September 28, 2009

Salary Caps as Barrier to Entry

Justin Katz

Whereas I focused on the likelihood that international governments' participation would ultimately exacerbate the problem of "too big to fail" and risk taking among large banks, Matthew Lynn argues that the big banks will leverage salary caps to hinder the one thing that could truly restrain their pay and risk taking — namely, competition:

They are talking their own book. Any controls on the financial industry will only make the existing big firms more profitable, and make it harder for new competitors to emerge. The people with most to gain wouldn’t be the general public. It would be banking CEOs such as Ackermann and Blankfein. ...

It would create an effective cartel among the main, established investment banks. They wouldn’t have to worry about their best staff being poached by a rival bank offering a better deal to the star traders. That would be banned. It would, at a stroke, transfer power from the staff to the managers.

Hopefully we won't have to find out how large a scale of damage can be done when the government-big-bank system that the internationalistas are pursuing experiences inevitable failure.

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Did I hear Paiva-Weed accurately when she stated we don't have annual deficit problems?
Did she really say that?
Was quite disappointed John didn't remind her of the one-time fixes like stimulus and tobacco that have been needed in recent years to balance the books.
This clueless woman is the boss of the state Senate?
No wonder the ship is sinking. As a passenger on the Titanic Paiva-Weed would have started a study commission on the effects of ships hitting icebergs.

Posted by: Linda at September 28, 2009 10:44 AM

Justin please remove my response above. I put it on the wrong thread. Thanx!

Posted by: Linda at September 28, 2009 11:08 AM

It's all part of the master plan. Make the banks into robotic bureacracies. Stifle innovation to the degree that regulation is the only thing left that moves the economy. Ever watch a snail move? Inspiring, eh?

Posted by: George at September 28, 2009 11:15 AM

When the government talks about "big money", it is well to remember the experience of J.P. Morgan.

Somewhere around 1908, the government went broke. In their need, they approached J.P. Morgan. Morgan arranged a loan to keep the government in business for 6 months.

In return, the government charged Mrogan with being the head of the "money trust" and brought him before congress for investigation. That is where he made his famous statement "I only loan money to gentlemen".

Want more? Google the "Pujo Committee". Wikipedia is accurate as far it goes, but seems to side step a few matters.

Posted by: Warrington Faust at September 28, 2009 9:16 PM
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