Comments on: Can higher capital standards cause lower pay?

By: q

Sat, 05 Sep 2009 01:23:12 +0000

nope, i think that hedge funds set market rates for renumeration.

By: Sam

Sam — Fri, 04 Sep 2009 15:08:52 +0000

You right this post as if the goal is to decrease renumeration: the goal should be to improve financial intermediation and remove incentives that distort the pricing of risk, while reducing the probability of a severe “macro event” and the cost of such an event

By: Dollared

Dollared — Fri, 04 Sep 2009 00:50:15 +0000

The whole point of propping these entities up is to recapitalize them, no? And the core problem is that these are historically partnerships, and the key employees expect a big payout from profits every year, even though they now have outside shareholders and debts to Uncle Sam, yes?

Well, as I’ve said before (really) you can’t recapitalize a kleptocracy. At least not for very long.

So why not have a provision that caps total compensation for the top 50% of employees of the TARP banks at X percent of the take? For example, 60% of 2008 top 50% compensation plus 30% of net earnings before comp costs? (people with more experience of the industry can set the ratios).

You limit the pie, putting more onto the SH/creditor side and less on the highly compensated employee side – and you put in a hard cap to make sure that the fighting is not employee versus SH/Creditor (who are not in the room) but employee versus employee.

And make it universal to all banks supported by TARP, or any bailout anywhere. Let them move to China – if it’s that important to them….

By: Griff

Griff — Thu, 03 Sep 2009 23:01:11 +0000

Higher capital ratios should be implemented over a 2-5 year plan, systematically exacting the increased cost as financial systems rebuild / replenish / renovate themselves, in the US and Europe.

If salaries are not high enough, then all them wizened bankers will find better pasture elsewhere. But not all of em can…I highly doubt they would all find it so

By: OneEyedMan

OneEyedMan — Thu, 03 Sep 2009 22:51:51 +0000

Don’t higher capital ratios actually increase the rewards to individuals and firms that can figure out a ways to circumvent them?

By: Curmudgeon

Curmudgeon — Thu, 03 Sep 2009 22:29:04 +0000

The problem is that no one in the financial services industry believes in any way that they need lower pay, or need to be a smaller part of the economy. Quite the opposite. Unless the participants believe that they have a problem, we will maintain the status quo.