Think!

Congress: Shortsighted About Financials

The nine most terrifying words in the English language are:
"I'm from the government and I'm here to help."

Ronald Reagan - 40th president of US (1911 - 2004)

Why Capping Pay Is Likely to Work

Unfortunately, it is looking more and more like nationalization.
Obama has opened up the gates of hell by feeding populist opinion in order to achieve his policy objectives.

The American people are angry and "rich and fat" bankers look like a great place to blame, right? No realtor, mortgage broker, appraiser, leveraged borrower or home buyer has any responsibility for this mess, right? Let's sock it to those nasty bankers who have the nerve of getting paid part of their comp with bonuses!

Capping comp in the short-term is probably ok but has risks. It has a lot more downside in the medium and long term.

You arm-chair pundits don't have any idea what it takes to run or even be in the top 2 levels of management at a major financial institution. No, they won't be "giving you a call" because you don't even begin to have the skill set to get the job done. I have regular personal contact with the Treasurers, CFOs and CEOs of most of the top 20 banks in the U.S. You have no idea how hard these people work and the pressure that they are under.

If you drain the talent, then these organizations will truly be brain-dead. That is the problem. Removing all employee incentives will produce corresponding behavior. Equity (how Sr. Mgt and even the rank and file has been receiving the majority of its compensation for the past few years) has been gutted.

How will you recruit, manage and motivate talent? "Be glad that you have a job" is a very-short term motivator. If there is no upside offered, there will be a brain drain from the industry.

That will not be good for the institutions or the country.

Try to moderate the emotion and maximize the strategic thinking.