Via Kevin Drum, would you believe that, despite being paid huge amounts of money in bonuses -- money we were told was necessary to garner top talent -- some bankers are bad at their jobs? Believe it!
Some of the star financial advisers who were promised six- or seven-figure payments to jump ship have been huge disappointments, failing to generate profits for their new employer. Others quickly abandoned the brokerage firm that wooed them.
Most people watching Wall Street in 2008 and 2009 were astonished at the huge bonuses being paid to bankers in times of trouble, and wondered if there was any economic rationale for such an action. Turns out there was another bubble besides the one in housing -- the banker compensation bubble. Apparently, the banks that didn't see the crash coming also didn't realize that it's relatively easy to establish a track record as a money maker when the markets are all going up that might not hold up to scrutiny in a different environment. A reminder: Whenever banks make an argument -- that deregulation is good for business, that high compensation is needed for top talent, that consumer regulation will drive up costs, that derivatives are too complex to be traded and cleared on exchanges -- it's best to raise an eyebrow before you jump aboard.
-- Tim Fernholz
