Everybody, from President Obama to the junior senator from Missouri are up in arms about Wall Street bonuses. A few facts are in order:
The pretext for the political outrage was the New York comptroller's report this week on the aggregate data for bonuses in 2008. That "irresponsible" bonus pool of $18 billion was for every worker in the New York financial industry, from top dogs to secretaries. This bonus pool fell 44% in 2008, the largest percentage decline in 30 years. The average bonus was $112,000; bonuses typically make up most of an employee's salary on Wall Street. The comptroller estimates that this decline will cost New York State $1 billion in lost tax revenue and New York City $275 million. Both city and state may have to announce layoffs.
With that in mind, let us remember that
...compensation levels are a business judgment made under the pressure of competition. The "idiots" notwithstanding, Wall Street has lots of highly talented financial minds and mobility among firms based on compensation is routine. If Congress is going to start setting legal limits on salaries and bonuses in the U.S., it is going to drive talent out of Bank of America and these other banks and into institutions without such limits, perhaps abroad.