The New Wave Of Super-Rich Wall St. Executives

The Wall Street austerity of 2008 and 2009 has quickly given in to a bounty of riches for the top tier of management at large financial firms. Proxies showed this began late last year. Today it was disclosed that a trader who left UBS for Citigroup (NYSE: C) will make as much as $30 million over three years.

Stephen Trauber, an energy trader, has hit the jackpot as he moves to one of America’s largest banks. The Wall Street Journal reports that “For Citigroup—still partly owned by the Treasury after years of woe—the hiring coup was seen as a sign the bank has grown confident it can grant hefty pay packages without fear of government objection.”

Pay czar Kenneth Feinberg has headed off to run the BP $20 billion escrow fund set up to help businesses and people hurt by the Deepwater Horizon spill. He left behind his bully pulpit and whatever he might have done or said to incite the average American or federal government to revisit extravagant pay packages given out by the largest financial services firms.

A compelling argument can be made that men like Tauber need to join America’s largest banks. The financial reform bill will cripple earnings at some financial houses, particularly has they have to exit their profitable proprietary trade businesses. Those voids will need to be made up by M&A and investment bank activity. Tauber and his kind will be essential to drive profits.  That, in turn, should improve bank balance sheets which will keep some firms from needing to raise new capital. The improved profits should also be good for shareholders whose investments were destroyed from early 2008 to the present.

Citigroup raised the compensation for its top management last week. The argument by its board of directors is almost certainly that the company has paid most of the government’s money back for the rescue that kept the bank in business less than two years ago. The Treasury still holds stock that it can sell. Citi may even end up as a good investment for taxpayers.

Citi and its peers can make the effective argument that they should not be punished nor should be their managers. The disaster that nearly crushed the credit market is now in the past. Compensation is what drives strong earnings, and earnings will drive the complete recovery of Wall St. Taxpayers, even those who are unemployed, should appreciate that progress despite the fact that their their hearts may not be in it, and they aren’t.

Douglas A. McIntyre