flyers.