According to the corporate stenography newspaper, The Wall Street Journal, the bank execs are pushing back against the potential of bonus eliminations.
I'm getting really tired of hearing this "if we don't pay them bonuses they'll leave meme."
To be sure, some bankers may simply retire, a minor loss to be sure.
1.It is one thing to think about leaving or threatening to leave when it is one firm (AIG) with a couple hundred effected employees. What are the job prospects like when there are a several thousand bankers all threatening to join the job seeking line all at the same time?
2.If they don't want to stay at a failing bank that can't pay bonuses because it takes TARP money, what are the prospects of staying at a failing bank that refuses to take TARP money?
Let's give these greedy bankers the cold reality, and then see how much bravado and bluster they have.
Let me also add, I don't entirely disagree with the concept that some of the bankers might deserve huge rewards if they can pull the troubled banks through the mess they're in (although I do wonder a little how tough that is when they're almost certainly going to be given over $1 trillion to do it when all is said and done).
So, I don't disagree with what Sheila Blair says according to this quote from that article:
"Not everyone in Washington was in support of taxing bonuses. FDIC Chairman Sheila Bair, an outspoken critic of the nation's giant banks, on Friday raised concerns about moves to hamper bonus pay. In a speech in Phoenix, she said: "Some talent is better than others, and some people do need to be better compensated."
Ultimately what has been shown up is that this 'hybrid'model of bank bailouts, wherein the bankers get the public money while getting to largely remain in private control is a complete failure (so, it's time to fire the architects of this plan, Geitner and Summers). Had the banks been temporary nationalized, it would have been a lot easier to sell the notion of bonuses: "The government will get the money back on these bonuses because paying key employees well helps ensure the banks will return to profitability and the government will ultimately make a profit on the resale of the shares."
Just to add one more thing that I've mentioned in another few blogs. If the capable bankers do end up leaving and going to the healthy banks, is that actually a bad thing? While it won't help at cleaning up the toxic assets, it's logical that, while there is always some turnover, ultimately if there is room at the healthy banks for new employees, it's because they must be expanding and lending more. If the key is to get credit moving again (and I think it already is) it doesn't matter if it's done via the presently insolvent banks or through the healthy banks. So, if the capable bankers do leave and go to the healthy banks, that's probably a good thing.
In light of that, I don't pretend to be an expert on this situation, but maybe the rest of the TARP money should go to help expand the healthy banks, and not go to the insolvent banks. This eliminates moral hazard and it promotes those who did the right thing.