With Pay Cap Restrictions Faltering, Will Talent Return To Wall St.?

Wall St. firms and the large money center banks with investment and M&A arms have continued to insist that their best talent will head to private equity firms and hedge funds as opportunities for multi-million dollar paydays disappear. The notion was probably flawed from the start. The number of people who work at private financial firms is fairly small. They certainly cannot grow enough to handle a mass exodus of Wall St. talent.

The best bankers may decide to stay at the large financial firms. The payback of TARP money by 10 institutions will get them out from under the most onerous compensation provisions. According to the The Wall Street Journal, the Administration is backing off some of its most draconian base pay and bonus cap programs. New restrictions on compensation “will likely come in the form of recommendations”, the paper reports. When huge bonus packages are at stake, recommendations mean nothing.

The Administration will probably still appoint a “pay czar” who can examine compensation of bank executives and traders, but keeping track of thousands of investment experts, money managers, and M&A players will be nearly impossible. Now that the government is beginning to back down on the pay issue, banks will try to circumnavigate whatever weak provisions remain.

Big pay is back on Wall St. Bonus payment for 2009 should return to “normal.”

Douglas A. McIntyre