Meredith Whitney: Banker Pay Caps a Disaster
[I still disagree with her, but she makes a good point.]
Meredith Whitney, the CIBC Oppenheimer bank analyst who has presciently called banks’ woes over the past 18 months, opposes pay caps for bank executives.
President Obama announced this week that financial companies receiving government aid in the future will have to limit compensation of top officials to $500,000 a year.
“No one goes onto Wall St. to save the world,” Whitney pointed out on Bloomberg TV.
“Compensation is the motivating factor. Wall Street attracts the best and the brightest because of its compensation structure.”
And what if you take that structure away?
“The best and brightest will still figure out a way to make money, and it may not be on Wall Street when those minds are needed the most.”
Wall Street has taken a lot of flack since news emerged last week that its executives received $18.4 billion in bonuses last year as the financial system went up in flames.
“There has to be an incentive structure for anyone who works,” Whitney says.
“I’m not talking about executives compensating themselves tens of millions of dollars while firing tens of thousands of people,” she explains. “That’s egregious.”
Meritocracy represents one of our country’s finest qualities, Whitney says.
“If you alter that course so dramatically, we’ll hurt the economy for a longer period of time.”
Obama, of course, feels differently.
“In order to restore trust, we’ve got to make certain that taxpayer funds are not subsidizing excessive compensation packages on Wall Street,” he said at the White House announcement.
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