Friday, October 23, 2009

Today in Not Understanding Your Charge

We have Kenneth Feinberg who doesn't understand the ethos or goings-on of the finance industry. From the New York Times, "Pay Czar Doubts Cuts Will Make Bankers Leave."

“I wouldn’t begin to say how much money you should make on Wall Street,” Mr. Feinberg said in an interview last week, as he prepared to slash pay for the top 25 earners at seven firms that received significant government aid. “I’ve never worked on Wall Street. I don’t claim to know the ethos of Wall Street.”

“If any one of these people left, I would be very disappointed,” he said.

Mr. Feinberg said he expected his ruling to please no one. If that happened, he added, he would consider it a mark of success.
“The populists will undoubtedly say:, ‘You caved. You gave Wall Street financiers too much money,’ ” he said. “The other side, the Wall Street culture, will say I put those companies at a disadvantage.”
I don't agree with his job or the need for it, but I think he should realize that creating these disincentives for the highest-skilled financiers at bailed-out firms will induce them to flee for firms that don't have these requirements. After all, power finance and banking is very geographically clustered, not to mention the fact that these workers are highly mobile under normal conditions. So it isn't even hard for them to jump ship!