Everyone seems upset by the prospect of banks paying big bonuses. What they’re not asking is: why have banks paid them for so long?
The popular answer is that banks need to attract the best talent.
Yeah, right. Eric Falkenstein and James Kwak provide the real answer. Traders must be bribed not to plunder the firm. If you don’t pay them millions, they’ll sell the banks’ assets cheaply to rival firms for which they then go and work. They are paid fortunes not because they have skill, but because they have power.
Great point. Pushes towards a managerialist theory, of course.