First of all, let me say that I'm supportive of President Obama's measures to limit executive pay in companies that accept new bailout money. There are loopholes that I'm sure smart guys will be able to finesse a bit, but for the most part it limits the comp of senior executives working in such firms to $500,000. Now, this may seem like a lot of money to people who do more than push various colors of paper around for a living, but in actuality, for a banker, you might as well be offering a salary of $1 per year. Okay, that may be an exaggeration, but not by much.
So I'm trying to figure out who will be attracted to the job of running the next big bank to suck up some more of the public weal. Who will NOT be taking the job will be anybody who has considered themselves a banker up until now, guys who were trained for it and are now in mid-career, who have built up lives dependent on the kind of money that bankers, up until now, could expect to draw down. It's not only the base salary that's a laughable pittance to such individuals. It's the fact that bonuses will be tied directly to performance, and closely monitored by angry shareholders who have only one criteria for executive success: the stock price.
Do you have any idea how irrational the stock market is? Great, profitable companies languish in the single digits. Idiotic brain farts out in left field are rewarded with huge multiples. Hoards of lemmings skitter back and forth, driven over a variety of cliffs by fear and greed. Would you want your comp based on that? I don't think so. Not when there are so many other things you can do. Like be a consultant.
I figure there are three kinds of people who will be running bailout institutions:
- Rich guys who have already made their nuts and who will provide either gravitas or branding power to their crumbling edifices, presiding over a cadre of hungry young pups who do all the work. Think Alan Greenspan, Warren Buffett, Donald Trump.
- Young business school graduates who want to make a name for themselves in both Finance and in the governmental functions that will be overseeing that industry; where these dudes used to gravitate to McKinsey to make their bones, they'll now hop into banking and do a little workout samba on those bongos.
- Politicians with a background in accounting. Think about it. Five hundred grand is a molehill to a real banker. But it's a mountainous pile to a politician. The top job in the field pays less, doesn't it?
It remains to be seen whether any of these will be qualified to lead the large fiduciary entities that form the foundation upon which our economy rests. On the other hand, how could they do any worse than the bozos who took all that money to screw things up?