K Street to Look Over the Back of Wall Street
Government Capitalism – more like socialism – is still trying to take a larger and larger administrative role in how Wall Street operates. Wall Street just isn’t going to go along with it. Yes Wall Street was largely to blame for the economic implosion. Now the government wants to step in and regulate how the firms operate and how they pay people. That isn’t the government’s job. They can create legislation empowering the SEC and the Treasury/Fed with powers to force regulations and standards upon Wall Street like the Sarbanes-Oxley act of 2002 but they cannot and will never be able to control the price people are willing to pay for talent. This at the core of Capitalism.
All eyes are focused again on the high pay of executives on Wall Street. Obama will speak today about this very subject and to a lesser amount about the actual regulatory specifics that need to change. Oh by the way – this needs to happen globally too – where the US has no power at all. I know regulations and more power being held by the SEC will happen and a lot of that good to reign in pandemic possibilities and rogue practices but talent is a fluid resource that will go where the money is – and hence take the business and clients with them.
Frankly, if Goldman Sachs didn’t pay out huge bonuses – the people would go to the Bank of Hong Kong for example that would and use their talents there. Why? Because they pay better. 99% of all Americans can’t stomach the hundreds of millions of bonus payments and perks on Wall Street but they would also leave their job in a second if their pay would go up by 50% or even 500% I assure you. The same holds true here although the people just make a lot more money.
Now my opinion is that executives in America in the C suite should all get paid a very modest sum of money. If the team makes money the money goes into a pool. They are all aligned. If they make money for shareholders great they get paid more. If they lose money or the stock plummets under their watch then they don’t get a penny. This should be a free market principal. Shareholders like you and me I think would back companies with this type of profile as opposed to others that don’t adhere to pay programs that create up front pay packages that don’t penalize poor performance.
But despite the free market principles that America was built on K Street just can’t keep their hands off the Golden Goose. Right now financial firms more than ever are pumping hundreds of millions in to campaign coffers, lobbyists and hiring senior political people to help them. Why would DC ever give up that attention now. The wouldn’t – and Won’t. This new direct DC relationship with Wall Street should be entirely arms length but legislation is for sale in America. Expect pay packages and incentives to remain under the capitalist watch while government tries to curb it. Our government and those around the world should be working internally without outside influence to put standards and practices legislation in place – with the rest of the world in total agreement – to make sure the systems and the risky practices are monitored tightly and regulated – that is the only role government should be playing – and not politicizing the whole thing.